1 Scope and Format of the guide

2 Summary of changes October 2006

3 Funding Conditions

4 Types of development - New Build

5 Types of development - Rehabilitation

6 Contract type and Partnering

7 Building Agreements

8 Insurance Requirements

9 The use of Local Authority staff

10 Authorised signatories

11 Bank account details

12 Money Laundering Regulations 2003 

13 Assigning a "Build category" to schemes

 

1 SCOPE AND FORMAT OF THE GUIDE 

1.1 This version of the Capital Funding Guide must be used for all schemes receiving confirmation of Social Housing Grant on or after 1st October 2006.  Schemes that received confirmation of grant before 1st October 2006 or Grant Confirmation prior to April 2006 should be processed according to previous versions of the guide relevant to that date.  Previous versions can be accessed via a direct link from the Capital Funding Guide’s homepage on the Corporation’s website – www.housingcorp.gov.

1.2 Following publication of the National Affordable Housing Programme prospectus, together with a new approach to programme management and the revised Low Cost Home Ownership products the April 2006 Capital Funding Guide was substantially revised. The revision is ongoing and paragarpah 2 below contains details of changes for October 2006.  Further updates will be published as soon as they become available This guide now covers the following general topics in the following chapters:

 

• GENERAL - General points applicable to Social Housing Grant (SHG) funding through the Housing Corporation;
• REC - Capital Grant Recycling and Recovery;
• DPF - Disposal Proceeds Fund;
• MILESTONES – This chapter is not yet available but will cover details of target milestones and scheme variation guidance. It is currently under construction and will be available in due course.
• PAYMENTS – This chapter is currently under construction, RSLs wishing to submit a claim for grant should telephone 0207.393.2234 for further information. 

 
1.3 Guidance on each of the main scheme type and the Right To Acquire is set out in separate chapters.  Each chapter contains guidance within broad section headings.  The scheme type sections are:

• RENT - permanent rented housing which is new build, rehabilitation, and re-improvement;
• REPAIR - Major repairs and Miscellaneous Works, including adaptations;
• TSH - Temporary Social Housing;
• SALE - shared ownership, shared ownership for the elderly, rural repurchase, and rehabilitation for outright sale;
• HOMEBUY;
• SHB- Social Homebuy;
• VPG - Voluntary Purchase Grant – after sales issues;  
• RTA - Right To Acquire;
• KWL- Keyworker Programme.

 
1.4 This Guide should be read in conjunction with Scheme Development Standards and the Regulatory Code. 

1.5 Please note that where this guide refers to the Corporation’s Publications Department, contact should be made by email to publications@housingcorp.gsx.gov.uk  .

1.6 In many instances throughout this guide it requires RSLs to contact their local Corporation office for further guidance or approval on investment matters. Unless specified otherwise RSLs should initially contact their local Investment Officer.

1.7 For all other queries please contact the Corporation’s Enquiry Team on 0845.23.7000 or email  enquires@housingcorp.gov.uk

 

2 SUMMARY OF CHANGES

 

GENERAL
  

General-6, para 4.3 has been updated to reflect the replacement of the Department of Trade and Industries Clear Skies Grant with the three-year Low Carbon Buildings Programme. 
 

  
REC

Following the Corporation's Recycled Capital Grant Fund and Disposal Proceeds Fund Review the REC chapter has undergone a complete rewrite. Users are required to familiarise themselves with the new layout and content. New content expands on those issues highlighted in the “Important Additional Information” at the beginning of the July Chapter. 

 

SOCIAL HOMEBUY

 

SALE

 

 

RTA

 

HOMEBUY

 

KWL

 
 
3 FUNDING CONDITIONS

3.1 Funding Conditions apply to programmes for which an RSL has an allocation from the Corporation.

3.2 Every RSL with an allocation in 2006/2008 is required to ask for the Funding Conditions for 2006/2008 to be accepted by the RSL’s Committee and must retain a minute of the Committee decision on file for compliance audit purposes. Funding Conditions can be signed off in IMS by the organisations Security Administrator or any other user with the 'Funding Conditions Sign Off' authority assigned to their security profile

3.3 The RSL will not be able to make a submission of any kind into IMS until this confirmation has been made.

3.4 The following conditions apply to all programme types.

 

FUNDING CONDITIONS

 
These Funding conditions set out the requirements that must be met by a Registered Social Landlord (RSL) when using Social Housing Grant (SHG), Purchase Grant VPG/RTA/SHB provided by the Housing Corporation (HC).

Grant conditions applied to all programmes

1. All funding is subject to the provisions of the Housing Act 1996 (or any amendment or re-enactment thereof) and any determinations made under that Act by the HC.
 
 
2. All grant confirmation and other scheme submissions relating to the achievement of forecast milestones must be made, and all grants provided must be used, in accordance with the HC’s published criteria, procedures and audit arrangements. Non compliance with the HC’s procedural requirements could result in the withdrawal of allocations and recovery of grant.

3. Grant funding is conditional upon the RSL meeting the HC’s Regulatory Code; this will be monitored through regulatory engagements and will be assessed through the Housing Corporation Assessment system (HCA). The code includes standards for the housing and related services that RSLs should provide to their residents and communities.
 
