Capital Funding Guide

7. Grant Recovery

This chapter sets out the grant recovery and recycling requirements for all registered providers and includes the Agency’s Recovery Determination.

1. Overview

1.1 Purpose

1.1.1 In defined circumstances, capital grant is subject to recovery by the Agency. This chapter sets out grant recovery requirements for Registered Providers. The Recovery of Capital Grants and Recycled Capital Grant Fund General Determination 2015 makes provision for the recycling of grant by all classes of Registered Provider regardless of whether they are non-profit or profit making providers. Where Registered Providers are referred to in the chapter, this should be read as referring to all Registered Providers that are developing with capital grant outside of London, unless otherwise stated. Local authority Registered Providers should also refer to their 2015 to 18 Grant Agreements for specific details of their recovery and recycling procedures.

1.1.2 Disposal Proceeds Fund

Under the Housing and Regeneration Act 2008, the responsibility for the administration and policy making for the Disposal Proceeds Fund rests with the social housing regulator. The regulator has published updated requirements and guidance on operation of the Disposal Proceeds Fund. Any queries not resolved by reading the requirements and guidance documents may be directed to the referrals and regulatory enquiries team on 0300 1234 500 (select option 3), mail@homesandcommunities.co.uk

1.1.3 This chapter sets out:

  • The legislative framework for grant recovery including the Recovery of Capital Grants and Recycled Capital Grant Fund General Determination 2015 (Recovery Determination)
  • The ‘Relevant Events’ which trigger grant recovery
  • The circumstances under which recoverable grant must be repaid to the Agency, or where recoverable grant can be recycled
  • How to calculate the amount of recoverable grant, including when property is sold and specific requirements for profit making Registered Providers in following disposal events
  • How the grant is apportioned to each property within schemes developed with grant
  • The grant recovery process, highlighting the difference between repayment and recycling through a Recycled Capital Grant Fund
  • The Permitted Uses of the Recycled Capital Grant Fund
  • The requirements for accounting, reporting and audit

1.1.4 These procedures apply to capital grants provided by both the Agency (and predecessor bodies) and local authorities. They apply equally to historical grant paid as Housing Association Grant or Social Housing Grant; and Social Housing Assistance currently paid under section 19(6) of the Housing and Regeneration Act 2008; unless grant was paid under contractual arrangements i.e. subject to clauses in a Grant Agreement for unregistered providers. The different types of funding listed here are referred to collectively in the Recovery Determination and this Guide as ‘Capital Grant’ or just ‘grant’.

1.1.5 Properties developed by organisations with the assistance of Social Housing Grant under section 27A of the 1996 Housing Act, which as part of their Grant Agreement were/are subsequently transferred to Registered Providers that were formerly Registered Social Landlords, are to be treated as funded under section 18 of that Act and will therefore be subject to these procedures following transfer.

1.1.6 Where this chapter refers to recycled grant it refers only to funds from the Recycled Capital Grant Fund and not the Disposal Proceeds Fund (which is covered by separate guidance). When referring to recovered grant this includes notional interest added to a Recycled Capital Grant Fund balance which can then be spent like grant.

1.1.7 Since 1 April 2012, in Greater London, the administration of the Recycled Capital Grant Fund for amounts generated within Greater London is the remit of the Greater London Authority. Registered providers should refer to the Greater London Authority’s separate arrangements for the recycling of grant amounts generated within greater London

1.2 Context

1.2.1 Legislation requires the Agency to determine and or specify principles regarding grant recovery. The main legislative requirements are as follows:

  • Section 32, Housing and Regeneration Act 2008
  • Section 27, Housing Act 1996
  • Section 52, Housing Act 1988

Supplemented by Statutory Instrument 2010/862.

1.2.2 The Agency’s current principles governing Grant Recovery following the sale of property (and other defined relevant events) are set out in The Recovery of Capital Grants and Recycled Capital Grant Fund General Determination 2015.

1.3 Conversions

1.3.1 As part of the Shared Ownership and Affordable Homes Programmes (SOAHP) Registered Providers are able to utilise the concept of ‘conversions’ to aid additional supply of affordable housing. In certain conversion scenarios and as agreed with the Agency as part of a Registered Provider’s SOAHP, grant may not be subject to recovery provided it generates financial capacity to deliver new supply. Conversion includes:

  • On re-let, existing Social Rent to Affordable Rent
  • Social Rent to shared ownership
  • Intermediate Rent to shared ownership

Further details of conversion scenarios can be found in paragraph 2.13 of the 2011 to 15 AHP Framework Document.

1.3.2 Normally in the above circumstances Registered Providers would be required to consider whether there may have been a relevant event – such as a ‘change of use’ or ‘disposal ‘ and if so whether grant is due to be recycled via the Recycled Capital Grant Fund. However, where conversion has been agreed as part of the Registered Provider’s 2015 to 2018 Grant Agreement or 2011 to 2015 Framework Delivery Agreement this may not lead to grant recovery and will be subject to Annex four of the 2011 to 15 AHP Framework Document.

2. Relevant events

2.1 General

2.1.1 This section sets out the procedures that must be followed by all Registered Providers when a relevant event occurs in connection with grant funded land or property. For the avoidance of doubt property is defined in the Determination as including - a dwelling, hostel (note that this is not intended to be permanent accommodation), supported housing, temporary social housing or traveller pitch funded by capital grant. Grant is recoverable when a relevant event occurs. Typically this is the sale of a rented property, or a shared owner staircasing, but can also be the failure to complete the development of a scheme, a change in use of a completed scheme, the sale of undeveloped land or property and other specified situations.

For guidance on the term recoverable please see below.

When this Guide uses the general term recoverable, or recovery it refers to the fact that an obligation arises on the Registered Provider to repay the defined amount of grant, when the relevant event occurs or to recycle the grant through a Registered Providers Recycled Capital Grant Fund. This obligation can be discharged by literally repaying the grant, or by crediting the sum to the Registered Provider’s Recycled Capital Grant Fund reinvesting the grant in accordance with our priority uses of permissible purposes as appropriate.

The term recoverable simply looks at when this obligation arises and the amount of grant recoverable. It does not look at the procedural requirements governing how recycled grant can be used. These are set out in section 5.

2.1.2 The term relevant event comes from The Recovery Determination, and must be read in this section to mean relevant events as defined in that Determination. The term does not refer to milestones, or other ‘relevant events’ described in other guidance or contract arrangements.

2.1.3 Depending upon which relevant event has triggered grant recovery, Registered Providers will either be required to repay grant to the Agency, or will have the option of recycling it through their Recycled Capital Grant Fund to spend on permitted uses (see section 5).

2.2 The relevant events

2.2.1 The relevant events are defined at paragraph (7) of the Recovery Determination.

2.2.2 When a relevant event occurs to land or property funded from the Recycled Capital Grant Fund, the principles within the Recovery Determination (and detailed in this Guide), apply equally to the recovery and repayment or re-use of that recycled grant – as if it had been funded with new Social Housing Assistance.

2.2.3 When a relevant event occurs Registered Providers must check if it is one which requires them to repay the grant directly to the Agency, or whether they have the option of crediting the grant to their fund. The relevant events 7a) – 7i) in the determination are the repayment events. Relevant events 7j) – 7q) are recycling events.

2.2.4 For Relevant Event (7)(f) – see the Recovery Determination - the Agency will make a judgement as to whether the error is of sufficient size to warrant repayment; this will normally include any sum greater than £500.

2.3 Repayment and recycling timetables

2.3.1 When a relevant event occurs and recoverable grant is to be paid to the Agency, written notification must be sent to the relevant Agency operating area responsible for the location in which the property is situated, within 14 days of:

  • The Agency notifying the Registered Provider in writing that one of the relevant events (a) to (f) in (7) of the Recovery Determination has occurred or
  • The date of completion when a property is disposed of by sale or transfer or
  • The date when demolition started, where a capital receipt is received or
  • The date when the property ceased to be used for a purpose eligible for capital grant, or when it ceases to be used for supported housing when its use is to change to general needs or
  • The receipt of compensation by the Registered Provider where a property is disposed of under a compulsory purchase order or
  • The date the dwelling is sold by a former tenant who received a discount and all or part of a discount is repayable (applicable to Right to Buy sales)

The Agency will then raise an invoice, stating the terms and schedule for payment. Registered Providers should not forward a payment in advance of receiving an invoice.

2.3.2 Should the repayment of recoverable grant place Registered Providers in financial difficulty they must advise the Agency’s operating area of the reasons and resultant impact in full detail. The Agency may decide to defer the repayment to a future date, or accept payment by agreed instalments, or in exceptional circumstances agree to the write off of part or all of the repayment.

2.3.3 Where Registered Providers fail to meet a scheme milestone by the date specified, re-forecasting is not accepted and an acceptable replacement scheme is not available, the Agency will require repayment of grant already paid under paragraph 7b of the Recovery Determination (scheme cancellation). In this case the Agency will issue the Registered Provider with an invoice for the amount to be recovered. Where such an event occurs for profit making Registered providers will be required to repay grant in accordance with the uplift principles and methodology defined at sections 5.7.1 to 5.7.2.

2.3.4 Where there is an option to recycle and Registered Providers opt to credit recoverable grant to their Recycled Capital Grant Fund (as detailed in this chapter), the effective date of the credit is the date of the relevant event. For details on the administration of the fund, please see section 5.

2.4 Interest chargeable on delayed notification or repayment

2.4.1 Where Registered Providers are required to notify the Agency of a relevant event and that notification is not received by the appropriate deadline, as set out in 2.3.1, the Agency will normally add interest to the amount of capital grant recovered. For Registered Providers that are profit making the Agency will require the addition of uplift as well as interest to be added to the amount of capital grant repaid. Where such an event occurs repayment will be in accordance with the uplift principles and methodology defined in sections 5.7.1 to 5.7.2. For the period between the deadline (i.e. the 15th day following the relevant event) and the date of receipt of the notification, Registered Providers should contact their contract manager who will be able to advise on the rate of interest that will apply and interest will accrue daily, with six monthly compounding from the start date for payment.

2.4.2 For the purposes of charging interest following delayed notification, the date of the relevant event will be determined by the Agency, on the basis of paragraph (7) of the Recovery Determination. For events (a), (d) and (e) this will normally be the date of the missed milestone or the milestone on which delivery was non-compliant. For events (b), (c) and (f) this will normally be the date at which Registered Providers notify the Agency of the relevant event.

2.4.3 Interest will not be charged if the Agency has been informed in writing of a likely delay and has agreed in writing that the circumstances do not justify the charging of interest for a particular period. Where supporting documentation is not available, Registered Providers can avoid interest by paying the whole of the recovered grant to the Agency.

2.4.4 The Agency will charge additional interest if the invoice for repayment of grant, or interest due to late notification, is not paid within the timescales specified in the invoice. Registered Providers should contact their contract manager who will be able to advise on the rate of interest that will apply and interest will accrue daily.

2.4.5 Payment of Interest Only

As per Programme Management 4.3.2 Registered Providers are required to notify the Agency as soon as they become aware that a forecast payment milestone will not be achieved and reforecast the milestone as appropriate. Where a reforecast is not undertaken or discussed with the Agency and the payment milestone is not actually achieved, payment of interest only may be due as per 2.4.6 below.

2.4.6 Where grant is claimed and paid following a payment milestone and the Agency later discovers that the payment milestone was not actually achieved or took place later than forecast, this is a relevant event for grant recovery purposes. However depending on the circumstances the Agency may decide it will not recover grant but it will normally require payment of interest on the amount of that grant paid. Grant will be deemed as having been claimed in advance of the appropriate payment milestone being achieved – see Programme Management 4.1.6 which defines how the various payment milestones can be achieved.

For some examples please see below.

Example 1

A Registered Provider claimed grant at the forecast start on site milestone, but for various reasons achievement of the start on site did not actually occur until a later date. The delay between the forecast start on site date and the actual achievement of the start on site date came to the Agency’s attention during a contract review meeting.

Following discussions with the Registered Provider as to why start on site was claimed as having been achieved and grant claimed when it hadn’t; if the Agency considers it is satisfied with the reasons and that the scheme should continue, even though there has been a relevant event (milestone takes place later than anticipated) the Agency may in exceptional circumstances decide that grant should not be repaid. However as the Registered Provider claimed grant in advance of the milestone actually being achieved the Agency will normally require that the Registered Provider to pay interest only on the amount of grant already paid. Interest will be due from the 15th day following the date the original start on site milestone was forecast until the day before the start on site milestone was actually achieved.

Example 2

A Registered Provider claims grant at the forecast start on site milestone but during a programme review meeting it comes to light that for various reasons the start on site is yet to be achieved. Depending on the reasons given why grant was claimed together with how soon start on site is likely to be achieved the Agency may agree in exceptional circumstances that the Registered Provider is not required to repay grant. However the Agency will normally require interest only to be paid on the grant which has already been claimed. Interest will be due from the 15th day following the date the original start on site milestone was forecast and will continue to be charged until the date start on site is actually achieved.

2.4.7 In such cases, interest will be due from the 15th day following the date of the relevant event (the original payment milestone) and continue to be charged until the payment milestone is achieved or a re-forecast milestone is achieved.

2.4.8 The Agency will calculate the amount of interest to be paid and invoice Registered Provider accordingly. Registered Providers should not make a payment in advance of receipt of the invoice.

3. Calculation of recoverable grant

3.1 General

3.1.1 This section sets out the basis for Registered Providers when calculating recoverable grant following one of the relevant events set out in the Recovery Determination (please see section 1.2.2).

For details of how to apportion grant to a property in order to calculate the amount of grant that is recoverable, please see section 4.

For schemes developed under the AHP 2011 to 2015, grant liability for recovery is always calculated according to the total grant required rather than the agreed payment rate. For details of what is meant by these terms, please see Finance section 3.1.6.

3.1.2 Where appropriate Registered Providers are required to calculate the Net Sales Receipt from property sold and ascertain whether this is sufficient to cover the grant recovery liability – taking into account the Agency’s eligible deductions.

3.1.3 If the net receipt is greater than the recoverable grant, then the Registered Provider must either repay or recycle the full amount of recoverable grant as directed below.

3.1.4 If the net receipt is less than the recoverable grant, then Registered Providers may need to defer recovery of the balance, or, in circumstances described in the following paragraphs, Registered Providers may write off the shortfall with the prior permission of the Agency.

Note that this does not apply to shared ownership properties where the mortgagee has taken possession action and following a disposal the resulting receipt is insufficient to recycle any grant.

For further guidance on writing off grant, please see below.

It is a commonly held misconception that the Agency has the power to ‘write off’ amounts of recoverable grant whilst that grant still ‘sits’ in or is apportioned to property owned by a Registered Provider. Whilst there are certain circumstances where the Agency may waive or not pursue recovery of grant, it cannot write off these sums. Only organisations can write off assets that are shown in their accounts. Therefore it is for individual Registered Providers to write off amounts where directed in this chapter. If Registered Providers intend to write off grant or are unsure if the grant can be written off, they should approach the relevant operating area in the first instance.

3.1.5 The term ‘recovery’ is an umbrella term covering two different processes – repayment to the Agency and recycling via a Recycled Capital Grant Fund. Registered providers should note that the recycling option is only available for relevant events (j) to (q).

3.1.6 The relevant events detailed in paragraphs 7(a) to (f) of the Recovery Determination cover grant paid in error or in excess of requirements and circumstances where a Registered Provider does not act in accordance with the Grant Agreement or contract, the Recovery Determination, Funding Conditions (where applicable), this Guide or other published requirements. Following these relevant events the Agency will require the recovery of grant or excess grant (calculated by comparison of the amount advanced with the amount needed) in full, without deductions or allowances for the Registered Provider’s costs, and, where appropriate, with interest.

