Given the increasing insufficiency of grant funding, private not-for profit Registered Providers (PNPRP) are reliant on leveraging the value of their housing stock as security for their financing.
The opportunity to achieve significant financial benefits when PNPRPs are organisationally aligned towards a joined-up charging strategy is there but the need to ensure all stakeholders understand the essential importance of finance security to PNPRPs is key.
This means proactivity: securing the cooperation of internal stakeholders, particularly PNPRPs' boards, leadership and development teams, to ensure it is corporately prioritised and adequately financially resourced and that relevant documentation is prepared, reviewed, and provided in a timely fashion. This ensures that any chargeability or valuation issues are identified at an early stage and, vitally, provides capacity to work towards achieving uplifted charging value.
During a charging exercise, affordable housing properties tend to be valued according to either their market value subject to their tenancies ('MV-STT') or according to their current use as social housing ('EUV-SH'). By way of example, for one particular client, on average, an MV-STT valuation was approximately 60% higher than a EUV-SH valuation of the same properties but by dedicating resources to uplifting values, the client requires 7,000 fewer properties to achieve the same level of security, thereby freeing up capacity for further charging, and increasing the finance available to the PNPRP for its key aim of building more socially provided homes.
Adequate internal recognition by PNPRPs of the significance of this issue and the implementation of a strategy to identify valuation issues at the earliest possible stage can avoid values being restricted to EUV-SH and delays in the charging process. Involving your specialist legal charging advisers at acquisition stage may avoid the need for subsequent deeds of variation by ensuring that documentation is drafted to reflect lender's current requirements. Where this isn’t possible you may still be able to secure uplifts by reviewing and, where necessary, amending legal agreements over the properties and the scheme of development of which they are a part, often with the consent of local authorities. Such processes can be slow and costly therefore identifying such issues early ensures adequate time and resource can be applied to secure uplifts.
A common charging challenge faced by PNPRPs is missing documentation including discharge of planning conditions and s.106 obligations. Organisational commitment to a charging strategy ensures that pursuing such documentation is internally prioritised and in turn relevant third parties such as developers and local authorities are made aware of PNPRP charging requirements. Where such documentation and confirmations are not available your specialist legal charging advisers can suggest appropriate solutions based on their extensive transactional experience.
A proactive charging strategy allows PNPRPs to take into account changing market conditions and funding requirements, whilst also allowing more time to negotiate with and ideally gain the support of key external stakeholders: particularly housing developers and local authorities.