4. Where the RSL is undertaking the role of Employer/Client on developments for which grant is requested, funding is conditional upon the RSL obtaining and maintaining either Client’s Charter Status or Mini-Charter status. Client’s Charter status is required by any RSLs with an annual construction activity (works plus fees, but excluding VAT) of more than £1.5m. Where values are less than £1.5m RSLs may obtain the Mini-Charter in order to qualify for funding. The HC will exercise discretion in relation to RSLs undertaking small or occasional projects with insignificant construction activity.

5. All grant paid must be applied to the provision of housing and must be used as prescribed in our guidance. RSLs should ensure appropriate financial appraisal of schemes to confirm their viability both during the development period and in the long term. Where RSLs have specified that schemes are to be developed to higher standards and/or incorporate Modern Methods of Construction (MMC) the schemes must be developed to incorporate these features unless specific prior approval to waive certain aspects is granted by the HC. The dwellings produced should meet the HC’s Scheme Development Standards (SDS) current at the time of the confirmation of grant and all other requirements contained within the National Affordable housing Programme 2006-08 Development Brief (Revision 4 201005).  Housing Quality Indicators (HQI) assessments should be carried out at Feasibility, Scheme Design and Practical Completion stages and recorded within the HQI section of IMS.

6. Funding is conditional on the RSL either possessing a legal interest in the property already, or having entered into or an intention to enter into a binding legal agreement to acquire such an interest as part of a scheme, prior to drawing down grant. Where the RSL is acquiring an interest in the property or where works are to be done, the property must offer good title. Property already in the RSL’s ownership must comply with this condition. Where a leasehold interest is to be acquired, the outstanding term should be at least thirty years for rehabilitation schemes and sixty years for new build schemes at the date of purchase completion.

7 . No member, employee, agent or consultant of the RSL should have any interest in the proposed vendor, contractor or the land or property to be acquired, including properties purchased by individuals under Homebuy or other such schemes. This includes any firm, partnership or organisation in which they or their families are involved.

8. There should be consistency between the rents, including Housing Benefits (HB) eligible service charges specified by RSLs at the time of grant allocation, with those agreed at confirmation of grant stage and those charged from first letting or point of sale onwards. The RSL will therefore charge rents, including HB eligible service charges, on first letting or point of sale which are no higher than those agreed at confirmation of grant; and thereafter it will only change its rents in compliance with rent restructuring guidelines specified by the HC. The HC guideline limits also apply to HB eligible service charges. In the case of intermediate rent projects rents charges will be between market rents and social rents. Any rent increases will be restricted to a maximum of RPI + 0.5%.

9. Where a scheme is to be developed by a different RSL from that which will ultimately own or manage the scheme, there must be a written agreement between the RSLs on the Terms of Transfer and the rents including HB eligible service charges to be charged for the scheme.

10. All funding is subject to RSLs complying with the EU Procurement Rules in relation to Works (Works Directive 93/37/EEC) and Services (Services Directive 92/50/EEC), where applicable.

11. RSLs undertaking delegated development activities in partnership  with a ‘Lead’ RSL under the PPA route shall fully co-operate with the RSL (Lead) in order to enable the RSL (Lead) to discharge its functions on behalf of its partner RSLs.

 12. A sole RSL or single Group RSL following the PPA route is required  to  commission an appropriately qualified independent  consultant or  auditor to  undertake a programme of self-assessment procedural compliance audit.

13 Funding of properties which have already received TSH grant and whose previous lease length was of 6 years or less and are eligible for further Temporary Social Housing (TSH) SHG when the lease or licence expires will be at the discretion of the Corporation. The RSL is required to demonstrate that it has taken into account the additional on-cost paid on the original ‘shared unimproved’ scheme and therefore the cost of re-lifing such schemes must demonstrate value for money.

14 Where the RSL is acting as the ‘Lead’ for a group of other RSLs that are participating in the delivery and/or management of homes included within a PPA, then the RSL will be deemed responsible to the HC for the following additional responsibilities and obligations on behalf of any of the participating RSLs:

• maintaining acceptable business performance as ‘Lead’ to be evidenced by the Housing Corporation Assessment;
• maintaining ‘Client’s Charter’status (not Mini-Charter);
• appraising risk and financial status of individual projects and the overall programme;
• securing HC funding for a programme of agreed projects;
• determining the individual RSLs that will carry out development functions for specific projects and undertake SHG draw-down;
• determining the individual RSLs that will carry out development functions for specific projects;
• usage of suitable legal and procedural documentation for all partnership members including an appropriate and binding agreement between the Lead RSL and the other participating RSLs that sets out the roles and responsibilities of all parties and details arrangements for resolving disputes within the partnership;
• actively and effectively undertaking the role of Design Champion and promoting good design within  the partnership;
• ensuring that a consistently good quality standard is applied to all schemes within the partnering programme;
• where necessary, providing staff training and/or skills assistance to other partner RSLs participating in development activities;
• monitoring programme delivery by all RSL members of the partnership and taking appropriate action to avoid slippage;
• where a development is carried out on behalf of another RSL within the partnership, ensuring that the build contract is assignable to the other RSL on completion, together with warranties from all design consultants and  sub-contractors and where relevant, obtaining section 9 consent  for the transfer;
• arranging regular progress review meetings involving all members of the partnership;
• agreeing and facilitating a programme of Quarterly Review meetings with the HC’s lead investor and financial appraisal and lead regulation representatives as appropriate;
• commissioning appropriately qualified independent  accountants to undertake a programme of self-assessment procedural compliance performance tests across the partnership in accordance with the HC’s published standardised terms of engagement

Additional requirements for:

 

15. RENT

All properties developed for letting at social rents with SHG funding will be subject to the “Right to Acquire” provisions of the Housing Act 1996 unless exempted by Part V of the Housing Act 1985 as amended by the Housing (Right to Acquire) Regulations 1997 or under one of the Housing (Right to Acquire or Enfranchise)(Designated Rural Areas) Orders 1997.  In this context “developed for rent” includes newbuild, rehabilitation, off the shelf, existing satisfactory purchase, purchase and repair and re-improvement schemes. 