3.1.7 The relevant events detailed in paragraphs 7(g) to (q) of the Recovery Determination cover disposals, change and cessation of use and other circumstances. Following these relevant events the Agency will make certain allowances, in particular for:

  • Costs, fees and expenses incurred by the Registered Provider in direct relation to the relevant event
  • The deferral or reduction of grant recovered where Net Sales Receipts are less than the amount of grant that is, in theory, recoverable
  • Deemed loan debt

3.1.8 Registered Providers are required to keep a written record of grant recovery calculations for audit purposes.

Supporting documentation should be kept together with the written record of the calculation.

3.2 Deemed loan debt

3.2.1 For a definition of deemed loan debt, please see the Glossary chapter.

3.2.2 For rental schemes Registered Providers must apportion deemed loan debt in the same way as they apportion grant. Please refer to section 4 below for further information.

3.2.3 For shared ownership schemes approved on or after 1 April 1993 please see section 4.2 below.

3.2.4 For shared ownership schemes approved before that date, the deemed loan debt calculations take into account the percentage of equity initially sold.

3.3 Relevant events requiring repayment

Where any such repayment event occurs for profit making Registered Providers will be required to repay grant in accordance with the uplift principles and methodology defined at sections 5.7.1 to 5.7.2.

3.3.1 Relevant event (a)

When, during the progress of a project approved for Capital Grant, an instalment of Capital Grant was claimed or paid in anticipation of a milestone, and that milestone either does not take place or takes place later than anticipated.

3.3.1.1 If a milestone is never achieved, the Agency will normally require repayment of the entire grant paid without eligible deductions, plus any interest due as per section 2.4. Repayment will normally be sought via a reclaim activated within IMS.

3.3.1.2 If a milestone is achieved later than anticipated, and the Agency’s operating area has agreed to re-forecast the milestone, whilst grant may not be required to be repaid interest may be charged on any grant paid in advance of need as per section 2.4.5.

3.3.2 Relevant event (b)

When, after an instalment of Capital Grant has been advanced upon a project approved for Capital Grant, the Agency cancels the approval, or approves the project on revised terms which involve a reduced entitlement to Capital Grant.

3.3.2.1 Where an approval is cancelled, the Agency will normally require repayment of all grant paid for the scheme without eligible deductions, plus any interest due as per section 2.4.

3.3.2.2 Where an approval is revised, the Agency will normally require repayment of any grant paid out in excess of the revised amount, plus any interest due as per section 2.4.

3.3.3 Relevant event (c)

Discovery, upon an intermediate or final review of the costs of a project approved for Capital Grant, that an instalment or payment on account of Capital Grant had been greater than eventually required.

3.3.3.1 Where an approval is revised, the Agency will normally require repayment of any excess grant paid, that is the difference between the amount of grant paid and the revised approval plus any interest due as per section 2.4.

3.3.4 Relevant event (d)

Failure to use Capital Grant for the purpose for which it was paid.

3.3.4.1 The Agency will normally require repayment of all grant without eligible deductions, plus any interest due as per section 2.4.

3.3.5 Relevant event (e)

Failure to comply with any condition attached to the making of Capital Grant, including failure to complete a project.

3.3.5.1 The Agency will normally require repayment of all grant without eligible deductions, plus any interest due as per section 2.4.

3.3.6 Relevant event (f)

Discovery that the Secretary of State, the Agency or a local authority has received incorrect information or made an error in connection with the calculation of Capital Grant payable or recoverable.

3.3.6.1 Depending on the circumstances of individual cases, the Agency will normally require repayment of grant in whole or in part without eligible deductions, plus any interest due as per section 2.4. .

3.3.6.2 If the Agency requires repayment of grant in part, the amount of grant to be repaid will be calculated according to the particular facts relating to the property or scheme in question.

3.3.7 Relevant event (g)

Disposal of Capital Grant funded land acquired for the development of Social Housing, or designated for a further phase or phases of Social Housing, when the development or further phase or phases was, or were, not completed at the time of disposal.

3.3.7.1 Selling land that has been acquired with the aid of grant before the development has either begun or been completed requires grant to be repaid in full.

3.3.7.2 The gross sales receipt for the land sold should not be less than the valuation provided to the Registered Provider by an independent Royal Institution of Chartered Surveyors (RICS) accredited qualified valuer.

3.3.7.3 Eligible deductions can be made from the gross sale receipt as follows:

  • Reasonable valuation fees and expenses
  • Reasonable legal fees and expenses
  • Reasonable marketing costs

3.3.7.4 Grant paid should be recovered from the net sales receipts. That is the gross sales receipt less eligible deductions as above.

3.3.7.5 Where the net sales receipt of the land/scheme being sold is not sufficient to enable all recoverable grant to be repaid, please see section 3.1.4 above.

3.3.7.6 Where only part of the land or scheme is sold, grant should be should be apportioned as required in section 4.6.

3.3.7.7 Spare land The sale of spare land whether sold prior to or after development is not treated as a disposal and not deemed a relevant event, therefore no grant is recoverable. Spare land includes:

  • Part of a garden or general landscaping
  • Plots of land for electricity sub-stations or similar utilities
  • Land swaps to regularise boundaries
  • Rights of way, access, or easements

Spare land excludes any area of land designated at project approval for any future phase or phases of development.

If Registered Providers are in any doubt about whether land can be classified as spare they should approach the relevant Agency operating area team.

3.3.8 Relevant event (h)

Redemption of the outstanding indebtedness on a Property owned by a co-ownership (equity sharing) housing society and funded by Capital Grant.

3.3.8.1 The Agency will normally require repayment of all grant, without eligible deductions, plus any interest due as per section 2.4.

3.3.9 Relevant event (i)

De-registration of a Registered Provider by the Regulator, under section 118 or 119 of the Housing and Regeneration Act 2008.

3.3.9.1 When a Registered Provider seeks to de-register from the social housing Regulator all grant previously paid to the Registered Provider is required to be repaid, including credits in the Registered Provider’s Recycled Capital Grant Fund. Registered Providers are required to inform the Agency immediately of their de-registration application. Registered Providers operating inside and outside London will need to inform both the Agency and the Greater London Authority as funders can check whether there are any incomplete schemes which may need to be taken into account. Please note that where a Registered Provider holds stock both outside and inside Greater London, they will have to repay grant to the Agency for the former and the Greater London Authority for the latter. This is also the case where a Registered Provider holds recycled funds generated from both inside and outside London.

3.3.9.2 The Agency is aware that the act of de-registration does not necessarily mean the de-registering Registered Provider intends to dispose of its grant funded stock. The Agency will anticipate that there might not be any immediate sales receipt from which to recover grant vested in those properties. Where Registered Providers are able to demonstrate to the Agency’s satisfaction that immediate repayment of grant would result in financial hardship, the Agency may consider agreeing deferment of repayment to a later date or repayment by instalments – please see section 2.3.2.

3.3.9.3 Unless, by the agreement of the Agency, exceptional circumstances exist the Agency will expect any sums in Registered Providers’ Recycled Capital Grant Fund to be repaid immediately and will arrange for Registered Providers to be invoiced accordingly. Where Registered Providers have already entered into a written commitment to spend sums in their fund, they should provide full details to the Agency’s operating area. The Agency will consider each case on its own merits and determine whether planned and committed spend can proceed.

3.4 Relevant events for which recycling is an option

3.4.1 Relevant event (j)

A change of use of land or Property to one which would not qualify in principle for Social Housing Assistance, or change to a use which might receive a significantly lower grant (for example a change from supported to general needs housing).

Change to non grant eligible use

3.4.1.1 A change of use will be a relevant event if the Registered Provider changes the use of the property to one which does not qualify for grant (at the time of the change of use). The relevant event date will be the date of the change of use.

3.4.1.2 Recoverable grant should be calculated as if the property is to be sold outright.

3.4.1.3 As Registered Providers will not actually receive any sales receipts the calculation must be based on notional figures. In order to determine the notional gross sales receipt Registered Providers are required to obtain a valuation of the property from an independent RICS accredited qualified valuer on the assumptions of:

  • Vacant possession
  • Existing use

3.4.1.4 Eligible deductions are the same as for open sale i.e.

  • The deemed loan debt
  • Reasonable valuation fees and expenses
  • Reasonable legal fees and expenses of the disposal

Registered providers may not deduct any administration allowance.

3.4.1.5 Grant will not normally be recoverable where the primary need of an elderly resident changes from housing to nursing care and it is intended that the next letting will be to someone in housing need.

3.4.1.6 Where there is any doubt about the future use of the property, Registered Providers should consult the relevant Agency operating area for advice.

Temporary change of use with permission

3.4.1.7 In exceptional circumstances, the Agency may agree a temporary change of use, without recovery, to one not qualifying in principle for grant.

3.4.1.8 Registered Providers must discuss proposals with the Agency’s operating area who will consider individual cases on their own merit taking into account:

  • The level of demand for the existing use of the land or property
  • The likelihood that it could be returned to Affordable Housing within 12 months
  • Factors which make it difficult or undesirable to dispose of the land or property
  • Whether the temporary use offers a housing or regeneration function
  • Whether the temporary use falls within the permitted purposes of a Registered Provider

3.4.1.9 The Agency’s agreement to a temporary change of use to one which is non grant eligible will last for 12 months. The agreement will be subject to review and only in truly exceptional circumstances renewed.

Change of use of property where the landlord is participating in the High Income Social Tenant policy

3.4.1.10 Where a property is exempted from rent policy requirements as a result of being let to a social tenant household with an income of at least £60,000 a year, in line with the Government’s policy on rents for social tenants with high incomes – and a market rent is to be charged permanently –, this will trigger recycling or recovery of grant for grant funded general needs properties, as a change of use to one which would not qualify for grant.

3.4.1.11 Where a change of use is proposed for grant funded general needs properties to market rent and is time limited solely to the household currently in occupation – which has an income of at least £60,000 a year - the Agency can agree to defer the recovery of grant. The Agency can agree to such requests as this is covered in the Determination by a temporary change of use with permission. See paragraph 21 of the 2015 Determination for further details.

3.4.1.12 Providers applying to the Agency for a temporary change of use where the intention is to charge up to a market rent for a time limited period for high income tenants, will be required to seek permission of the relevant contract manager in writing, to change the use. Applications can be submitted on a programme approach rather than an individual property basis detailing the quantum of properties where the change of use will apply.

3.4.1.13 The Agency will not require individual property address details or the levels of rent to be charged, where the provider intends to apply for a temporary change of use, but providers will be required to maintain such details on their own systems, which should be available to the Agency to inspect upon request. Providers will also be required to confirm on an annual basis whether a market rent is being charged and the length of time that this has been the case.

3.4.1.14 Providers will need to submit an annual confirmation statement that the uplift in rental income has been applied for purpose of funding new supply as eligible for the application of Recycled Capital Grant Fund for low cost rental and sale accommodation via the annual Recycled Capital Grant Fund IMS return from April 2015. The Agency will expect to review with the provider, periodically where a market rent continues to be charged in the long-term, as to whether recycling or recovery is deemed to have been triggered.

Change of use to one requiring significantly less grant

3.4.1.15 Where Registered Providers wish to change the use of property to one which would have required significantly less grant then an element of the original grant is required to be repaid or recycled via the Registered Provider’s Recycled Capital Grant Fund.

3.4.1.16 Please note that this includes instances where Feed in Tariff is claimed in respect of renewable energy generators which have also received grant funding. Registered providers will have the option to recycle the grant in these circumstances, but this will need to be agreed with the relevant Agency operating area on a case by case basis.

Conversion from Social Rent to Affordable Rent

3.4.1.17 Conversions of Social Rent units to Affordable Rent units as part of a 2011 to 2015 or 2015 to 2018 Affordable Housing Programme offer is not a relevant event for grant recovery purposes. Please see the entry on conversions at section 1.3.

Change from Supported Housing

3.4.1.18 It is not necessary to treat a change of use from supported housing to general needs housing as a ‘notional sale’. There are no gross sales receipts (real or notional) nor eligible deductions. Instead, Registered Providers must credit 12% of all grant paid in respect of the supported housing units (net of any grant previously recovered) to their Recycled Capital Grant Fund, subject to the exceptions set out immediately below.

3.4.1.19 If Registered Providers are providing a replacement Supported Housing service in units that form part of its general needs stock then grant recovery may be waived at the discretion of the Agency. However the Agency reserves the right to recover grant in the future, if those replacement units cease to be used for supported housing purposes without further replacement units being made available.

3.4.1.20 Where a change of use from supported housing to general needs housing triggers grant recovery, repayment or recycling of grant may be deferred until a future relevant event at the discretion of the Agency’s operating area.

3.4.1.21 In considering a request to defer grant recovery the operating area will take into account:

  • Any changes in revenue sources and amounts
  • The future needs of the current client group
  • Changes in methods of supplying support, e.g. floating support
  • Other potential client groups
  • The nature, type and condition of the building, currently and in future

3.4.1.22 A change of supported housing client group does not constitute a relevant event and grant is not recoverable.

Change of use from Affordable Rent provided through Lease and Repair Empty Homes, Temporary Social Housing, Temporary Market Rent Housing, Short Life and ‘HAMA PLUS’

3.4.1.23 What are

  • Affordable Rent provided through Lease and Repair Empty Homes
  • Temporary Social Housing
  • Temporary Market Rent
  • Short Life
  • HAMA PLUS

Please see guidance below for details.

Affordable Rent provided through Lease and Repair Empty Homes, Temporary Social Housing, Temporary Market Rent Housing, Short Life and ‘HAMA PLUS’ are historical products which enabled certain properties to provide a limited life for social housing use. Registered Providers would have a legal interest in the property by means of a short lease. This could be for as little as two years. Grant was provided to make such accommodation available either:

  • At below market rates
  • To provide higher quality accommodation and tenancy management than would have been available on the open market, at market rent levels

3.4.1.24 Where the Registered Provider’s (short-term) legal interest in the property has run its course grant is deemed to have achieved its social policy aim and is no longer recoverable.

3.4.1.25 For these products grant recovery rules are the same as for leased property funded through the AHP 2011 to 2015. Where a lease is sold before it expires or there is a change of use to one which is not grant eligible then grant was recoverable on a pro rata basis – please see the archived version of the Empty Homes chapter 7.2.2.

3.4.2 Relevant event (k)

Cessation of use of property or land funded by Capital Grant.

3.4.2.1 Where Registered Providers have ceased to use land or property for six months, for example where property has been void, the operating area must be notified immediately.

3.4.2.2 Following notification to the Agency Registered Providers will have one month to produce proposals for either bringing the property back or land into use, its demolition, or its disposal.

3.4.2.3 These proposals must be discussed with the operating area and a course of action agreed. If Registered Provider does not implement the agreed course of action within an agreed timetable, including any Agency agreed extension; the grant will be recovered in accordance with the procedures for the change of use to a non grant eligible use at section 3.4.1.1 above.

3.4.2.4 Where Registered Providers decide to cease using grant funded property grant will be recovered in accordance with section 3.4.1.

3.4.3 Relevant event (l)

Demolition of property or other buildings funded by Capital Grant.

