F2-11/96 Cessation of surety and related provisions by the Housing Corporation
Distributed to:
All registered housing associations and local authorities
Summary:
Notification of the Housing Corporation's intention to cease the provision of its discretionary surety arrangements, including General Guarantee provision for Section 38 Agreements, surety provision for Section 104 Agreements and all other bondsman activities.
This circular supersedes guidance within the Housing Corporation's Mortgage Procedure Guide and Good Practice Guide.
1 Background
1.1 Currently the Housing Corporation provides surety arrangements for statutory agreements and associated bonds on a discretionary basis. The details of the extent of the provision are contained in:
i Mortgage Procedure Guide - reference 4.1 (1.4.94), reference 4.2 & 4.3 (1.12.94), and annex references 4.7.1 - 4.7.7 (1.4.94);
ii Good Practice Guide - references 3.2.3 (1.6.90).
1.2 These surety arrangements apply only to Housing Corporation funded schemes, local authority or wholly privately sponsored schemes fall outside the existing provisions.
1.3 In addition the surety arrangements are available only to those housing associations having the financial ability to indemnify the Housing Corporation against any claims which might fall on the Corporation whilst acting as surety.
1.4 Having re-assessed the arrangements in the light of the availability of suitable alternative arrangements in the financial or related sectors and following discussions with the National Federation of Housing Associations, the Housing Corporation has decided to cease offering surety arrangements as of 1 April 1996.
2 Alternative arrangements
2.1 Associations needing to set up surety arrangements for statutory agreements are advised to consider the financial arrangements offered by banks and other financial institutions. Special arrangements may be available, on a discretionary basis, for housing associations from the National House Building Council, telephone 01494 434477, or Zurich Building Guarantees, telephone 0 1252 3 ) 87597.
2.2 The costs arising from the need to enter into statutory agreements and associated bonds, including all fees and charges directly attributable to such works, are eligible for Grant as part of the Works element of the overall cost of development. See 'Total Cost Indicators 1996/97 - Guidance Notes' page 4 paragraph Works (vi).
3 Enquiries
Please direct enquiries on this circular to the appropriate regional office of the Housing Corporation.
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