Properties developed for letting at intermediate rents for key workers should be let on an assured shorthold tenancy basis and will therefore not be subject to the right to acquire. Rent levels should be set at sub-market levels.

16. SHARED OWNERSHIP

The lease used by the RSL must include the fundamental clauses detailed in the Capital Funding Guide.

17. HOMEBUY

The RSL must hold a valid Consumer Credit Licence and have received a Direction under section 60(3) of the Consumer Credit Act 1974 [as amended] as required by the HC’s Homebuy procedures.

18 KEY WORKER LIVING (KWL)

 The following general funding conditions apply to all KWL schemes but additional conditions may be imposed on individual schemes or groups of schemes:

• KWL grant is provided to facilitate the provision of homes for rent at sub-market levels or assist the purchase of an eligible property by an eligible applicant and cannot be used for any other purpose;
• A KWL allocation is separate from and additional to the home ownership programmes funded through the mainstream ADP and through transitional LASHG arrangements. RSLs may not combine ADP/LASHG allocations with funds from the KWL in the same scheme to provide a higher level of subsidy per unit. Units provided through mainstream ADP/LASHG may be provided on the same site as long as they are funded separately;
• Assistance through the KWL cannot be combined with any other publicly funded home ownership schemes.
• Where applications are received for a joint purchase of a property, at least one applicant must be a key worker. Two or more key workers may not combine separate applications for assistance through KWL where they are intending to purchase jointly. In these cases a single, joint application should be submitted and the joint household income taken into account in determining the appropriate level of assistance;
• KWL grant cannot be used to assist eligible applicants to purchase stock already owned by an RSL. The only exception to this is where the stock has been provided without public subsidy or through stock transfer and has never used as social housing. RSLs may develop for sale through the KWL new housing using their own resources on sites they already own;
•  Where development or rehabilitation is involved, RSLs must ensure that all necessary planning consents are obtained, building control requirements are observed and that adequate insurance is in place during development and after purchase if the RSL retains an interest in the property;
• Schemes must be within the objects of the RSL. Where this is in doubt RSLs should take their own legal advice;
• No member, employee, agent or consultant of the RSL, or any partner organisation (unless the allocation is for a specific development) should have any interest in the proposed vendor, contractor, land or property to be acquired under KWL, including individual street properties. This includes any firm, partnership or organisation in which they or their families are involved. The Housing Corporation’s regulatory guidance GPN3 – Maintaining Standards of Probity identify circumstances and procedures to be observed where relatives of officers or staff who are eligible can be offered properties to rent or purchase.

19. PROGRAMME MANAGMENT / SYSTEM MANAGEMENT

The RSL must join and fully participate in the “Continuous Recording of Lettings System” (CORE); if it has a current development programme and if the RSL owns or manages:

    - more than 250 self contained homes;
    - more than 250 hostel/shared housing bedspaces;
    - or if the RSL undertakes any leasehold or shared
    - ownership sales.

20. The RSL must follow the processes for re-forecasting milestones and for proposing any grant variation as set out in Capital Funding Guide. Decisions on accepting proposed variation will be made in the light of the organisations’ Resource Expenditure Limits.

 22. The HC may impose penalties including amendment of allocations if forecast milestones are not met.

22. In the event of the RSL failing to comply with these Funding Conditions or if there is any cause for serious concern about the RSL’s performance or financial viability, the Corporation reserves the right to suspend funding.

23. If an RSL should fail to comply with these conditions specified under sections 18 (3), 20 (4) and 21 (4) of the Housing Act 1996, the HC may recover all or part of the grant in accordance with its determinations and guidance.

24. RSLs must review their security arrangements in accordance with the Security Administrator and Good Practice Guide available at www.housingcorp-online.org. 

In particular, RSLs must:
• ensure that the Corporation is notified immediately if a Security Administrator leaves or changes posts and responsibilities;
• ensure that the list of IMS users and their authorities is regularly reviewed to ensure they are correct and appropriate;
• ensure that users are removed from IMS immediately they leave the organisation or are no longer required to work on IMS; and
• ensure that IMS passwords are not shared and that RSL users are prevented from entering IMS under a UserID other than their own.

25. Failure to comply with the above and with the conditions set out in Annex 2 of the Security Administrator and Good Practice Guide may result in the withdrawal of the RSL’s IMS access.

26.  The HC reserves the right to issue additional conditions in year as deemed appropriate and necessary.

27. A copy of the relevant Committee minutes of the decision to  
agree to comply with the Funding Conditions must be
retained by the RSL for Compliance Audit/Regulatory purposes.