3.4.3.1 The Agency’s approval must be obtained prior to demolition of a grant funded property.

3.4.3.2 If the property is be demolished because it has reached the end of its useful life (considering such factors as age, location, physical condition and property type in the context of current needs or market conditions) or because alternatives such as refurbishment are considered to be unviable, then the Agency will not normally recover grant at that time, but will consider deferring recovery until a subsequent relevant event occurs.

3.4.3.3 Where deferment is agreed the liability to repay or recycle grant will arise at the next relevant event relating to the land on which the demolished property was located. The grant recovery policy and procedures in force at that time will apply.

3.4.3.4 In the meantime grant is treated as remaining or resting in the land.

3.4.3.5 Where grant is resting in the land it will not be included in any value for money assessments undertaken by the Agency when deciding whether or not to provide additional grant to redevelop the site. In other words, it will not make any future redevelopment scheme look artificially expensive in terms of subsidy requirements. However, both the ‘dormant’ and ‘new’ grant will be subject to future relevant events.

For an example see below.

A property is demolished and the original £50,000 grant remains ‘dormant’ in the land. New property is built on the site with a total grant required of £20,000. Some years later the property is sold on the open market when £74,000 grant will be recoverable as per section 3.4.4 below.

3.4.3.6 If a Registered Provider demolishes property so that:

  • The resultant vacant site remains in the Registered Provider’s ownership
  • The site is to be used for non-income earning purposes (such as forming an open space or facilitating the realignment of roads)
  • A compensation payment is received by the Registered Provider

Then grant will be recovered.

3.4.3.7 Where a compensation payment is received Registered Providers may subtract the following eligible deductions from that payment

  • Any deemed loan debt
  • Reasonable expenses incurred (excluding the costs of demolition)

If following the above eligible deductions the net payment is insufficient to enable full grant recovery, the shortfall must not be written off but must remain dormant in the land concerned until a future relevant event.

3.4.4 Relevant event (m)

Disposal of Property or land funded by Capital Grant by a Registered Provider, except [exceptions given in determination.]

3.4.4.1 Outright sale of land and buildings

Please see guidance below for details of what is classified an ‘outright sale.’

An outright sale of rental property is:

  • A sale on the open market
  • A negotiated private sale
  • An outright sale to a sitting tenant other than on Right to Buy/Right to Acquire/Social HomeBuy terms

Outright sale excludes sales under Social HomeBuy, the Right to Acquire, the Right to Buy, and sales or transfers to other Registered Providers.

3.4.4.2 The gross sale receipt must not be below a valid valuation by an independent RICS qualified valuer.

3.4.4.3 From the gross sales receipt Registered Providers may deduct the following eligible deductions to arrive at the net sale receipt:

  • The deemed loan debt
  • Reasonable valuation fees and expenses
  • Reasonable legal fees and expenses relating to the disposal

3.4.4.4 Registered providers may not deduct:

  • Any administration allowance
  • The cost of demolition if the site is sold after demolition

3.4.4.5 If the net sales receipt is less than the attributable grant, then the Agency will be likely to agree to the shortfall being written off by Registered Providers. The prior consent of the relevant Agency relevant operating area should be sought before writing off historical grant amounts. N.B. that this does not apply in the circumstances where a lender has taken possession of a shared ownership property.

3.4.4.6 For additional guidance on the recording of net sales receipts from outright sales, please see below.

The following information should be included in the written calculation of the recovery of capital grant. Please note this is not an exhaustive list and the Registered Provider should add anything else it deems pertinent:

  • Registered Provider details
  • Property/scheme details (e.g. address, IMS scheme ID number)
  • Type of sale (e.g. open market sale, Right to Buy, voluntary sale on shared ownership terms etc.)
  • Supporting documentation for any write-off of grant (e.g. invoices, valuation report or cost floor calculation for Right to Buy)
  • Sales proceeds (including valuation date, duration and amount, sales completion date, discount and cost floor for Right to Buy, and actual sales receipt)
  • Expenses (including legal fees, Right to Buy sales allowance/costs of abortive sales where applicable, valuation fees)
  • Deemed loan debt please see the Glossary chapter for definition
  • Net sales receipt
  • Total grant liability (please note that for schemes developed under the AHP 2011 to 2015 this will be based on total grant required (Note that this does not apply to schemes developed under the AHP 2015 to 2018 or prior to the AHP 2011 to 2015) – please see Finance section 3.1.6
  • Grant liability minus eligible deductions as per section 3.4.4.3 above
  • Grant to be written off (if applicable)

3.4.4.7 Where the intention of the Registered Provider is to write off grant where the sales receipt is less than the attributable grant, the prior consent of the Agency should be sought (note that shared ownership properties where the mortgagee is in possession are not affected by this requirement). The presumption remains in favour of Registered Providers being able to write off grant. To help make the case Registered Providers should provide supporting documentation that should be included alongside the written calculation to confirm the figures used in the calculation. The Agency reserves the right to test with the Social Housing Regulator as to whether a negative decision would have an impact on a Registered Provider’s viability.

Please see guidance below for further information.

Supporting documentation confirming the figures used in the calculation should include:

  • A copy of the valuation
  • A copy of the valuer’s invoice
  • A copy of the Registered Providers solicitor’s invoice
  • Details of the loan debt attributable to the property, and how that amount of debt was attributed
  • Details of the amount of grant attributed to the property, and how that amount of grant was attributed
  • Scheme allocation information

3.4.4.8 Where as part of a Registered Provider’s disposal consideration the provision of replacement property on a different site is included, the Agency may agree to waive recovery. In such circumstances, Registered Providers must transfer the original grant liability to the replacement property and demonstrate this by means of recording a credit to and debit from the Recycled Capital Grant Fund, supported by suitable documentary evidence in place of the written calculation.

Any subsequent relevant event connected with the replacement property would lead to grant recovery under the same requirements and procedures as if the property had originally received the grant.

3.4.4.9 Sale under compulsory purchase orders If a property owned by a Registered Provider is sold under a compulsory purchase order (or where there is written evidence of the threat of a compulsory purchase order, the amount of recoverable grant will be calculated in the normal way, except:

  • The gross sales receipts will be the higher of either:
    • The receipt from the disposal plus any compensation received plus any interest received as part of the compulsory purchase order
    • The amount obtained by a qualified valuer acting on behalf of the Registered Provider in negotiation with the body exercising compulsory powers
  • Eligible deductions will only include the Registered Provider’s reasonable valuation and legal fees & costs, and an administrative allowance if the body exercising the compulsory purchase order has not paid them as part of the compulsory purchase order process

3.4.4.10 The amount of interest to be included in the calculation of the gross sales receipt will be the interest paid by the acquiring body, less any tax on that interest that the Registered Provider may have to pay (if it is non-charitable), plus any tax relief grant that it may have received to offset the tax paid.

3.4.4.11 Disposal of spare land in these circumstances is covered in section 3.3.7.7.

3.4.4.12 The amount of grant recovered will not normally be reduced in respect of any costs incurred by a Registered Provider in opposing a compulsory purchase order.

3.4.4.13 Where a reduction in recoverable grant is sought, Registered Providers must obtain the Agency’s prior consent, which will only be given in exceptional situations.

3.4.4.14 If the net sales receipt is insufficient to enable the recovery of all grant attributable to the property or land, the amount of recoverable grant may, at the Agency’s discretion, be reduced by the shortfall. Registered Providers must discuss such cases with the relevant Agency operating area. However, if Registered Providers make net surpluses upon the sale of other property or land within the same compulsory purchase order, those surpluses must be used to offset the shortfall in whole or in part.

3.4.4.15 If a shortfall still remains, the amount of the shortfall may be written off by the Registered Provider, with the prior consent of the Agency. Where grant is to be written off, a written calculation must be supported by documentary evidence confirming the figures.

3.4.4.16 Shared Ownership Sales

Please see 3.2.3 above for information on deemed loan debt for shared ownership schemes approved on or after 1 April 1993.

3.4.4.17 Shared ownership: voluntary sale of rented property

Registered Providers should note that this section covers voluntary sales on property on a shared ownership basis with no discount. It should not be confused with Social HomeBuy, which is the voluntary sale of property outright or on a shared ownership basis with a discount funded by the Agency - please see the Social HomeBuy chapter.

3.4.4.18 The gross sale receipt of the share being sold must not be below a valid valuation by an independent RICS qualified valuer.

3.4.4.19 Registered Providers may deduct the following eligible deductions from the gross sale receipt:

  • The deemed loan debt
  • Valuation expenses
  • Legal expenses relating to the disposal

But no administrative allowance may be deducted. All grant attributable to the property is recoverable from this net sale receipt.

3.4.4.20 If the net sale receipt is insufficient to enable the full recovery of the attributable grant, then recovery of the shortfall must be deferred until the next sale of further shares (staircasing). Written calculations supported by documentary evidence of the figures used in relation to the deferment must be retained by the Registered Providers.

3.4.4.21 Sales on shared ownership terms of property included in an Estates Renewal Challenge Fund Programme will be subject to grant recovery, except when such sales without recovery were agreed as part of the Estates Renewal Challenge Fund delivery plan.

3.4.4.22 Shared Ownership: Sale of a Property Repurchased with Recycled Grant

Property repurchased with contributions from a Registered Provider’s Recycled Capital Grant Fund and subsequently sold on shared ownership terms are subject to the same grant recovery requirements as if the property had been repurchased with new grant.

3.4.4.23 The requirements for calculating recoverable grant following a sale of a repurchased property in a protected area, whether funded with new or recycled grant, including examples are detailed at Shared Ownership section 9.6.2.

3.4.4.24 Shared Ownership: Staircasing sales

The following paragraphs refer to property acquired or developed for sale on shared ownership terms, under the branding of such as Help to Buy, Affordable Home Ownership or New Build HomeBuy.

3.4.4.25 The sale of the first share in property acquired or developed for sale on shared ownership terms is not a relevant event and grant recovery only arises when further shares are purchased (staircasing).

3.4.4.26 The gross sale receipt of the share purchased must not be below the applicable percentage of a valid valuation by an independent RICS qualified valuer and as detailed in the shared ownership lease. Please see below for an example. The valuation must be paid for by the prospective purchaser.

Current property value £200,000
Share to be purchased 10%
Value of share £20,000

3.4.4.27 Registered Providers may deduct the following eligible deductions from the gross sale receipt:

  • The deemed loan debt attributable to the percentage of share being sold
  • The staircasing allowance

3.4.4.28 The net sale receipt is used to recover the grant attributable to the shared purchased; for an example please see below.

Grant attributable to the property £15,000
Initial Share Sold 40%
Grant of £15,000 Attributed to provider’s 60% share
Additional share to be purchased 10% (= 17% of the original remaining 60% share)
Recoverable grant 17% of £15,000 grant in property (= £2,550)

If having recovered the grant attributable to the share being purchased there is still a balance of net sale receipt, then Registered Providers must initially use this balance to repay any previously deferred recoverable grant in this or other property within the same scheme – see immediately below.

3.4.4.29 If the net sales receipt is insufficient to enable the recovery of grant attributed to the share being sold Registered Providers should recover grant in part and the shortfall should then be recovered when the sale of a further share of that dwelling, or the sale of shares of any other shared ownership property within the same scheme occurs.

3.4.4.30 Written calculations supported by documentary evidence of the figures used in relation to the calculations, deferment, tracking deferment and grant written off must be retained by Registered Providers. For further guidance on what to include in written calculations, please see below.

The following information should be included in the written calculation of the recovery of capital grant. Please note this is not an exhaustive list and the Registered Provider should add anything else it deems pertinent:

  • Registered provider details
  • Property/scheme details (e.g. address, IMS scheme ID number)
  • Type of sale (e.g. conventional shared ownership, Protected Areas, Older Persons Shared Ownership, voluntary sale on shared ownership terms etc.)
  • Supporting documentation for any write-off of grant (e.g. invoices, valuation report, mortgagee’s completion statement for repossessions)
  • Sales proceeds (including valuation date, duration and value of whole property, sales completion date, discount and cost floor for Right to Buy, and actual sales receipt)
  • Expenses (staircasing allowance as per Admin Allowances)
  • Deemed loan debt please see the Glossary chapter for definition
  • Net sales receipt
  • Grant liability apportioned to the percentage share sold please note that for schemes developed under the 2011 to 15 AHP this will be based on total grant required – please see Finance section 3.1.6
  • Grant deferred from previous sales in the same scheme
  • Total grant liability
  • Grant liability net of eligible deductions as per section 3.4.4.2 above
  • Grant to be deferred to next sale or written off (if final sale in scheme), where appropriate

3.4.4.31 If, when the final property in a scheme is staircased to outright ownership (or the maximum percentage allowable for that scheme) the total net sales receipt is less than the grant recoverable, that is recoverable grant from that staircasing sale plus any previously deferred recoverable grant) the final shortfall may be written off by the Registered Provider.

3.4.4.32 Shared ownership: Repossessions

For an overview of repossessions, see Mortgage Default at Shared Ownership section 7.4.

Please see guidance below for further information.

Repossession occurs where the leaseholder’s mortgage company takes possession of the property, and then does one of three things. Either the mortgage company:

  • Sells the lease to another purchaser
  • Staircases to a higher percentage (but not to 100% ownership) and sells the lease to another purchaser
  • Staircases to 100% and then sells the property on the open market

The mortgage company then uses the sale receipt to pay themselves the loan outstanding from the defaulting leaseholder and (in the second and third scenarios) will pay a sum to the Registered Provider as the staircasing premium. If there is any money left over after the loan has been paid off and the Registered Provider has been paid, the mortgage company passes it to the leaseholder.

From the Registered Provider perspective, therefore, repossessions involving staircasing are theoretically the same as any other situation where someone staircases out, and the Registered Provider gets a capital receipt. However, the Mortgagee Protection Clause means that the gross sale receipt that the Registered Provider receives from the mortgage company is not necessarily the value of the property multiplied by the Registered Provider’s equity share. Where this is the case it is not a requirement that Registered Providers must first seek Agency consent in order to write off grant.

The Mortgagee Protection Clause in the shared ownership lease allows the leaseholder’s mortgage company to staircase at a lower price than that normally required. The amount to be paid for the outstanding share is the actual sale price of the property (not the equity percentage of a property valuation) less those sums due to the mortgage company, i.e. the sum of the mortgage company’s reasonable and proper expenses incurred in:

  • Exercising the right to purchase a new lease or the freehold
  • Exercising its powers of sale
  • The amount of principal due under the mortgage approved under Clause 34(15) (or equivalent) of the Lease
  • Up to18 months unpaid interest;
  • Advances to the Registered Provider to cover any sums such as rent and service charges due under the lease
  • Reasonable legal fees
  • Reasonable estate agent’s fees
  • Reasonable valuation fees
  • Other costs incurred in connection with the protection of the security or sale of the property

3.4.4.33 Policy in respect of defaulting shared owners is contained in the Shared Ownership joint guidance.

3.4.4.34 The approach to calculating recoverable grant, including deferment and potential write off is the same as for any other shared ownership staircasing (see section 3.4.4.24 above), however:

  • Registered Providers may accept (for recovery purposes) the valuation by the mortgage company’s valuer instead of one by an independent RICS qualified valuer
  • The gross sale receipt is the money received from the mortgage company, as stated in the mortgage company’s statement of account

3.4.4.35 Registered Providers may deduct the following eligible deductions from the gross sale receipt:

  • The deemed loan debt attributable to the percentage sold
  • The Staircasing allowance

3.4.4.36 Any shortfall on staircasing receipts remains a debt due to the Registered Provider by the defaulting leaseholder.