3.5 RSLs following only the Specialist route need not adhere to clauses 11-14

4 TYPES OF DEVELOPMENT - NEW BUILD

 

Acquisition and Works

4.1 The construction of new dwellings on land purchased by the RSL.  In certain circumstances the RSL may enter into a building licence agreement. See paragraph 6

4.2 In order to provide reassurance to tenants/owner occupiers, funders and valuers on structural soundness and durability the following requirements must be demonstrated to the Corporation:

• the properties have a life expectancy of at least 60 years;
• the system is capable of achieving necessary Building Regulations and other statutory approvals;
• the system has been assessed and confirmed as suitable for housing by an independent approvals authority.

 
Off The Shelf

4.3 A brand-new completed dwelling, suitable for social housing letting, purchased from a contractor/developer or their agents, following an inspection by a suitably experienced or qualified person.  The on-costs include an element for any minor works necessary for the scheme to comply with SDS, and must not exceed £1,500.

4.4 Grant is paid in a single tranche at Acquisition stage.

Works Only

4.5 The construction of new dwellings on land already owned by the RSL, therefore there are no acquisition costs.  If the land is not part of a public sector funded scheme, the RSL can consider following the ‘historic acquisition’ route. See General 03.  The work may be the demolition and redevelopment of existing buildings on the site, or new construction.  These units are subject to Right to Acquire.

4.6 Where there is a Deemed Loan Debt on the land this will be an eligible cost provided it does not exceed the current valuation in which case the lower amount will qualify. Grant will be paid at the rate applicable to the new scheme as a whole.  For LSVT stock the outstanding mortgage will be the eligible cost. See Glossary in General-10 for definition and calculation of deemed loan debt.

Land Inclusive Package

4.7 A ‘land inclusive package’ is where the land/property is acquired from the developer or building contractor who will also produce the dwellings on the land.  Normally there will be separate contracts for the purchase of the land/property and for the development works.  Usually these contracts are signed simultaneously with the building contract dependent upon the completion of the land acquisition contract.

4.8 Exceptionally, a land inclusive package may include the acquisition of some partially or wholly completed dwellings.  Land Inclusive Packages, which consist solely of completed dwellings, must follow the Off the Shelf or Existing Satisfactory route.

4.9 Land Inclusive Package projects are Acquisition and Works schemes with the simultaneous payment of the Acquisition and Start on Site tranches at Start on Site stage, following the exchange of contracts for acquisition.

4.10 Where the contract sum includes items which are classed as ‘on-cost’ items, such as design fees, planning fees etc., the contract sum must be split between the ‘works’ element’ and ‘other’.  On the submission to the Corporation, only the ‘works element’ must be shown as ‘works’ otherwise the other costs will be double counted in the works figure and the ‘on-costs’ figure.

5 TYPES OF DEVELOPMENT - REHABILITATION

5.1 An inspection of all properties requiring works must be carried out by relevantly qualified, experienced and professionally indemnified technical consultants or relevantly qualified and experienced members of staff.

Acquisition and Works

5.2 The RSL acquires a property, or properties, on the open market for refurbishment or conversion.  The cost of the SHG-eligible work per dwelling must exceed £10,000 exclusive of VAT.  If the works cost less than £10,000 per dwelling, the Existing Satisfactory or Purchase and Repair route must be followed.  A building contract will normally be entered into, but sometimes work can be carried out under a building licence agreement. See paragraph 6.

Existing Satisfactory

5.3 The RSL acquires a second-hand existing dwelling, or dwellings, on the open market, which are already of a standard and condition suitable for social housing letting, after an inspection by a suitably experienced or qualified person.  The on-costs include an element for any minor works necessary for the scheme to comply with SDS, and must not exceed £1,500. SHG is paid in a single tranche at Acquisition stage.

Purchase and Repair

5.4 The RSL acquires a second hand dwelling on the open market, which requires some repair to bring it to a standard and a condition suitable for social housing letting.  The estimated cost of the SHG-eligible works will exceed £1,500 but be less than £10,000 per dwelling, exclusive of VAT.

Works Only

5.5 The property must already be owned by the RSL and no public funds have been paid for any previous refurbishment or conversion.  The property is in need of rehabilitation, improvement or conversion.  If the RSL wishes to obtain SHG for the original acquisition, the scheme must follow the ‘historic acquisition’ route.  See General 03 .

Re-Improvements

5.6 The property must already be owned by the RSL and some form of grant or subsidy, such as HAG or SHG, has already been paid for construction, improvement or conversion at some time in the past.  Unlike Major Repairs which are remedial, Re-improvements can result in an increase of rent.  The work may be improvement or conversion, but not just repairs.  The contract may include maintenance work but that is a ‘housing non-qualifying cost’, which is ineligible for SHG.  See the Repair section for eligibility and procedures for repairs only.

5.7 Re-improvement schemes will not normally be considered less than:

• 15 years after Practical Completion of the original rehabilitation scheme, the stock transfer in the case of Stock Transfer RSLs (e.g. LSVTs); or
• 30 years after Practical Completion of the original new build scheme.

However, re-improvement schemes may be considered sooner where the property is difficult to let because it is no longer appropriate for the intended use, or there is a serious health risk to tenants.
 
5.8 The outstanding mortgage of the original works is an eligible cost, on which grant will be paid at the rate applicable to the new scheme as a whole.
 