3.4.4.37 Where the leaseholder’s mortgage company has used the Mortgagee Protection Clause in the shared ownership lease, and the Registered Provider has suffered a shortfall on staircasing receipts recoverable grant may continue to be written off by the Registered Provider or deferred if the Registered Provider without the prior consent of the Agency provided that they confirm in supporting documentation to the written calculation of recoverable grant that they:

  • Are in the process of obtaining legal advice, or have already obtained legal advice on prospect of recovering the money due from the leaseholder
  • Will take all necessary steps to recover the money due
  • Undertake to credit all money received, less reasonable costs incurred, to the Recycled Capital Grant Fund, or pay the money to the Agency, if applicable within 14 days of receipt

3.4.4.38 In deciding what action is reasonable to pursue the debt Registered Providers should obtain written legal advice. A copy of the solicitor’s advice must be kept with the written calculation of recoverable grant for audit purposes.

3.4.4.39 If Registered Providers take action as advised by their solicitor, and no receipts are generated, any expenses or abortive costs will not be allowed as eligible deductions unless the surpluses from shared ownership staircasing sales completed in the previous twelve months are insufficient to cover the costs.

Where Registered Providers incur such a loss, they can deduct the costs incurred from a future grant recovery on a shared ownership sale or staircasing in that scheme.

3.4.4.40 If the amount for which the defaulting leaseholder is liable under the Mortgagee Protection Clause would have left the Registered Provider with a surplus after full grant recovery then it is a matter for the Registered Provider to decide whether to seek to recover this amount when taking action to recover other monies due.

3.4.4.41 Where grant recovery is to be reduced or deferred, the supporting documentation should include an appropriate certification signed by the Registered Provider authorised signatory together with a copy of the completion statement provided by the leaseholder’s mortgage company, and a copy of the mortgage company’s explanation if the sale price is lower than the valuer’s valuation.

3.4.4.42 Co-ownership equity sharing sales

When a co-ownership (equity sharing) society sells a property to one of its members, the society should calculate the grant attributable to the property pro rata, based on the capital amounts of the purchasing members.

3.4.4.43 The Agency does not permit deferral or write off by the Registered Provider of the recoverable grant in this scenario. In other words, the amount of grant recoverable is not reduced if the sales receipt is less than the grant recoverable. There are no eligible deductions for this product.

3.4.4.44 Where a case is handled solely by the co-ownership society, the recoverable grant must be repaid to the Agency.

3.4.4.45 Where a case is handled through a Registered Provider that Registered Provider should credit its own Recycled Capital Grant Fund with the recoverable grant.

3.4.4.46 Change of ownership

Sales or transfers of grant funded property between any class of Registered Provider are not relevant events; grant recovery is therefore not triggered. Instead, the liability for grant passes to the recipient Registered Provider as if they had originally received the grant themselves. Grant becomes recoverable from the recipient Registered Provider following any future relevant event. See the Recovery Determination paragraph (25).

3.4.4.47 Both the exporting and receiving Registered Providers are required to keep adequate records of grant transferred to and from each other in respect of properties as this information will be required to be included in the annual Recycled Capital Grant Fund IMS end of year return see section 7.2.

3.4.4.48 Should a subsequent disposal take place where a profit making Registered Provider has received stock (regardless of whether funded with grant or not) from a non-profit making Registered Provider, then the Social Housing Regulator requires that the proceeds of sale are placed in the Disposal Proceeds Fund. Please see exemption xiv) under relevant event 7 m) in the determination and refer to the Regulator’s published Disposal Proceeds Fund guidance for more details. For the avoidance of doubt, this also includes disposals either outright or in staircasing increments of shared ownership property transferred from non-profit making Registered Providers to profit making Registered Providers.

3.4.4.49 Right to Buy

In addition to the Right to Buy provisions for local authority and former local authority tenants, prior to 15th January 1989 certain housing association tenants (usually those of Large Scale Voluntary Transfer housing associations) with secure tenancies (not assured tenancies) also had the Right to Buy under the Housing Act 1985 Right to Buy provisions. Although anticipated to be extremely rare purchase under these provisions it is still possible should any existing tenants still have secure tenancies.

3.4.4.50 The sale price must not be less than the cost floor please see the Glossary chapter for a definition of this term unless the cost floor is greater than the valid valuation at the time of offer.

Please see below for an example.

The market value is £100,000 and the cost floor is £70,000.

The gross sales receipt (the sale price) is the market value less the applicable Right to Buy discount, provided the discount does not reduce the sale price below £70,000 of the cost floor.

In this example, if the eligible discount is more than £30,000 (for example £33,000) then the sale price (and so the gross sale receipt) is £70,000 (£100,000 market value - £30,000 discount) not £67,000.

(Note the maximum Right to Buy discount is now £77,000, although the figure varies by locality).

3.4.4.51 Where the cost floor is greater than the property’s market valuation (without discount) the sale price should equal the valuation.

See below for an example.

The market value is £100,000 but the cost floor is £110,000.

The sale price, irrespective of eligible discount, is £100,000, which is what the tenant will have to pay.

3.4.4.52 Registered providers may deduct the following eligible deductions from the gross sale receipt:

  • The deemed loan debt
  • Reasonable valuation expenses
  • Reasonable legal expenses relating to the disposal
  • The Right to Buy sales allowance
  • Any previous abortive Right to Buy sales expenses

For guidance on abortive sales, please see below.

The cost of preparing Right to Buy notices is covered by the Right to Buy sales administration allowance. However, the Agency may, upon request, also consider cases where an application is withdrawn before an offer notice has been served but after a considerable amount of work has been done. Supporting documentary evidence similar to that needed for completed sales will be required. Neither the Right to Buy sales allowance nor actual administrative expenses can be claimed in respect of abortive sales.

3.4.4.53 Reasonable expenses can also include deficits on Right to Buy service charges in respect of repairs. Please see guidance below for further details.

Section 4 of the Housing and Planning Act 1986, which took effect on 7 January 1987, requires providers to notify prospective Right to Buy purchasers of any known structural defects and to provide in the offer notice binding estimates of service charges for repairs and improvements to be carried out during the initial period of the lease (currently five years), i.e. service charges cannot be increased above the estimate except to take account of prescribed inflationary allowances. Thus, in certain circumstances, Registered Providers may incur expenditure which cannot be recouped from the Right to Buy purchaser via the service charge.

Deficits incurred on service charge

Grant recovery arrangements allow Registered Providers to deduct as an admissible expense a one-off insurance premium against the possibility of hitherto unknown structural defects arising in the ten year period immediately following the Right to Buy sale together with the cost of the associated survey.

Providers, thus, already have the means of insuring themselves against the possibility of paying for structural work which was not foreseen at the time of a Right to Buy sale of a flat and for a longer period than that entailed by the binding estimates requirement of the 1986 Act. Also the survey associated with the structural insurance together with the valuation survey should go some way towards defining what structural defects will need remedial work within the initial period (currently five years) and assist in providing a basis for estimating the associated costs.

There remains the possibility that estimated work turns out to cost more than originally anticipated. Under normal circumstances, such cases should be rare. If the increased costs arise because, for example, the opening of a particular element reveals a hitherto unknown defect, they should normally be covered by the structural defects insurance. The 1986 Act provides for estimates to be uprated to take account of cost increases limited to inflation, so deficits should arise only in respect of inaccurate estimating of works included in the service charges or where the inflation upgrading does not fully meet the actual increases in costs.

Where deficits on repairs arise they should be offset against any surpluses arising on Right to Buy sales in the same accounting period in which the deficit was incurred.

In cases where there are no Right to Buy surpluses or insufficient surpluses, grant will be paid on any remaining deficit arising on repairs (not improvements) after the association has met the first £250 per unit and 10% of the remainder up to a combined limit of £500 per unit. This payment can be made on a year by year basis for the initial period only.

Grant will only be paid where the deficits arise on repairs not on improvements. Applications for grant funding of any such deficits incurred on Right to Buy service charges must be made to the Agency’s operating area within six months of the end of the accounting period in which the deficit was incurred.

Grant will be payable on a per unit basis. Where more than one unit is involved, each unit will be dealt with separately.

Survey costs

In view of the need to provide binding estimates for the first five years, providers will need to consider the necessity for detailed structural surveys in order to assess their service charge estimates. Although survey costs are an admissible expense for the purposes of grant recovery, the Department of the Environment wish to ensure that such costs are reasonably incurred given the circumstances of a case.

Given limitations on an association’s liability to fund any deficits incurred, and given the possibility that some protection should normally be available by way of insurance cover, the Department of the Environment will only admit those survey costs which may be regarded as reasonable under particular circumstances. In addition, providers would be expected to have a reasonable knowledge of the state of their properties at any given time.

It is emphasised that survey costs remain an eligible cost for the purposes of Right to Buy sales and the proposal to assess the reasonableness of such costs relates to the need for a full structural survey and the frequency with which such a survey needs to be updated. There will be circumstances in which a provider already had adequate knowledge of the state of a property either because of an earlier Right to Buy sale or for some other reason.

3.4.4.54 Abortive Right to Buy sales: A copy of the completion notice or a signed statement by the tenant that he or she does not intend to proceed with the sale should be attached to the written calculation of recoverable grant as supporting evidence.

3.4.4.55 The net sales receipt of Right to Buy sales must be used to recover all grant attributable to the property in question. If the net sales receipt is insufficient to enable full recovery of the attributable grant, then the shortfall may be written off by the Registered Provider.

For some guidance on why there may be a shortfall please see below.

With a Right to Buy sale, the discount that the tenant is entitled to is not covered by grant and is met by the Registered Provider. It is not uncommon therefore for the capital receipt less eligible deductions to be insufficient to repay the attributable grant in full.

3.4.4.56 Where a Registered Provider has deducted expenses following abortive or deferred sales when calculating the net sales receipt, a schedule or similar evidence must be attached to the written calculation of recoverable grant demonstrating that surpluses from Right to Buy sales of grant funded property in the previous accounting period, and the current accounting period to date, are insufficient to cover these costs.

3.4.4.57 Further grant recovery may occur if the new owner should dispose of the property within the discount repayment period and be required to repay all or part of their discount.

3.4.4.58 Grant recovery must not be deferred or written off by Registered Providers to give discounts to sitting tenants greater than those provided for in section 129 of the Housing Act 1985 and/or as subsequently amended.

3.4.5 Relevant event (n)

A disposal of Property or land funded by Capital Grant that would give rise to a repayment of discount under section 155 of the Housing Act 1985.

This is an historical relevant event, relating to the repayment of discounts repayable in a particular timeframe, which has now passed. It is not anticipated that this situation will arise in the future.

3.4.6 Relevant event (o)

A disposal of Property or land funded by Capital Grant that would give rise to a repayment of discount under sections 11 and 12 of the Housing Act 1996.

This is an historical relevant event, relating to the repayment of discounts repayable in a particular timeframe, which has now passed. It is not anticipated that this situation will arise in the future.

3.4.7 Relevant event (p)

A disposal of Property or land funded by Capital Grant that would give rise to the repayment of a payment made to a tenant as an incentive to vacate a Dwelling owned by a Registered Provider under the terms of the mortgage deed requiring repayment of the original payment.

This relevant event relates to Tenant Incentive Schemes. These schemes had a requirement that discounts received by tenants would need to be repaid if the property was disposed of within three years of purchase. Given the length of time that has now elapsed since discounts under Tenant Incentive Schemes were available, the Agency does not envisage any recovery issues arising in the future.

3.4.8 Relevant event (q)

The redemption, or a disposal of Property or land funded by Capital Grant giving rise to the redemption, of an Equity Percentage Loan secured by an Equity Mortgage.

3.4.8.1 Equity Loans paid under the former New Build HomeBuy product which was available before April 2006 For a brief description of the pre-April 2006 New Build HomeBuy product (which is not to be confused with New Build HomeBuy the former brand name for Shared Ownership) please see below.

Prior to April 2006 Registered Social Landlords were able to develop new-build schemes for sale and market them on the (then) HomeBuy basis.

The purchaser bought 100% of the property, but only paid the Registered Social Landlord 75% of the market value. The remaining 25% of market value was treated as an equity loan provided to the purchaser by the Registered Social Landlord.

This loan became repayable when the purchaser subsequently sold the property. The amount to be repaid to the Registered Social Landlord was 25% of the market value of property at the time of re-sale.

Registered Social Landlord s received grant towards the cost of both developing the scheme as well as covering the costs of providing the equity loan to the purchaser.

3.4.8.2 Under the pre 2006 New Build HomeBuy product, grant recovery occurred in two main stages:

  • Initial sales stage (recovery of grant paid in respect of development)
  • Subsequent disposal of the property (repayment of the loan amount)

As there have been no outstanding pre 2006 New Build HomeBuy schemes for some time, the Agency does not anticipate that there are any initial sales left to complete. However, if, at the time of the original sale of property, the net sales receipt was insufficient to enable grant recovery then this may have been deferred until the owner sells on and is required to repay their 25% equity loan. In this case, the deferred grant would be recovered from the 25% of the value that is payable to the Registered Social Landlord.

3.4.8.3 If, on repayment of the equity loan, the receipt is insufficient to recover the ‘loan’ element of grant plus any deferred ‘development’ grant, the shortfall may be written off by the Registered Provider.

3.4.8.4 Worked examples:

Grant Recovery worked example

3.4.8.5 Equity loans paid by Registered Providers or HomeBuy Agents under HomeBuy (i.e. products existing before the 2006-08 National Affordable Housing Programme), Expanded Open Market HomeBuy (EOMHB), or Government Loan Only (GLO).

An owner redeeming all or part of an equity loan, either voluntarily or when obliged to do so upon selling their property, is a relevant event (paragraph 7(q) of the Determination). For further details on equity loan redemptions, including how to calculate the repayment amount, please see below.

Equity loan redemption worked example

3.4.8.6 The grant recoverable is the lower of:

  • The grant attributable to the property (including any grant paid to cover the scheme on costs)
  • (Where property values have fallen) the amount attributable to the percentage of the open market value for which the equity loan accounts. If the funds redeemed after the first charge lender has recovered the outstanding mortgage monies are insufficient to cover the required amount, the shortfall will be written off by the Registered Provider. N.B. that it is not intended that Registered Providers will need to consult first with the agency or seek consent in order to write off grant shortfalls in relation to equity loan redemption activity under these programmes

3.4.8.7 If the loan is being redeemed voluntarily (or in other circumstances not involving the sale of the property, such as redemption of the main mortgage with no replacement senior lender), administrative costs associated with the redemption are not eligible deductions from the gross sales receipt. This is because there are no costs of sale, as there is no sale, only the redemption of the loan.

3.4.8.8 Equity loans paid by equity loan providers under Open Market HomeBuy products from 1st April 2008 (other than under transitional arrangements in place up to 30 September 2008).

An owner redeeming all or part of an equity loan, either voluntarily or when obliged to do so under the terms of their equity loan agreement, is a relevant event (paragraph 7(q) of the Determination).

3.4.8.9 On receipt of the home owner’s equity loan repayment the equity loan provider will be required to process that receipt in accordance with the terms agreed with the Agency and the relevant clauses in their equity loan agreement.

3.4.8.10 Equity Loans paid under the Mortgage Rescue Scheme (Shared Equity product)

The Mortgage Rescue scheme is now closed and the following requirements apply to equity loan redemptions for property funded under this programme.

An owner redeeming all or part of a Mortgage Rescue equity loan, either voluntarily or when obliged to do so under the terms of their equity loan agreement, is a relevant event (para 7(q) of the Determination).

3.4.8.11 On receipt of the equity loan redemption payment calculated in accordance with section 7 of the Mortgage Rescue Shared Equity chapter, the Registered Provider will be required to ring fence 73% of this amount and either repay this to the Agency or place it in its Recycled Capital Grant Fund. The remaining 27% is to be retained by the provider.

3.4.8.12 Equity loans paid through FirstBuy/HomeBuy Direct

The FirstBuy and HomeBuy Direct programmes preceded the Help to Buy equity loan programme and are now closed. The following requirements are relevant to property funded under these schemes where the redemption of the equity loan in part or in whole has taken place by the property owner.

An owner redeeming all or part of a FirstBuy/HomeBuy Direct equity loan provided by a Registered Provider developer, either voluntarily or when obliged to do so under the terms of their equity loan agreement, is not a relevant event under the Recovery Determination).

This is because, for these products, grant is paid directly to the homeowner in the form of a loan and the equity loans are repaid direct to Post Sales HomeBuy Agent. The homeowner’s solicitor then repays 50% of the amount redeemed to the developing loan provider 50% to the Agency. The whole process is administered through a contract, with the grant being sent to the developer and Agency via the home owner’s solicitor on the day of completion, the process for which is managed by the Post Sales HomeBuy Agent. There is therefore no option to recycle recovered grant in respect of FirstBuy/HomeBuy Direct.

4. Grant liability

4.1 Apportionment of grant: Rented properties

4.1.1 This section sets out the requirements for apportioning grant on a reasonable basis to individual properties where a relevant event does not affect the whole scheme. It also makes reference to apportionment of grant to and within schemes in respect of the AHP 2011 to 2015 where grant is payable on an agreed payment rate per unit basis but also subject to total grant required as indicated in the offer. Note that the agreed payment rate applies only to the AHP 2011 to 2015 not to schemes delivered via the AHP 2015 to 2018. The following principles of apportioning grant where a relevant event has occurred within schemes applies regardless of the programme under which funding has been given.

For examples of what the Agency believes to be a reasonable basis please see below.

Acceptable methods of grant apportionment to individual properties are:

  • Rents as charged on first letting
  • Floor area
  • Equal division where properties are similar in size
  • Rateable value where this has been used in previous disposals in the scheme

Any other method approved by the Agency’s operating area in advance.

4.1.2 The total amount of grant paid in respect of a scheme and to be apportioned must include:

  • Funding (including new and recycled grant received on the initial development)
  • Grant paid to clear any loan on a scheme originally approved under section 41 of the Housing Associations Act 1985, and the works funded under later legislation
  • Grant paid for re-improvement, Major Repairs, and Minor Miscellaneous Works
  • Grant paid on any previous scheme on the site, which has been demolished whose recovery has been deferred (i.e. previous grant less any grant already recovered)
  • Simple interest (i.e. interest arising for late payment of grant to the Registered Provider)

4.1.3 For schemes grant funded under the AHP 2011 to 2015 only, the grant amount used must be the amount of grant indicated on IMS as being ‘the total grant required’, not the agreed payment rate that was paid for the unit.

4.2 Apportionment of grant: Shared ownership properties

4.2.1 For shared ownership schemes approved on or after 1 April 1993, grant is apportioned according to the market values of the dwellings at practical completion of the scheme.

4.2.2 For shared ownership schemes approved before that date, the grant calculations take into account the percentage of equity initially sold - see deemed loan debt in the Glossary chapter.

4.2.3 For shared ownership schemes grant funded under the AHP 2011 to 2015 only the grant amount used must be the ‘total grant required’ as entered on IMS and not the agreed payment rate that was paid for the unit.

4.3 Shared ownership staircasing sales

4.3.1 A shared owner may ‘staircase’ by purchasing a further share, or shares, of their dwelling. The grant attributable to the staircased share will be the appropriate percentage of all the grant attributed to the property, including that grant paid on interest arising after the relevant date. It will also include any recoverable grant deferred from previous staircasing within the same scheme.

For a worked example, please see below.

Shared ownership staircasing sales

A 25% share of a dwelling was initially purchased and the total grant attributable to the unsold equity (75%) in the property was £21,000.

The shared owner buys a further 25% of the property. This is one third of the equity owned by the Registered Provider (25% out of 75%).

The grant attributable to that staircasing purchasing is therefore one third of the grant paid (£21,000) i.e. £7,000.

Recovery of £2,143 had been deferred from a previous staircasing of a different dwelling in the same scheme.

The total grant recoverable is therefore £7,000 + £2,143 = £9,143

If the net sale receipt of this current staircasing is £8,250 then £8,250 of grant is recovered and the balance of £893 (£9,143 - £8,250) is deferred to the next staircasing within this scheme.

4.3.2 In respect of 2011 to 15 AHP funded schemes only it must be the total grant required that is attributable to the property and not the agreed payment rate per unit.

4.4 Initial sales of existing rented stock in to shared ownership

4.4.1 A dwelling forming part of a Registered Provider’s existing rented stock may be sold voluntarily on shared ownership terms. The grant attributable to the initial share sold will be all of the grant that is attributable to the dwelling as per 4.1 etc. (including that grant relating to interest arising after the Relevant Date).

4.5 Leasehold Schemes for the Elderly (LSE), Rural Restricted Equity/Rural Buyback and Rural Repurchase

4.5.1 In all cases Registered Providers should refer back to the procedures under which these schemes were developed for the special features relating to sale and grant recovery. The special features are summarised below.

4.5.2 For Leasehold Schemes for the Elderly schemes where the units were sold outright at a discounted sale price, the grant funded discount is not recoverable.

4.5.3 For Leasehold Schemes for the Elderly shared ownership schemes, the total grant that may be recovered is the total grant paid less 25% (or the specified percentage) of the cost of providing that dwelling at final cost stage. For these dwellings, grant will never be recovered in full unless the whole dwelling is disposed of, in which case the procedures for outright sale will apply. For an example please see below.

Leasehold Schemes for the Elderly staircasing sales

25% of a dwelling was initially purchased, with grant attributable to the remaining 75% of the dwelling of £21,000.

If the shared owner then buys the maximum shares allowed, that is a further 50% of the dwelling, (i.e. two thirds of the remaining shares) the grant attributable to that staircasing is two thirds of £21,000 = £14,000. The balance of £7,000 grant remains in the property.

4.5.4 For Rural Restricted Equity and some Protected Area properties, a cap is placed on the proportion of equity that the shared owner can purchase, e.g. restricting the shared owner to 80% ownership. Unlike the Leasehold Scheme for the Elderly provisions described above the whole of the capital grant paid (or indicated as total grant required on IMS in respect of AHP 2011 to 2015 funded schemes only) on the property is recoverable, if possible, from the proceeds of that restricted staircasing.

For an example, please see below.

Rural Restricted Equity and some Protected Area property staircasing sales

25% of a dwelling was initially purchased and the grant attributable to the unsold equity was £21,000.

With a cap of 80% sales, that leaves 55% of the equity available to be purchased at some point (80% - 25%)

If the shared owner buys a further 40% of the dwelling, the grant attributable to that staircasing is 40/55 x £21,000 = £15,273.

If the net sale receipt is £19,800 then £15,273 of grant would be recovered, with the balance of £4,527 accruing to the Registered Provider.

If the net sale receipt is £9,200 then £9,200 of grant will be recovered with the balance of £6,073 (£15,273 - £9,200) of the recoverable grant being deferred until the next staircasing sale.

The grant attributable to the final staircasing to 80% ownership would be (£21,000 - £15, 273) £5,727 plus the deferred £6,073 = £11,800. If the net sale receipt of that staircasing purchase were only £11,000 then £800 would be written off by the Registered Provider.

4.5.5 For Rural Repurchase/Protected Area Repurchase schemes, grant recovery is calculated on a unit basis rather than a scheme basis i.e. a shortfall on one dwelling in the scheme is not rolled forward to other dwellings in the scheme.

4.5.6 When the final staircasing of such a dwelling takes place, Registered Providers may immediately write off any shortfall of recoverable grant; shortfalls are not deferred to the next staircasing sale within that scheme. N.B. there is no requirement to consult with the Agency before taking action to write off grant under these circumstances.

4.5.7 However, when considering how to apportion grant between the properties in the scheme, this must be calculated in accordance with market value (as for shared ownership), and not on any other basis (as rented properties can be).

4.5.8 Upon the resale of a Designated Protected Area repurchased property, grant recovery as per shared ownership staircasing rules will apply. However, the first sale of shares in a repurchased property will not be deemed an exempt disposal and grant will become recoverable immediately the share is sold and a sales receipt realised. For an explanation, please see below.

The Recovery Determination considers that the sale of the initial share of a property being developed for sale on shared ownership terms is deemed an exempt disposal for grant recovery purposes. This is because when bidding for grant for newly developed shared ownership property landlords are required to plan and anticipate the percentage and value of the initial share to be sold and then to take the forecast sales receipt into account.

Potentially it is possible that new grant, or a combination of new and recycled grant, may have funded the full or partial repurchase price of Designated Protected Area Repurchase property. In these circumstances the Agency anticipates that the landlord would:

  • Not necessarily have been aware of the leaseholder’s intention to sell and have therefore been unable to forecast and plan the repurchase
  • Be obliged to repurchase the property
  • Be obliged to repurchase the property within the time scale contained in the lease
  • Be unaware of the ‘share’ the next eligible applicant could afford and sustain and therefore unable to forecast the sales receipt of that share

Given the above the Agency accepts that the landlord would not be in a position to take future sales receipts into account when bidding for new grant to fund the repurchase. As, potentially, the Agency could fund up to 100% of the repurchase price, the Agency therefore requires grant to become immediately recoverable once the sales receipt becomes available.

4.5.9 The resale of a new or recycled grant funded Designated Protected Area repurchased property must be at market value. Following the resale of the initial share, recoverable grant should be calculated according to the percentage of the share sold compared to the total new or recycled grant used to fund the repurchase. From the gross sales receipt landlords can deduct eligible deductions as follows: the Agency’s staircasing allowance and any deemed loan debt apportioned as appropriate.

Please see below for examples.

The following examples are based on a property with a market value of £250,000 being repurchased in part or in full.

Repurchase funded by new and recycled grant (1)  
Share to be repurchased 80%  
Value of share to be repurchased £200,000
Landlord’s own contribution Nil
New and recycled grant £200,000
Total new and recycled grant as a percentage of repurchase 100%
First share to be resold 30%
Sales receipt for 30% share sold £75,000
Less staircasing allowance of £449 £74,551
Recoverable grant £200,000 x 30% = £60,000
Grant recovered £60,000
Surplus to be retained by landlord £14,551
Repurchase funded by new and recycled grant (2) (where the value of the sales receipt does cover the recoverable grant)  
Share to be repurchased 100%
Value of share to be repurchased £250,000
Landlord’s own contribution Nil
New grant and recycled grant £250,000
Total grant/recycled grant as a percentage of repurchase 100%
First share to be resold 50%
Sales receipt for 50% share sold £125,000
Less staircasing allowance of £449 £124,551
Recoverable grant £250,000 x 50% = £125,000
Grant recovered £124,551
Grant deferred to future staircasing £449
Repurchase funded by landlord’s reserves and new grant  
Share to be repurchased 80%
Value of share to be repurchased £200,000
Landlords own contribution £100,000
New grant £100,000
Total grant as a percentage of repurchase 50%
First share to be resold 25%
Sales receipt for 25% share sold £62,500
Less staircasing allowance of £449 £62,051
Recoverable grant £100,000 x 25% = £25,000
Recovered grant £25,000
Surplus to be retained by landlord £37,051
Repurchase funded by a private loan, new and recycled grant (1)  
Share to be repurchased 80%
Value of share to be repurchased £200,000
Landlord’s private loan £100,000
New and recycled grant £100,000
Total new and recycled grant as a percentage of repurchase 50%
First share to be resold 25%
Sales receipt for 25% share sold £62,500
Less deemed loan debt (possibly loan of £100,000 x 25% = £25,000) £37,500
Less staircasing allowance of £449 £37,051
Recoverable grant £100,000 x 25% = £25,000
Grant recovered £25,000
Surplus to be retained by landlord £12,051
Repurchase funded by a private loan, new and recycled grant (2) (where the initial sales receipt does not cover the recoverable grant)  
Share to be repurchased 100%
Value of share to be repurchased £250,000
Landlords private loan £150,000
New and recycled grant £100,000
Total new and recycled grant as a percentage of repurchase 40%
First share to be resold 25%
Sales receipt for 25% share sold £62,500
Less deemed loan debt (possibly loan of £150,000 x 25% = £37,500) £25,000
Less staircasing allowance of £449 £24,551
Recoverable grant £100,000 x 25% = £25,000
Grant recovered £24,551
Grant deferred to future staircasing £449

4.5.10 Upon staircasing the remaining new/recycled grant is recoverable on the same basis and allowing for the same eligible deductions.

Please see below for examples.

Following on from the examples above, a year later the leaseholder wishes to purchase a further share. At the time of staircasing the property has a market value of £260,000

Repurchase funded by new and recycled grant (1)  
Property value £260,000
Original new/recycled grant to enable repurchase £200,000
Additional shares to be purchased 10%
Sales receipt for 10% share purchased £26,000
Less staircasing allowance of £449 £25,551
Recoverable grant £200,000 x 10% = £20,000
New and recycled grant to be recovered £20,000
Surplus retained by landlord £5,551
Repurchase funded by new and recycled grant (2)  
Property value £260,000
Original new/recycled grant/ to enable repurchase £250,000
Additional shares to be purchased 10%
Sales receipt for 10% share purchased £26,000
Less staircasing allowance of £449 £25,551
Recoverable grant £250,000 x 10% = £25,000
Additional recoverable grant previously deferred £449
New/recycled grant to be recovered £25,449
Surplus retained by landlord £102
Repurchase funded by landlord’s reserves and new grant (1)  
Property value £260,000
Original new/recycled grant to enable repurchase £100,000
Additional share to be purchased 10%
Sales receipt for 10% share purchased £26,000
Less staircasing allowance of £449 £25,551
Recoverable grant £100,000 x 10% = £10,000
New/recycled grant to be recovered £10,000
Surplus retained by landlord £15,551
Repurchase funded by private loan, and new and recycled grant (1)  
Property value £260,000
Original new/recycled grant to enable repurchase £100,000
Additional share to be purchased 10%
Sales receipt for 10% share purchased £26,000
Less deemed loan debt (possibly loan x 10% = £10,000) £16,000
Less staircasing allowance of £449 £15,551
Recoverable grant £100,000 x 10% £10,000
New/recycled grant to be recovered £10,000
Surplus retained by landlord £5,551
Repurchase funded by private loan, and new and recycled grant (2)  
Property value £260,000
Original new/recycled grant to enable repurchase £100,000
Additional share to be purchased 10%
Sales receipt for 10% share purchased £26,000
Less deemed loan debt (possibly loan x 10% = £15,000) £11,000
Less staircasing allowance of £449 £10,551
Recoverable grant £100,000 x 10% = £10,000
New/recycled grant to be recovered £10,000
Surplus retained by landlord £551

4.6 Apportioning grant on land

4.6.1 When a Registered Provider sells the land or buildings that make up an entire scheme no apportionment of grant is necessary, as the recoverable grant will be the entirety of the grant paid (or for 2011 to 15 AHP funded schemes only the entirety of the grant indicated on IMS as the total grant required).