5.9 The improvement or conversion works carried out in a re-improvement scheme must bring those parts or elements of the property which have been subject to re-improvement up to the current design and construction standards as set out in SDS.

Regeneration

 
5.10 Regeneration of an area can require a wide range of activities. The Corporation published ‘Adding Value to what we have: the Housing Corporation’s Regeneration and Market Renewal Policy’ and a Strategy for consultation in June 2004 to set out our overall approach to regeneration. These documents will be revised in the light of the responses to the consultation. The processing of schemes can include various options:
 

Rehabilitation

 
5.11 The RSL already owns some property in the regeneration area and will acquire other property in the area, with all buildings retained.  The properties already owned by the RSL will be processed as a new Works Only or Re-improvement scheme or schemes.
 
5.12 The properties being acquired will form a separate scheme approval, or approvals, processed as Acquisition and Works, or Existing Satisfactory or Purchase and Repair schemes as appropriate.
 
A mixture of acquisition, rehabilitation of RSL owned property, demolition and new build.
 
5.13 Some properties are already owned by the RSL, funded with HAG/SHG.  Other are to be acquired.  The regeneration will involve wholesale demolition, redevelopment not necessarily on the same street plan, possibly with some buildings retained.  The rehab. work may be re-improvement, works only, conversion (two into one) etc.  The area regeneration will be split into three or four different types of scheme:
 

• Rehab. Works Only or Re-improvement scheme(s) for stock already owned by the RSL;
• Rehab. Acquisition and Works, Purchase and Repair, and/or Existing Satisfactory for the acquisition of property not owned by the RSL;
• New Build Acquisition and Works for new construction following demolition of property already owned by the RSL and property being acquired.  The eligible acquisition cost is the purchase price of the properties acquired for demolition plus the Deemed Loan Debt for the properties being demolished (see General 10 Glossary for DLD definition).

 
If the Corporation considers that the grant is over-generous, taking into account affordability etc., the Corporation’s local office may negotiate a discount on grant with the RSL.

 
Supported housing schemes
 

5.14 These schemes provide accommodation, which may be either shared or self-contained, designed to meet the needs of particular user groups for intensive management.
 
Combined supported housing and general needs schemes
 
5.15 Within the same development there can be a mixture of supported housing and general needs housing.  The TCI calculation for each type of unit is dependent upon the individual unit characteristics.  See the latest TCI guidance.
 

Tenanted acquisitions
 

5.16 Where the RSL intends to acquire tenanted property, there are a number of issues to be considered.  These are covered in chapter General 03 

 
 
6 CONTRACT TYPES AND PARTNERING

6.1 There are various types of building contract available to the RSL when considering how to carry out a development. Primary and other reference documents, guidance and sources of advice are listed in the Corporation’s Scheme Development Standards.  The types of contract used by an RSL may be:
 

Competitive Tendering

 6.2 This involves a common set of documents priced by three or more tenderers in accordance with either:
 
• code of practice for single stage selective tendering;
• code of practice for two stage selective tendering; or
• code of practice for selective tendering for design & build.

Negotiated Tendering

6.3 This involves negotiating with the building contractor/developer, without direct competition from other contractors.  Negotiated tendering is more usually associated with land inclusive packages, but also features in continuation contracts resulting from serial tendering.

Traditional

6.4 This involves the RSL employing professional consultants to design the development with the work carried out by a building contractor based upon a building contract with the RSL.  The contractor may be selected by single stage competitive tendering or by direct negotiation.

Design And Build

6.5 This is where the main building contractor may be responsible for both the design and the works, and for obtaining all necessary permissions such as planning permission and building regulation approval.  The contractor may be selected by competitive tendering or by direct negotiation.

6.6 The contract is usually on a fixed and inclusive price on the basis of a common set of requirements or brief provided by the RSL.  The extent to which the RSL may wish to influence the design will be reflected in the requirements or brief provided by the RSL.

6.7 The most basic variant of design and build relies wholly upon the contractor providing the design for all aspects of the scheme.  A more collaborative variant of design and build may involve the RSL, or consultants on its behalf, providing design input up to and including that equivalent to RIBA Stage D (Scheme Design) and the contractor, or consultants on its behalf, then completing the design process and taking contractual responsibility for the collaborative design.

6.8 Design and Build contracts may be in conjunction with either:

• Land Inclusive Package - where the package offered to the RSL by a contractor or developer includes land/property acquisition in addition to building works; or
• Non-Land Inclusive Package - where the offer to the RSL by the contractor or developer comprises building works only and excludes the land/property acquisition element.

Management Contracting

6.9 A management contract is one whereby the building work is wholly executed upon a sub-contract basis, organised by a fee paid management contractor who operates with, and as part of, the professional team of consultants commissioned by the RSL.  The standard Grant tranche criteria will apply. Start on site for tranche purposes will be determined by the date for possession fixed and set in the signed and dated Management Contract agreement.

Partnering

6.10 The Construction Task Force report 'Rethinking Construction' seeks to define partnering as follows:

 “Partnering is a management approach involving two or more parties working together to improve performance through agreeing mutual objectives, devising a way for resolving any disputes and committing themselves to continuous improvement, measuring progress and sharing the gains”.