4.6.2 However, Registered Providers may sell land that is a part of a grant-funded scheme under the following scenarios:

  • Scenario 1. Spare land that is part of a completed development
  • Scenario 2. Land swap or sale, using land from a completed development, to enable site assembly undertaken either by the Registered Provider or another body
  • Scenario 3. Land and / or part-completed properties sold or swapped prior to completion of the development

It is necessary to apportion grant to cater for these scenarios.

4.6.3 Spare land – scenario 1: Grant will not be recovered when a Registered Providers dispose of spare land associated with a scheme. Spare land includes:

  • Part of a garden or general landscaping
  • Plots of land for electricity sub-stations or similar utilities
  • Land swaps to regularise boundaries
  • Rights of way, access, or easements

4.6.4 Spare land excludes any area of land designated at scheme approval for any future phase or phases. If a Registered Provider is in doubt about whether land should be classed as spare, they should consult the relevant Agency’s operating area.

4.6.5 Land swaps and sales (completed developments) – scenario 2: Where a scheme has been completed, the grant should have already been apportioned between the properties. There will therefore be no grant apportioned to the parts of the scheme that are landscaping, roads etc. The disposal by sale or barter of this land is a relevant event, but there is attributed grant to be recovered.

4.6.6 Land swaps and sales (partially completed developments or before building work starts) - scenarios 3: If, after disposing of part of the site, or some of the partially completed dwellings, Registered Providers are still able to deliver the number of units housing the agreed number of people, and comply with all other Funding Conditions, then the grant can be apportioned to the properties, rather than being apportioned between land and properties. There will therefore be no grant attributed to land (as opposed to properties) and although a relevant event will have occurred, there is no grant to be recovered.

4.6.7 If, after disposing of part of the site or some of the partially completed dwellings, Registered Providers are unable to deliver the required number of units etc., they must seek confirmation from the Agency’s operating area as to whether or not the Agency is willing to continue to fund the scheme. The Agency may be willing to allow a (reduced) scheme to proceed at lower level of grant the Agency will consider whether the provider may be able to deliver the balance of units elsewhere.

4.6.8 If the grant payable for the new scheme is less than had already been paid for the cancelled scheme, the difference will be recoverable.

4.6.9 Where the Agency cannot agree proposed changes to the development as per the above paragraph the scheme may be cancelled. This would be a relevant event, triggering recovery (by immediate repayment) of all grant paid on the scheme (or ‘total grant required’ as indicated on IMS for AHP 2011 to 2015 funded schemes only).

5. Recycled Capital Grant Fund Administration

5.1 General

5.1.1 This section sets out how the Recycled Capital Grant Fund must be administered, including crediting to the fund, its use and its management. The following arrangements apply to all recycled capital grant generated outside of Greater London and these requirements are applicable to all classes of Registered Provider that operate a recycled capital grant fund. Local authority Registered Providers should also refer to their contractual terms which require local authorities to be able to account for and report separately on the operation of their recycled capital grant funds.

5.1.2 As indicated in paragraph 1.2.2, the principles governing grant recovery are set out in the Agency’s Recovery of Capital Grants and Recycled Capital Grant Fund General Determination 2015 specifically paragraph 19 where the principles for the establishment and use of a Recycled Capital Grant Fund are made clear.

5.1.3 Recycled grant held in a Recycled Capital Grant Fund may be spent (recycled) by Registered Providers on permanent uses outlined in section 6. If Registered Providers wish to use their recycled grant on non-priority permitted uses, they must seek the permission of the Agency.

5.1.4 Registered providers should note that not all relevant events referred to in the Recovery Determination allow an option to recycle grant and the Agency will require grant to be repaid if these events occur – please refer to section 2 for more details.

5.1.5 Recoverable grant arising from Key Worker Living or Starter Homes Initiative programmes is no longer ring-fenced for that purpose and can therefore be recycled by Registered Providers on other local priorities.

5.1.6 Registered Providers’ internal records must record the originating local authority area in which recycled grant was generated (see section 6.4.3), together with details of whether this is a rural or protected area (see section 6.3.7).

5.2 Process for crediting the Recycled Capital Grant Fund

5.2.1 Following those relevant events that do not require repayment of grant (see section 2) Registered Providers have the option of repaying the recoverable capital grant to the Agency, or recycling into future permitted uses through a Recycled Capital Grant Fund.

5.2.2 Each Registered Provider must weigh up any advantage of being able to recycle grant against the cost of setting up and administering a Recycled Capital Grant Fund including the likelihood of a usable balance being built up in the fund and spent within three years.

5.2.3 Where Registered Providers opt to maintain a fund they will be required to calculate the amount of recoverable grant to be credited to the fund as per section 3 above. For each relevant event Registered Providers must complete, and retain, written documentation showing the calculation of the recoverable grant. This amount must be credited to the fund with effect from the date of the relevant event. The written documentation must also show whether any of the recoverable grant is to be deferred or written off (NB in certain circumstances grant may only be written off with the Agency’s prior consent) by the Registered Provider in accordance with details provided in section 3, or elsewhere in this chapter.

5.2.4 Where a relevant event occurs for a property produced with recycled grant from a providers Recycled Capital Grant Fund, a recovery calculation must be made in the same manner as if it had been funded with new capital grant and the recoverable grant either credited back to the fund or paid to the Agency in accordance with the requirements and procedures applicable at that time.

5.2.5 Each year, Registered Providers must calculate and credit notional interest to their fund – as detailed further below in this section. This notional interest becomes part of the Recycled Capital Grant Fund and may only be spent on permitted uses outlined in section 6.

5.2.6 Where a property is disposed to tenants under Social HomeBuy or Right to Acquire procedures, the proceeds must be credited to the Disposal Proceeds Fund, not the Recycled Capital Grant Fund. The Disposal Proceeds Fund is the remit of the Regulator; please see the Agency’s website for further information on use and administration of a Disposal Proceeds Fund.

5.2.7 Where credits arise from relevant events relating to Affordable Rent property, these credits should be ‘ring fenced’ within Registered Providers Recycled Capital Grant Fund to be spent on the further supply of Affordable Rent properties – see section 6.2.

5.2.8 Registered Providers are asked to note that where recycled grant amounts are generated outside Greater London, they must be spent outside Greater London. Similarly, recycled grant amounts generated inside Greater London must be spent inside Greater London – see section 6.3.

5.3 Administering the Recycled Capital Grant Fund

5.3.1 In allowing Registered Providers to maintain and administer a Recycled Capital Grant Fund the Agency expects such funds to be robustly managed. Credits to the fund must be closely monitored, spend planned, and the fund regularly reviewed to guard against large sums of uncommitted amounts accumulating. Registered Providers that are subject to a new supply agreement should expect that their review meetings will in part be used to monitor recycled grant spend. For more information on review meetings, please see Programme Management 2.3.2. Whilst the Agency acknowledges that it will be desirable to allow useable amounts to accrue this must be balanced against being able to spend those amounts within the prescribed time scale of three years – see below for further information.

5.3.2 Circumstances leading to repayment of Recycled Grant Under certain circumstances the Agency will require repayment in total or in part of any current balance in the Recycled Capital Grant Fund. These circumstances are:

a) The Agency discovers that a Registered Provider has provided incorrect information or made an error in the calculation of amount or notional interest in its Recycled Capital Grant Fund.

b) The Agency learns that a Registered Provider has not applied all or part of its recycled grant to a permitted use within three years.

c) The Agency discovers that a Registered Provider has failed to administer its Recycled Capital Grant Fund according to the principles set out in the Recovery Determination and detailed in this guide or has failed to report or supply information on the amounts of grant in its fund to timetables established by the Agency (as set out in this chapter of the guide).

d) The Agency discovers that a Registered Provider has applied its recycled grant for purposes other than those in the Determination and detailed in this guide.

e) The Agency decides, in exercise of its responsibilities, that a Registered Provider’s financial or management circumstances are such that grant held in an Recycled Capital Grant Fund is at risk and/or the option of placing recovered grant into a fund in the future would put that grant at risk.

f) The Agency decides that a Registered Provider is unlikely to be able to apply all or part of its recycled grant to a permitted use within three years.

g) The Social Housing Regulator de-registers a Registered Provider under section 118 or 119 of the Housing and Regeneration Act 2008. However the Agency may consider allowing recovery to be deferred until a further relevant event occurs using the definition of relevant events current at that future time or alternatively repayment by instalment.

h) The Registered Provider coming under Regulatory supervision and the Regulator deciding that retention of Recycled Capital Grant Fund monies by the Registered Provider would be inappropriate. The Regulator may change this decision at any time after the Registered Provider ceases to be a supervision case. The Agency will not return any previous fund balance or recovered grant that had been paid during the period of supervision to the Agency.

i) Any other relevant provision arising under relevant events 7 a) – i) from the Determination.

5.3.3 For (a) and (b) the Agency will require repayment of the specific sum involved.

5.3.4 For (c) to (i) the Agency will require repayment of all or part of the current balance and for (c) and (d) additionally any grant from the fund already spent by the Registered Provider using processes or for purposes which do not comply with those set out in the Recovery Determination and this guide.

5.3.5 The Agency may also direct that grant recoverable upon future relevant events is repaid to the Agency without the option for recycling for as long as the Agency considers appropriate.

5.3.6 In all cases notional interest that was added to the sum in the fund to be repaid will also be recovered.

5.3.7 In addition to the circumstances listed above, the Agency may withdraw a Registered Provider’s option of maintaining a Recycled Capital Grant Fund in accordance with the principles of the Determination at paragraph 19, if it considers that it would be appropriate to do so in the circumstances of a particular case.

5.3.8 Where repayment of monies previously credited to a Recycled Capital Grant Fund is required, the Agency will issue an explanatory letter and invoice, including the payment schedule and terms.

5.4 Accounting arrangements for the Recycled Capital Grant Fund

5.4.1 If Registered Providers who wish to recycle recoverable grant they must maintain a designated fund within their accounts entitled ‘Recycled Capital Grant Fund’.

5.4.2 The fund must be supported by a robust audit trail of relevant paperwork detailing individual amounts of:

  • Recoverable grant credited to the fund
  • Recoverable grant by local authority
  • Notional interest added
  • Any withdrawals made
  • Any amount written off

5.4.3 Registered providers may be asked to produce evidence of the audit trail. The supporting documentary evidence must be retained for ten years.

5.4.4 Rules covering the disclosure of Recycled Capital Grant Fund balances and transactions are contained within the Regulator’s Accounting Direction for Social Housing in England from April 2012.

5.5 Expenditure from the Recycled Capital Grant Fund

5.5.1 Properties developed or repaired with recycled grant will be subject to the same regulatory requirements, funding conditions and requirements as those funded with new social housing assistance from the Agency.

5.5.2 Where properties funded through recycled grant are defined as Social Housing under sections 68-70 of the Housing and Regeneration Act 2008, they will become or remain subject to the regulatory standards.

5.5.3 Withdrawals from a Registered Providers Recycled Capital Grant Fund should be debited on the date of the start on site and/or other payment milestones.

5.5.4 Please note that these may differ depending on the scheme type and under which AHP the scheme was developed . For details on payment milestones, please see Programme management section 4.

5.5.5 Expenditure from the fund should be debited on a first in, first out basis. Please see 5.10.3 below for an example of this.

5.5.6 Recycled Capital Grant Fund levels When developing property with recycled grant the Registered Provider can choose how much recycled grant to use to a defined maximum amount.

5.5.7 The maximum amount of recycled grant that can be used on the scheme is calculated as follows:

  • Total capital costs of the scheme (i.e. the amount capitalised on the balance sheet) less
  • The sum of any sales receipts (if applicable) less
  • The notional loan debt that the Registered Provider is able to support from the rental stream produced by the properties (if applicable) less
  • Any other resources, including the Registered Provider’s own

5.5.8 Repurchased units

Where a Registered Provider opts to repurchase properties where 100% has been sold in accordance with the requirements of 6.1.3 (and this offers value for money and fits with local investment priorities) this must be funded from their own resources and where necessary recycled grant.

5.5.9 Registered providers will be able to make use of capitalised rental income from the newly created rental unit. The Registered Provider may therefore debit from its Recycled Capital Grant Fund an amount up to the purchase price minus an amount equal to the capitalised rental income and plus an allowance for administrative expenses (it should use the staircasing sales allowance current on the date of completion of the repurchase).

5.5.10 Approval and accounting The Agency’s prior written approval is not necessary for the use of the fund or the calculation of the amount to be withdrawn from the Recycled Capital Grant Fund, unless specified elsewhere (e.g. for non-priority permitted uses).

5.5.11 Registered Providers can choose whether to debit the full amount of recycled grant to be used on the scheme at the first payment milestone (such as start on site), or to debit the amounts in a way which matches grant claims.

5.6 Addition of notional interest

5.6.1 At 31 March each year, Registered Providers must add notional interest to their Recycled Capital Grant Fund.

5.6.2 While the fund balance is £250,000 or less, the notional rate that the Registered Provider must use is that which a Registered Provider would obtain by placing the money in the high interest deposit account operated by its own clearing bank. Therefore a Registered Provider should keep a record of these rates available for its auditor.

5.6.3 While the fund balance is greater than £250,000, the notional rate is linked to the Bank of England’s base lending rate, as follows:

Size of Recycled Capital Grant Fund Rate of notional interest calculations. £250,001 to £500,000 Base lending rate minus 75 basis points £500,001 to £750,000 Base lending rate minus 50 basis points £750,001 to £1,000,000 Base lending rate minus 25 basis points Over £1,000,000 Base lending rate

A floor of 0% is applicable to notional interest calculations. Therefore, if the Bank of England base rate is at such a level as to produce a nil or negative amount of notional interest, then no interest should be added for the relevant period.

5.6.4 Registered Providers must calculate notional interest on a daily basis, to take account of varying balances, according to a 365 day year convention, that is:

Balance x rate x (days for which this balance held/365)

The base rate used in the calculation must be amended in line with clearing bank or Bank of England rate changes.

5.6.5 Registered Providers that pay corporation tax on their Recycled Capital Grant Fund interest earnings may deduct that tax from their Recycled Capital Grant Fund balance at the standard corporation tax rate that applied at the time.

5.6.6 In the calculation, notional interest must be compounded at 31 March of each year. Registered Providers must clearly identify whether Recycled Capital Grant Fund credits are recovered grant or notional interest. However, when using recycled grant, Registered Providers will simply be drawing against the balance on the account, and do not need to identify whether it is using money that was recovered grant or notional interest.

5.6.7 In calculating notional interest, the date the interest should be calculated from should be the date the recovered grant must be credited to the fund, i.e. the date of the relevant event.

5.6.8 Where one Registered Provider is transferring all or some of its Recycled Capital Grant Fund balance to another Registered Provider (for details of the circumstances under which this is acceptable, please see 5.8), notional interest is added at the end of the year. The transferring organisation will calculate interest on the balance up to the date of the transfer debit; the receiving organisation from the date of the credit.

5.6.9 All such transfers must be recorded as withdrawals and inputs from/to the relevant Registered Provider’s Recycled Capital Grant Fund

5.7 Uplift amounts

5.7.1 Profit making Registered Providers only, are subject to a requirement to recycle capital grant with uplift upon the occurrence of a relevant event. For a definition of uplift amount please see below.

Uplift Amount’ (as set out in the Determination) means an amount calculated by reference to any increase in market value of any housing or other land acquired, constructed, converted, improved or repaired as a result of capital grant.

5.7.2 Please refer to the uplift calculation guidance which explains the methodology and provides examples on uplift calculations.