 This is further expanded in guidance published by The European Construction Institute (ECI) entitled “Partnering in the Social Housing Sector”.  In addition, the Association of Consultant Architect's (ACA) in conjunction with David Mosey of Trowers & Hamlins have produced a new standard form of contract entitled the 'Project Partnering Contract 2000' (PPC2000) for use in project partnering situations.

Partnering: treatment of shared savings within the grant rate

6.11 The forecast of final works costs, or the final account of works contracts concluded at the time of the Final Cost submission should show both works and incentive payments made (or due to be made) to the contractor.

 The members of the supply chain receive their full share of the savings identified, to be further shared in accordance with their agreement.  The client-side share of the savings is shared between the RSL and the Corporation in accordance with the grant rate for the scheme.

Example: a £450,000 contract benefited from a value management exercise reducing costs by £2,000 and the RSL’s incentive arrangement is to share savings 50:50 with the supply chain.  The forecast final account should show the costs as £449,000 i.e. the £448,000 for the works plus £1,000 incentive payment. Grant is recalculated accordingly.

7 BUILDING AGREEMENTS (also referred to as building licences

7.1 This occurs when an RSL takes possession of a site in order to carry out building works before it has completed purchase of or acquired a leasehold interest in the site. The land or property remains in the owner’s possession until the legal interest is transferred to the RSL. The Building Agreement, which must be signed prior to Start on Site, must include a legally binding agreement that the freehold or leasehold in the property will transfer to the RSL at the latest on practical completion.

7.2 In all cases it is the responsibility of RSLs to:

• ensure there is a legally binding agreement that the legal interest in the property will be transferred to the RSL;
• seek legal advice to ensure they have sufficient security to proceed;
• be aware that if the scheme fails to complete, or the legal interest is not transferred to them, the Corporation will recover any grant paid. 

7.3 Building Agreements can be used to avoid payment of VAT when a local authority transfers land at nil cost to an RSL. However, RSLs must seek their own legal and specialist tax advice regarding the content of any agreement, and to contact their local VAT office regarding any criteria which needs to be met.
 
7.4 In some circumstances a building agreement is obtained for the full purchase price at exchange of contracts with completion of the purchase at practical completion of the dwellings. In most cases the full purchase price will not be required until completion of the purchase at practical completion of the building works.

Timing of claims for SHG

7.5 As SHG cannot be paid in advance of need, possession of the site alone will not be sufficient to enable an application for the acquisition tranche to be made. If details of the proposed agreement are provided to the Corporation, the Corporation may agree to pay the Acquisition tranche of SHG if it is satisfied that SHG will not be paid in advance of need. The RSL must confirm that the full purchase price has been paid in return for the building agreement.
 
7.6 The RSL can claim the Start on Site tranche when the contractor takes possession of the site/property in accordance with the signed main building contract. Where no payment is made for the acquisition the Start on Site tranche may be paid and the Acquisition tranche paid afterwards on completion i.e. reverse tranches.
 
7.7 Building agreements can be complex. To ensure a coherent policy of dealing with them, the RSL must give details to the Corporation’s local office.
 

Agreements to lease
 

7.8 Where the RSL will eventually acquire the leasehold of a site (for example in mixed use developments with a commercial freehold) it may enter into an agreement to lease so that works can be carried out before the leasehold interest is acquired. In these cases the general guidelines regarding building agreements apply.
 
 In all cases it is the responsibility of RSLs to:

• ensure there is a legally binding agreement that the legal interest in the property will be transferred to the RSL;
• seek legal advice to ensure they have sufficient security to proceed;
• be aware that if the scheme fails to complete, or the legal interest is not transferred to them, the Corporation will recover any grant paid.

Golden Brick schemes

7.9 The golden brick has been used by RSLs for the full recovery of VAT on costs associated with the construction of dwellings. This arrangement involves interposing a separate development company between land vendor and the RSL – the development company will start construction and then make a zero-rated sale of the partly completed building to the RSL.

7.10 As SHG cannot be paid in advance of need, possession of the site alone will not be sufficient to enable an application for the Acquisition tranche to be made. Where the Corporation is given details of the proposed agreement, it may agree to pay Acquisition tranche of SHG if satisfied that SHG will not be paid in advance of need. The RSL must confirm that the full purchase price or a significant proportion of it has been paid.

7.11  The RSL can claim Start on Site tranche when the contractor takes possession of the site/property in accordance with the signed main building contract. When no payment is made for the acquisition the Start on Site tranche may be paid and the Acquisition tranche paid afterwards on completion. This may result in the Start on Site stage being paid before the Acquisition tranche.

7.12  In all cases it is the responsibility of the RSL to:
• ensure there is a legally binding agreement that the legal interest in the property will be transferred to the RSL; 
• seek legal advice to ensure they have sufficient security to proceed; 
• be aware that if the scheme fails to complete, or the legal interest is not transferred to them, the Corporation will recover any grant paid;
• liaise with the local office of the Corporation if their scheme does not fit with the above.

Development and Purchase Options agreement for BME and other RSLs

7.13 Following previous advise in the Guide to the Allocation process for 2004/5 – 2005/6 relating to the Brent Protocol principles, a standard modular development agreement has now been produced by a steering group, which included a number of RSLs, for use when one RSL is undertaking development work on behalf of another RSL. Primarily for use where development work is being undertaken on behalf on a BME partner the agreement can be used in all partnering arrangements. The Corporation strongly encourages widespread use of this agreement, which has been designed to minimise the work required in compiling new agreements for each partnering arrangement. A copy of the agreement “Development and Sales Agreement relating to Social Housing Grant agency schemes for BME RSLs with options to purchase” is now available in the Corporation’s website library, which can be found at www.housingcorp.gov.uk.

8 INSURANCE REQUIREMENTS

8.1 It is a condition of SHG for Rent and Sale schemes that the insurance requirements are met as set out below.  The cost of taking out such insurance rests entirely with the RSL.

General requirements as a condition of SHG - covenant

8.2 It is a condition of SHG payment that the RSL, both during development and thereafter, insures and keeps insured for its full replacement value the accommodation provided.

Reputable Insurers

8.3 The Corporation requires RSLs to deal with reputable insurance companies. Supporting correspondence relating to the credentials of the insurance company should be retained so that the RSL is able to demonstrate, at compliance audit, that only reputable insurers are being used.

Insurable value

8.4 The ‘full insurable value’ or ‘full replacement value’ shall be deemed to be the full cost of reinstatement at the time of reinstatement whenever that may be.

8.5 Due allowance should be made in the reinstatement values for demolition, removal of debris, shoring up or propping, making good, professional fees, and the cost of complying with local authority and other statutory requirements.

8.6 The RSL may find the annually updated ‘Guide to House Rebuilding Costs’ useful for the ongoing determination of full re-instatement values.  This is prepared on behalf of the Association of British Insurers by the Building Cost Information Service of the Royal Institution of Chartered Surveyors (RICS) at 12 Great George Street London SW1P 3AD (Tel: 0870.333.1600 and website:www.ricsbooks.com).

8.7 The RSL may also wish to safeguard its insurance position by commissioning an independent professional opinion on reinstatement values every five years or more frequently as appropriate.

Other risks

8.8 In addition to the specified risks of loss or damage to the building caused by fire or aircraft, the Corporation requires ‘other risks’ to be covered as follows:

 For Rehabilitation property - from the exchange of contracts to purchase until practical completion of the whole or relevant part of the works:

• explosion, lightening, earthquake;
• storm, tempest, flood (not frost);
• bursting, leaking or overflowing of water tanks, water apparatus, water pipes, or sewage pipes.

For Rehabilitation and Newbuild property - from practical completion of the whole or relevant part of the works:

• as for rehabilitation property above; plus
• subsidence, ground heave, or landslip of the site on which the building stands.

 

Exclusions

8.9 The cover outlined under ‘other risks’ above may be subject to the normal insuring exclusions i.e. war, invasion, act of foreign enemy, hostilities, civil war, rebellion, revolution, insurrection, usurped power, loss or damage caused by ionising radiations or contamination by radioactivity from any nuclear fuel, radioactive toxic, explosive nuclear assembly or nuclear components thereof, or pressure waves caused by aircraft or other aerial devices travelling at sonic or supersonic speeds.

8.10 Terrorism is a normal insuring exclusion and falls outside the Corporation’s insurance requirements.  Whether or not to insure for this risk is a matter for individual RSLs to decide according to the perceived risk.

8.11 The Corporation requires prior notification of any other exclusions involving potentially significant costs.

Excess

8.12 Excess is an insurance deductible that relates to the uninsured first part of any claim which the policyholder has to bear.  Any such shortfall due to either voluntary or compulsory excess provisions must be borne by the RSL.

Property condition

8.13 Insurance policies require that any defect arising in the property that is likely, either directly or indirectly, to increase the risk of occurrence of any of the insured perils must be notified to the insurer.  Failure to notify could prejudice reimbursement from the insurer of a subsequent related claim.

Restrictive covenants

8.14 Some site or properties on offer for sale may be subject to restrictive covenants that put the development proposals at risk.  In such cases the lender may make the completion of the loan agreement and legal charge conditional on the issue of a restrictive covenant indemnity policy.  It is the responsibility of the RSL to take out such insurance where appropriate.

 

9 THE USE OF LOCAL AUTHORITY STAFF BY THE RSL

 

9.1 RSLs may wish to use local authority professional and technical staff in respect of any SHG-funded scheme. 9.2 Local Authority Direct Labour Organisations are empowered to carry out works of maintenance but not construction for RSLs under Section 1 (i)(d) of the Local Authorities (Goods and Services) Act 1970.  However a few local authorities may have secured specific powers under a Local Act to enter into contracts with RSLs for substantial construction work.

Action by the RSL

9.3 The RSL must be satisfied that the local authority can provide a consultancy service which:

• is equivalent to that available from the private sector;
• represents value for money;
• allows the RSL to properly exercise its client function;
• avoids any duality of interest;
• complies with the requirements contained in the Corporation’s Scheme Development Standards on Probity of Procurement.

9.4 The RSL may receive requests from local authority Direct Labour Organisations to be given the opportunity to tender for works of construction for rehabilitation or new build.  It is the responsibility of the RSL to enquire direct to the local authority concerned as to whether the authority has power under a Local Act to carry out such works for RSLs.

Action by the local authority

9.5 The local authority must be satisfied that:

• the consultancy service offered by the authority meets the criteria specified in the Corporation’s Scheme Development Standards;
• the authority is able to carry out a realistic and adequate value for money assessment of the scheme.