5.8 Transferring balances between Registered Providers

5.8.1 Registered Providers may, in the circumstances defined below, transfer all or some of their Recycled Capital Grant Fund to other Registered Providers where this helps create a usable balance and/or supports the quick and efficient use of recycled grant to meet local priorities. This includes Flexible Tenure, under the terms defined in section 6.5.

5.8.2 Transfers may occur between Registered Providers which are:

  • Members of a group structure (although each member of the group must have its own Recycled Capital Grant Fund)
  • Members of a Development Partnership or Consortium which is currently in receipt of grant

5.8.3 Transfers may also occur subject to the Agency’s prior agreement (this will be from the operating area responsible for the transferring Registered Provider) prior approval where these are:

  • To another local Registered Provider and/or
  • To a similar type of Registered Provider (e.g. a specialised housing provider)

Recycling grant generated in Greater London must only be spent within Greater London, and recycled grant generated outside Greater London must not be spent in Greater London.

5.8.4 The receiving organisation must ensure:

  • It documents the transfer
  • It receives notification of the date on which each sum being transferred was originally credited to the transferor’s Recycled Capital Grant Fund
  • The date on which it credits its own Recycled Capital Grant Fund is no more than one day after the date the sums are debited from the transferor’s fund

5.8.5 The donating organisation must debit the sum from its own Recycled Capital Grant Fund on the date the amount is transferred and document this accordingly.

5.8.6 Transfer of sums between organisations’ fund does not reset the three year repayment schedule. The time limit for spending transferred recoverable grant remains within three years following the year in which the date of the original relevant event occurred.

5.8.7 Transfers to and from other Registered Providers must be separately accounted for in the Annual End of Year IMS Returns, to avoid the possibility of double counting withdrawals and inputs. Please see section 7.2.

5.8.8 Where a transfer of engagements has occurred the process described above should be used, with a transfer of the full Recycled Capital Grant Fund balance to the receiving Registered Provider. At 31 March an Annual IMS End of Year Return should be made for both the receiving and the transferring Registered Provider, (the latter covering the period to transfer).

5.9 Repayment of Recycled Capital Grant

5.9.1 If Registered Providers do not recycle the grant within three years, the Agency will collect it (including notional interest) and recycle the money through the Affordable Homes Programme. For Registered Providers that are profit making repayment will be in accordance with the uplift principles and methodology defined at sections 5.7.1 to 5.7.2. See section 5.11 below regarding collection processes.

5.9.2 Whilst three years is the normal time allowed before seeking repayment of amounts in the recycled grant, the Agency reserves the right to collect it sooner.

5.9.3 Notional interest due will be calculated by the Agency and will be added to, and identified in the invoices sent to Registered Providers.

5.9.4 Registered Providers must pay the invoice by the due date, or be liable for interest for late payment.

5.9.5 Registered Providers must not simply send payment to the Agency without having first received an invoice. See section 2.4.1 above for how this is calculated.

5.9.6 When recycled grant, plus notional interest, is repaid to the Agency the amount must be debited from the fund on the date of repayment.

5.9.7 Registered providers may choose to repay sums in their Recycled Capital Grant Fund to the Agency at any time during the allowed three year period. Full details should be forwarded to relevant contract manager or in the absence of an assigned contract manager to the relevant operating area business support team.

5.9.8 On a case by case basis the Agency may allow Registered Providers to roll-over balances of ‘three year old grant’ into subsequent years. The Agency is prepared to consider cases where it believes this is in the interest of affordable housing provision, or results from an acknowledged error on the part of the Agency. To seek approval of a roll-over request Registered Providers should approach their operating area and provide a full written explanation of:

  • Why the fund has not been spent within the permitted three years
  • Why it needs to be rolled over
  • What it is to be spent on
  • When it will be spent

Requests will be agreed only in exceptional circumstances and at the sole discretion of the Agency.

5.9.9 Any agreement to roll-over will initially be for one year only and will be subject to the Agency’s monitoring. The Agency will inform Registered Providers of what details they should supply regarding the spend of the rolled over amount.

5.9.10 A further roll-over is unlikely unless there are exceptional circumstances, but would necessitate a further written request by the Registered Provider and the Agency’s further consideration and discretion.

5.10 How to identify three year old grant

5.10.1 Registered Providers must identify the amount of three year old recycled grant repayable, if any, while preparing their annual electronic end of year data return (see section 7).

5.10.2 The three years starts from the end of the Recycled Capital Grant Fund year (31 March) in which the recoverable grant was credited.

For an example please see below.

The three year period should be calculated as follows:

  • £100,000 credited to the fund on 16.8.2015
  • That is during the 2015/16 Recycled Capital Grant Fund year
  • The three year period following the year of credit is therefore 2016-2019

If not spent by 31 March 2019 it will become subject to collection.

5.10.3 When calculating the amount of three year old grant that is repayable to the Agency, Registered Providers must calculate grant as having been spent on a first in, first out basis.

For an example please see below.

Operating on a first in, first out basis means that if by the end of the following third year, the Registered Provider has spent, in total, more than it deposited during the year in question, it has nothing to pay, e.g.:

  • During the year ending 31 March 2015 £500,000 was credited to the provider’s fund
  • The three year period is therefore 2016-2019
  • In 2016/17 the provider deposits £100,000 into the fund
  • The total Recycled Capital Grant Fund balance is £600,000
  • During 2016-2019 period £550,000 is spent

Whilst there is balance of £50,000 there is no three year old grant as the £50,000 balance was from the 2016/17 deposit.

5.10.4 If, by 31 March of the year in question, Registered Providers have entered into a written contractual commitment to incur expenditure on permitted uses, then that amount of recycled grant can be treated as having been spent.

Only the following count as contractual commitments:

  • An exchange of contracts to acquire
  • Signing a building contract

5.10.5 Contracts devised to avoid repayment of three-year-old grant are not acceptable. The Agency expects contractual commitments to result in the contracted expenditure being incurred within six months. On a building contract, that would mean signing building contracts and starting on site within six months.

5.10.6 Registered Providers must not repay any outstanding three-year old grant to the Agency until they receive an invoice as per 5.9.5 above.

5.11 Collection process

5.11.1 Following a review of a Registered Providers Annual End of Year IMS Recycled Capital Grant Fund Return (see section 7.2) the Agency will raise an invoice for:

  • Any three year old grant (where a rollover request has not been approved)
  • The interest that the Registered Provider is required to calculate on that three year old grant up to 31 March of the year in question plus
  • Interest that the Agency will calculate as due from 1 April to the date of the invoice

The Agency will issue the invoice as soon as possible after the End of Year Return has been submitted. Registered Providers should not send a payment until they receive the Agency’s invoice.

5.11.2 If payment arrives later than the date required by the invoice, the Agency will calculate and invoice for additional interest, as pre-warned in the invoice.

5.11.3 Where Registered Providers report sums over three years old, which the Agency has agreed to roll over beyond the usual deadline, no invoice will be raised for this amount.

5.12 Administrative allowances

5.12.1 When disposing of property under shared ownership (including New Build HomeBuy); Social HomeBuy or other Voluntary or Statutory schemes Registered Providers may deduct administrative allowances when calculating sums to be credited to the Recycled Capital Grant Fund or Disposal Proceeds Fund.

5.12.2 The list below provides details of the property disposal deductible administrative allowances

Staircasing sales £449
Right to Buy sales £701
Right to Buy sales (flat) £1,576
Voluntary and Statutory Purchase Grants (house) e.g. Right to Acquire and Social HomeBuy £701
Voluntary and Statutory Purchase Grants (flat) e.g. Right to Acquire and Social HomeBuy £1,576

6. Permitted uses

6.1 General

6.1.1 Recycled grant will have the same Funding Conditions and conditions of grant as if the scheme had been funded with new social housing assistance, although properties provided with funding from the Recycled Capital Grant Fund are not subject to the Right to Acquire under section 180 of the Housing and Regeneration Act 2008 and section 16 of the Housing Act 1996, except when recycled grant is used in combination with money from the Disposal Proceeds Fund or new grant.

6.1.2 Recycled Capital Grant Fund balances previously ring fenced for use in key worker schemes, and grant recovered from previous key worker programmes (such as Starter Home Initiative, Key Worker Living etc.) are no longer subject to restrictions, and can be spent on the general permitted uses and in the first instance on the priorities indicated below.

6.1.3 Priorities In the first instance, the Agency expects that in the first instance, Registered Providers to spend recycled grant on the Agency’s priorities. Recycled grant may be spent on the following priority permitted uses without the prior agreement of the Agency.

6.1.4 The Agency’s priorities for the reinvestment of recycled grant include:

  • The provision of new dwellings for Shared Ownership, this can include new build, purchase of existing satisfactory and rehabilitation
  • The provision of new dwellings for Affordable Rent; including the funding of hostels and traveller pitches this can include new build, purchase of existing satisfactory and rehabilitation – however, please see 6.2.1 below
  • Re-improvement or the physical conversion of existing owned larger properties into smaller properties that better suit local housing need, for Affordable Rent (refurbishment of existing stock which results in a property of the same size, or larger, is not a priority use for the reinvestment of recycled grant)
  • Flexible Tenure where it will prevent repossession and homelessness - provided the criteria in section 6.5 are met

6.1.5 Expenditure on uses other than provision of Shared Ownership, Affordable Rent, Re-improvement or physical conversion of larger properties into smaller properties for Affordable Rent or Flexible Tenure will require prior approval from the Agency’s operating area.

6.1.6 In addition to the Agency’s priorities, recycled grant may also be spent, with prior Agency approval, on the following Permitted Uses (although these will be subject to some restrictions or additional criteria as detailed in 6.2 below):

  • Other activities for which the Agency could make Social Housing Assistance available funding of, except where a restriction is stated in this section of the guide;
  • Works to stock within the boundaries of an Estates Renewal Challenge Fund Programme area, (but only if the grant in the Estates Renewal Challenge Fund arises from recoveries related to property included in the Estates Renewal Challenge Fund Programme for that area)
  • Land acquisition
  • To repurchase homes sold outright under Social HomeBuy post April 2006 where the freehold transfer includes a 21 year pre-emption right
  • To repurchase properties sold under Right to Acquire or Right to Buy after 1 Jan 2005 (the Housing Act 2004 gives a ten year right to repurchase properties sold under Right to Acquire or Right to Buy)
  • To repurchase a shared owner’s equity in a grant funded shared ownership property provided the circumstances detailed at Shared Ownership section 5.3.30 are satisfied
  • To repurchase properties sold under Social HomeBuy or New Build HomeBuy post April 2006 on shared ownership terms, where the leaseholder has staircased to 100%

All expenditure must align with relevant Local Investment Plans or similar agreed documentation.

6.2 Restrictions and or additional criteria to permitted uses

6.2.1 Affordable Rent

Registered providers that are not on their own, nor as part of a consortium, developing Affordable Rent under an agreed grant agreement may not use recycled grant to provide new supply Affordable Rent, unless they are party to a Short Form Agreement with the Agency. The standard Short Form Agreement is currently published on the Agency’s website.

6.2.2 Registered Providers that are developing Affordable Rent under an agreed grant agreement may use their recycled grant to provide additional Affordable Rent property. However they should use any ‘ring fenced’ credits (as per section 5.2.7) in the first instance.

6.2.3 HomeBuy Registered providers that are not on their own, or as part of a consortium, developing or providing new housing under an agreed grant agreement may use recycled grant to provide shared ownership, subject to the usual considerations of local authority support and value for money.

6.2.4 Social Rent

Registered Providers may only develop social rent with recycled grant in limited circumstances, and only with prior approval of the Agency’s operating area. In all cases Registered Providers will require the support of their local authority. If Registered Providers are developing Affordable Rent under a grant agreement the Registered Provider will have to make a strong case as to why developing new Affordable Rent homes would not be a viable alternative.

6.2.5 Section 106

The SOAHP 2016 to 2021 Prospectus makes clear that the Agency does not expect to fund section 106 with new grant, except where a viability case can be made using an economic appraisal tool. The same principle that it is only in exceptional circumstances and where a viability case has been made using the Agency’s Development Appraisal Tool, extends to the use of recycled grant to fund section 106 development. If Registered Providers wish to use recycled grant to support delivery of homes on a section 106 site, they should contact the relevant Agency operating area.

6.2.6 Absolute Restrictions

The following may not be funded with recycled grant:

  • Funding Social HomeBuy or Right to Acquire discounts
  • Work to existing stock that is ineligible for funding because of the terms under which it was originally financed; Examples are major repairs to general needs projects funded under the Housing Acts 1988 and 1996 and stock transferred from a local authority
  • Day to day and cyclical maintenance
  • Tenant Incentive Schemes
  • Provision of the FirstBuy, Help to Buy or the equity loan product
  • Leasehold enfranchisement

6.2.7 Registered Providers must consult the relevant operating area if unsure about a proposed use of recycled grant.

6.3 Housing needs – locality and priority

6.3.1 Registered Providers must apply the funds in their Recycled Capital Grant Fund in accordance with the investment priorities of the relevant Local Investment Plans or similar agreed documentation and expenditure is expected to be for the provision of new affordable housing.

6.3.2 Registered Providers may make the case for an alternative use to:

  • Meet other strategic priorities
  • Ensure the Registered Provider remains financially viable

All requests to use recycled grant for uses other than the Agency’s priority permitted uses must be submitted to the Agency’s operating area for consideration and approval.

6.3.3 The Agency’s expectation is that spend should take place within the local authority area within which the recycled fund was generated. Registered Providers’ internal records of recovery will therefore need to record the originating local authority area in which the recycled grant was generated.

6.3.4 If Registered Providers wish to spend recycled grant in a different local authority from that in which it had originated, but within an operating area’s sub-area, they must inform the Agency’s operating area prior to entering into any commitment that is to be fully or partly funded with recycled grant.

For information on sub-areas please see below.

All of the operating areas have adopted the concept of sub-areas and sub-regions for the SOAHP, but operating areas have defined these differently. Registered Providers should refer to the relevant operating area to ascertain details of any sub-areas.

6.3.5 If Registered Providers wish to spend recycled grant in a different sub-area from that in which it originated, but still within the same operating area they must consult with the operating area prior to entering into any commitment that is to be fully or partly funded from recycled grant. In considering such proposals the operating area will take into account the clarity of its sub-area definitions and local priorities.

6.3.6 In exceptional circumstances recycled grant may be spend outside the operating area in which it originated, where the flow of the recycled grant out of the area is covered by an equivalent reverse flow of recycled grant from another Registered Provider. For details please see below.

Expenditure of recycled grant is permissible outside the operating area within which it was generated where the proposed spend is for a priority use (please see 6.1.4 above) and subject to the arrangement of an equivalent reverse flow of recycled grant from the operating area in which the planned spend is taking place to the operating area in which the transferred recycled grant was generated, to be agreed with another Registered Provider (i.e. there would be little or no effect on net recycled grant expenditure in the two operating areas).

Under these circumstances out of operating area expenditure will normally only be considered where:

  • The expenditure is greater than £1 million
  • The difference between the two flows is less than 5% of the larger
  • Spend of the full amounts will occur in the same financial year
  • The expenditure will create new supply in key priority areas identified in key local investment plans or similar agreed documentation

Agency operating areas have the flexibility to waive the above requirements for out of operating area expenditure of recycled grant, where they are in agreement. Decisions on whether to relax the requirements are a matter for agreement between the operating areas concerned.

Please note this does not apply to amounts generated within Greater London.