10 AUTHORISED SIGNATORIES

 
10.1 To use the Corporation’s Investment Management System (IMS) the RSL must nominate at least one RSL Security Administrator. RSLs must inform the Housing Corporation of any change of RSL Security Administrator by submitting a SIGRSLv3 form (available in the Help page of www.housingcorp-online.org) to the Housing Corporation. SIGRSL forms must be signed by one of the senior officers of the RSL as recorded on the Housing Corporation's On-line Register. RSLs can have up to four RSL Security Administrators.
 
10.2 RSLs who have not previously accessed IMS but would like to gain access should email THCHelpdesk@housingcorp.gsx.gov.uk in order to obtain the necessary information and application pack.
 
10.3 The RSL Security Administrator(s) have delegated authority in IMS to confirm the Authorised Signatories in IMS for their organisations by setting up each Authorised Signatory with the relevant security authority in IMS.

10.4 RSL Security Administrators can also add the ‘Maintain Register’ Authority to a user in IMS which will allow that user to update the Housing Corporation's On-line Register if there are any changes to the RSL details in-year e.g. if there are changes to senior officers.

 
 
11 BANK ACCOUNT DETAILS

 
11.1 The Corporation pays SHG directly into the RSL’s bank account. Therefore the Corporation requires details of the RSL’s bank account, otherwise grant cannot be paid to the RSL.  When the RSL receives an allocation of SHG from the Corporation for the first time, the RSL must provide details of the bank account to be credited, and notify any subsequent change of bank or account details.
 
11.2 The RSL must provide in writing the following information on headed notepaper, signed by the Secretary and two members of the Committee Members and sent, with a copy of the bank mandate, to the Finance Division of the Corporation:

• Bank name;
• Bank branch/address;
• Bank sort code;
• Bank account number;
• Bank account name.

12 MONEY LAUNDERING REGULATIONS 2003

12.1 Regulation 10 of these Regulations came into effect on 1st April 2004, and relates to persons who act as high value dealers.  It is unlikely that RSLs would be considered high value dealers when undertaking Low Cost Home Ownership activity, but they should ensure that they satisfy any requirements of the above Regulations by seeking their own advice as necessary.

13 ASSIGNING A “BUILD CATEGORY” TO SCHEMES

13.1 In order to record the homes that are produced using modern methods of construction, associations will be required to assign a “build category” to schemes at key stages in the processing route.  The following guidance sets out the categories and their definitions.

DEFINITIONS OF ‘BUILDING CATEGORY’

 

13.2 Modern Methods of Construction (MMC)

 
MMC is a broad category that embraces a variety of build approaches  including Off-Site Manufacturing (OSM).  Whereas all OSM may be  regarded as falling within a generic MMC heading, not all MMC may be regarded as OSM.  To address this we have set out a range of categories  together with accompanying guidance.

A. OSM - Volumetric

 Volumetric construction (also known as modular construction) involves  the production of three-dimensional units in controlled factory  conditions prior to transportation to site. Modules can be brought to site in a variety of forms ranging from a basic structure to one with all internal and external finishes and services installed, all ready for assembly. A family sized dwelling might typically be manufactured in four modules plus roof module(s).

B. OSM - Panellised

 Flat panel units are produced in a factory and assembled on-site to  produce a three dimensional structure. The most common approach is to use open panels, or frames, which consist of a skeletal structure only  with services, insulation, external cladding and internal finishing occurring on-site.  More complex panels - typically referred to as closed panels - involve more factory-based fabrication and may include lining  materials and insulation. These may also involve include services, windows, doors, internal wall finishes and external claddings.

C. OSM - Hybrid

 A method - also referred to as semi-volumetric - which combines both panellised and volumetric approaches. Typically, volumetric units  (sometimes referred to as ‘Pods’) are used for the highly serviced and more repeatable areas such as kitchens and bathrooms, with the remainder of the dwelling or building constructed using panels.  The hybrid approach is sometimes used to provide added flexibility on complex sites and those requiring additional communal areas.  As with both volumetric and panellised approaches the degree of factory-based fabrication is variable. 

D. OSM - Sub-Assemblies and Components

This category is intended to cover approaches that fall short of being classified as systemic OSM but which utilise several factory fabricated innovative sub-assemblies or components in an otherwise traditionally built structural fabric. Typically, schemes incorporating the use of floor or roof cassettes, precast concrete foundation assemblies, pre-formed  wiring looms, mechanical engineering composites, etc. would fall into  this category. Traditional constructed schemes utilising manufactured  units - such as windows, door-sets, roof trusses, etc., which might  otherwise be part of the fabrication process in the other OSM categories  - should not be included as sub-assemblies or components in this category.

E. Non-OSM Modern Methods of Construction.

This category is intended to encompass schemes utilising innovative housing building techniques and structural systems that fall outside the OSM categories.  The presence of innovation is an essential feature that  might manifest itself through an innovative non-OSM building system, through a building technique familiar in other sectors but new to house-building, or through traditional components being combined in innovative ways.  Typically, ‘Tunnel Form’ or H + H Celcon ‘Thin joint blocks’ would fall within this category.

F. Not Applicable

This category is intended to encompass all ‘Traditional’ site-based new build   schemes and site-based rehabilitation, refurbishment and conversion.

Please also see General 03 Acquis 

Cilck here for section 2 of the General Chapter