6.3.7 Registered Providers must also consult the relevant Agency’s operating area if a credit to the fund generated in a rural or protected area (defined as an area with a population below 3,000 or one designated by legislation as being a protected area) is to be spent in a non-rural area. Registered Providers’ internal records of recoveries must therefore record cases where the credit to the fund originates in a rural or protected area.

6.4 Combining Recycled Grant with new grant, Disposal Proceeds Fund and other finance

6.4.1 Registered providers may combine recycled grant with Disposal Proceeds Fund and new grant in the following ways:

  • Combine recycled grant with grant in schemes receiving an allocation within the SOAHP. Such schemes could only be those that are permitted uses of the Disposal Proceeds Fund (for Disposal Proceeds Fund Permitted Uses, see the Regulator’s Disposal Proceeds Fund guidance)
  • Combine recycled grant and Disposal Proceeds Fund (but no new grant). Such schemes could only be those that are permitted uses of the Disposal Proceeds Fund (for Disposal Proceeds Fund Permitted Uses, See the Regulator’s Disposal Proceeds Fund guidance)

6.4.2 All schemes require a proportion of the costs to be met with private sector loans or a contribution from the Registered Provider’s own resources.

6.4.3 Resource inputs into a scheme from a Registered Provider’s Recycled Capital Grant Fund must not exceed the level stated within the relevant bid (including if zero). Any proposal to add additional resources to an existing allocation must be agreed with the relevant Contract Manager in advance.

6.5 Flexible tenure through the Recycled Capital Grant Fund

6.5.1 Although a priority for the SOAHP, Flexible Tenure (also referred to or known as downward staircasing) is a permitted use of the recycled grant only in cases where other options for avoiding repossession have been exhausted. It is a last resort option to enable a shared owner (NOT an outright owner) experiencing severe financial difficulties to remain in their own home despite changes in their financial circumstances. It is aimed at preventing repossessions and the loss of the home. It is not a means of allowing the shared owner to restructure their debts (including rent arrears) or otherwise improve their financial position.

Note: recycled grant may only be used to fund up to a maximum of 70% of the Flexible Tenure purchase costs. See paragraph 6.5.12 for more details.

6.5.2 There is no ‘right’ to Flexible Tenure and any offer is purely at the Registered Provider’s discretion. However, where offered by Registered Providers the following eligibility criteria must be met:

  • Registered Providers must confine offers of Flexible Tenure to shared owners in their own stock, but can include both grant funded and non grant funded stock
  • Registered Providers may set their own detailed procedures provided that they comply with the required general policy and procedures in this section of the Recovery chapter
  • The shared owner must currently own less than 100% of the property
  • The shared owner must be paying rent on the unsold equity in the property. The term ‘rent’ excludes ground rent and service charges. Flexible Tenure is not available for other owner occupiers including former shared owners or those who have bought a property through a discount or incentive scheme such as Right to Acquire, Right To Buy, the Tenants’ Incentive Scheme (no longer available) or any of the Agency’s equity loan products.
  • Registered Providers must be satisfied that the shared owner has explored and exhausted other options. The shared owner must produce suitable evidence to prove their difficulty with mortgage repayments although they need not already be in mortgage arrears. Shared owners must be able to show that other short and long term options, such as loan rescheduling, or selling and moving to cheaper property within a reasonable travel to work area have been exhausted
  • Registered Providers must also take into account the shared owner’s ongoing ability to meet future repair and maintenance liabilities
  • Future sustainability should be based upon advice from an independent debt-counselling agency, and should include consideration of housing benefit eligibility
  • For Shared Ownership for Older Persons properties, the same policy applies. However, Flexible Tenure repurchase from the maximum shares permitted under this product will also be permitted to allow essential repair and maintenance work to be carried out where the leaseholder demonstrates that there is a need for such work to the property and that they lack the funds to pay for it
  • For non-grant funded stock, should Registered Providers consider repurchasing all the leaseholders shares thereby converting the tenure to an assured tenancy, they must undertake a survey of the property before completion of the Flexible Tenure application in order to assess any immediate and future repair liabilities that would be required under the Social Housing Regulator’s social housing standards

6.5.3 Registered Providers cannot use recycled grant funds to help shared owners release equity for any other purpose than avoiding threats, or potential threats, to their ability to remain in their home. Recycled grant cannot be used to allow shared owners to repay debt (other than their principal mortgage debt and arrears), or to buy other goods or services. This is NOT Flexible Tenure.

6.5.4 Under Flexible Tenure, Registered Providers must repurchase enough equity to reduce the leaseholder’s total housing costs to a level which they and the Registered Provider are confident is manageable and sustainable in the long-term.

6.5.5 This can include repurchasing sufficient equity to:

  • Clear the mortgage
  • Pay off arrears of interest and principal on the mortgage
  • Reduce mortgage payments to nil

6.5.6 In order to meet the needs as per the above paragraph, the repurchase of shares by Registered Providers under Flexible Tenure is not restricted to particular tranches in the same way as for upward staircasing. For further guidance please see below.

In order to repurchase sufficient equity as per the requirements at 6.5.4, Registered Providers may repurchase shares of any percentage, and are not restricted to 10% tranches. A repurchase of shares may also be to a level where the shared owner retains less than 25%.

Where Registered Providers are considering repurchases which will leave the shared owner with less than 25%, they should discuss the implications with the shared owner and make clear that under the terms of the shared ownership lease s/he will still have full responsibility for any repairs.

6.5.7 There is also the option of full re-purchase, under which the shared owner becomes an assured tenant of the Registered Provider. However, once a property has been re-possessed by the lender, Flexible Tenure ceases to be an option. For a cautionary note on full price purchase please see below.

The change from shared ownership to a tenancy shifts the insurance, maintenance and repairing obligations from the ex-leaseholder to the Registered Provider. Therefore it is recommended that the Registered Provider carries out a survey of the property before completion of the Flexible Tenure application in order to assess any immediate and future repair liabilities under the Regulatory Standards.

6.5.8 Where a Registered Provider does offer Flexible Tenure, its policy and procedures should be published and made available to all shared owners in its properties. Registered Providers should also ensure they retain any documentary evidence in support of their decision to use recycled grant to fund Flexible Tenure.

6.5.9 For any form of equity repurchase, the Registered Provider should ensure that any offer is acceptable to both the shared owner’s mortgage company, and its own lender. The latter may require a revolving credit facility.

6.5.10 The same general procedures apply to Flexible Tenure as for upward staircasing, i.e. the amount payable by the landlord will be the appropriate percentage of the shares to be purchased at their current open market vacant value as determined by an independent qualified valuer.

6.5.11 It will probably be a condition of the shared owner’s mortgage that the sale proceeds are paid direct to the first lender of the first mortgage. The Registered Provider’s solicitor should advise on this, but it would avoid any risk of misuse of the money. The shared owner must pay for the valuation and his/her own legal fees. Where these are paid by the Registered Provider, these costs may be deducted from the payment to the shared owner or the shared owner’s mortgage company allowing the Registered Provider to recoup the costs.

6.5.12 The amount to be debited should be drawn down from the Recycled Capital Grant Fund on the completion date of the legal transaction, and calculated as follows:

Debit from fund = (staircasing sales allowance) + (payment due for the shares to be purchased x 70%).The staircasing sales allowance at the level current at the date of completion should be used in this calculation.

The payment due to the shared owner or mortgagee must be the market value of the share to be repurchased. However, 70% of that share’s market value is the maximum that can be funded with recycled grant. The remaining balance must be funded from a Registered Provider’s own resources. Lesser amounts of recycled grant topped up by the landlords own resources are also permitted.

For an explanation of why only 70% is allowable please see below.

Following a review of the grant funding regime Total Cost Indicators were abolished with effect from April 2006 in favour of the current competitive bidding framework.

Total Cost Indicators had been a key objective of the then funding regime to ensure the correct level of grant was paid, and were divided into unit type and cost group areas, Based on Total Cost Indicators, the maximum level of grant payable differed depending on the location, as cost group areas were linked to local authority areas.

Prior to the demise of Total Cost Indicators the cost group area percentages featured in the calculation of how much recycled grant could be used to fund Flexible Tenure. As local authority based percentages were no longer available from April 2006 the Agency considered that an amount equivalent to a maximum of 70% would be suitable for all Flexible Tenure repurchases.

6.5.13 The resulting amount of public subsidy (Housing Assistance Grant, Social Housing Grant or Social Housing Assistance plus Recycled Capital Grant) attributable to the property must take into account any deferred recovery of Housing Assistance Grant, Social Housing Grant or Social Housing Assistance in the same scheme (see the worked examples below).

6.5.14 The resulting deemed loan debt for the property will be the outstanding balance of the original deemed loan debt plus the new deemed loan debt attributable to the repurchased part of the property (i.e. the 30% (or more) of the payment to the leaseholder that was not funded by recycled grant).

For a worked example please see below.

A shared owner owns 75% of a house valued at £160,000, and staircases down to 25% ownership.

The owning Registered Provider pays £79,400 to the shared owner’s mortgage company (£80,000 less valuation and the shared owner’s legal fees totalling £600).

The staircasing sales allowance is (for illustrative purposes) £400.

The withdrawal from the Recycled Capital Grant Fund is (£400 staircasing allowance) + (£80,000 x 70%) = £56,400

The Registered Provider has increased the Deemed Loan Debt on the property by the element of the payment to the leaseholder that was not funded by recycled grant i.e. £80,000 - £56,000 = £24,000.

6.5.15 Should the shared owner’s financial circumstances deteriorate even further, subsequent Flexible Tenure purchases are permitted even to the extent of a complete repurchase of the property – see 6.5.19 below.

6.5.16 Where a shared owner benefits from Flexible Tenure to reduce their share to a lower level of equity, the terms of the existing lease will continue, including the right to staircase again.

6.5.17 Where a shared owner’s financial circumstances improve and they wish to purchase additional shares, then normal staircasing procedures should be followed. In these cases, Registered Providers must treat the recycled grant drawn down to fund the Flexible Tenure as if it were new grant, and add this sum to any outstanding original funding for grant recovery purposes.

6.5.18 Whenever the shared owner benefits from Flexible Tenure or staircases again, the rent should be adjusted pro rata for the changed percentage rented, and comply with all relevant rent policies.

6.5.19 Where a shared owner becomes an outright tenant, the shared ownership lease must be formally terminated and a new tenancy agreement entered into on the same terms as for any other new tenancy agreement for rented housing let by that Registered Provider. For a comment please see below.

It would be at the Registered Provider’s discretion whether to offer a shared ownership lease in the future.

6.5.20 An ex-shared owner who becomes an outright tenant will not be able to purchase the property under the Right to Acquire because the property was not originally provided with public money for the purposes of being a rented property. This means it would not be an eligible property under Right to Acquire rules. However the assured tenancy would count towards future Right to Acquire residency criteria please see Right to Acquire section 2.2. As a tenant s/he may, if circumstances improve, be eligible for any discount or incentive scheme if offered by the Registered Provider such as Social HomeBuy with any eligibility period starting from the date of this new tenancy.

6.6 Land acquisition

6.6.1 Registered Providers may use funds from the Recycled Capital Grant Fund to acquire land where the intention is to develop the additional supply of affordable housing.

6.6.2 Recycled grant may also be used to acquire land for market housing schemes which will include an affordable housing element. Recycled grant should be attributed pro-rata to any affordable housing subsequently developed and shown as a Recycled Capital Grant Fund input at bidding stage, if new affordable housing grant is also bid for to support the development of these houses.

6.6.3 Registered Providers will be required to begin development on any land purchased with recycled grant within five years of purchase. If start on site has not progressed after five years Registered Providers will be required to pay back the recycled grant to the Agency, it cannot be re-credited back into the Registered Provider’s Recycled Capital Grant Fund.

6.6.4 Registered Providers are not to use recycled grant to acquire land for speculative gain.

6.7 Management and maintenance of new units produced from the Recycled Capital Grant Fund

6.7.1 Eligibility for grant to fund major repairs in respect of recycled grant funded units is the same as for units initially funded with new grant; please refer to the Housing for Rent - section 6 Repairs of the Housing for Rent chapter for further information.

6.7.2 Where applicable, property provided with recycled grant could be sold under Social HomeBuy or on the open market.

6.7.3 Properties provided with recycled grant must be made available to local authority nominees in the same way as property provided with grant.

7. Reporting and audit requirements

7.1 General

7.1.1 All Registered Providers that operate a Recycled Capital Grant Fund must report annually on credits to and expenditure from their fund via IMS – see 7.2 below.

7.1.2 Those Registered Providers that are subject to a Grant Agreement, must also separately record units funded with recycled grant and no new grant on IMS as and when developed as required by their agreements.

7.1.3 Registered Providers must retain documentary evidence to support an audit trail for all transactions leading to recovery and re-use of grant (for further details on this, please see section 5.4).

7.2 Annual returns

7.2.1 Registered Providers that operate a Recycled Capital Grant Fund must submit an annual end of year return electronically using IMS. It is the Registered Provider’s responsibility to ensure its return is submitted on time. The deadline for returns is 30 June of the year in question.

7.2.2 Registered Providers that operate inside and outside of Greater London should ensure that balances generated and reinvested in London reported to the Greater London Authority and balances outside of London reported to the Agency. This requires two separate returns recorded on the different funds in IMS.

7.2.3 Registered Providers must submit a return for every year that they have been in business and operating a Recycled Capital Grant Fund. A nil return should be submitted if there has been no activity during a particular year. However in the case of continuous periods of inactivity, the Registered Provider can determine whether or not to submit a return. If a Registered Provider is subject to a transfer of engagement, a return is still be required for the financial year in which the transfer took place.

7.2.4 In the event that a Registered Provider misses the submission deadline of 30th June, they should submit their return on IMS as normal as soon as possible after this deadline. Late returns can be submitted directly onto IMS as there is no longer a requirement for the system to be reopened. Late returns submitted after the deadline will activate a ‘Late Submission Comment’ box which must be completed with reasons for the delay. This will reviewed by the relevant contract manager as part of the sign off process.

7.2.5 The Agency may seek repayment and can require repayment of all or part of balances held in a Recycled Capital Grant Fund if information is not supplied on schedule, including either a late or absent annual end of year return.

7.2.6 Completion of the annual return The annual end of year return will consist of a number of screens within IMS:

  • General details
  • Financial
  • Analysis of inputs
  • Analysis of balances by local authority
  • Analysis of housing completions
  • A statement of intentions
  • Registered Provider certification and authorised signature

Details of how the various IMS screens should be completed can be found on the IMS guidance page (please scroll to the bottom of the page). Additional information is set out below.

7.2.7 The General Details screen is self-explanatory, but Registered Providers should remember that adding a contact name for their organisation is mandatory.

7.2.8 The Financial screen shows both the opening balances and closing balances, with a different ledger line for each type of expenditure, each labelled with a letter.

7.2.9 From 2014 the Agency introduced some limited changes to the Financial screen, as follows:

  • A withdrawals row has been added to capture conversion or re-improvement of existing owned properties into smaller units for Affordable Rent
  • Two columns have been added to capture starts and completions delivered from withdrawals outside of the Affordable Homes Programmes. As a mandatory requirement, providers must record for each relevant withdrawal category, the outputs achieved using recycled grant outside of the programme
  • Additional rows have been added to capture balances for years 0 and 1

The first few lines of the screen relate to opening balances generated from inputs that Registered Providers have accrued from the previous financial year, arising from:

  • Original grant recycled following relevant events (Line B)
  • Previously spent recycled grant recycled following relevant events (Line C)
  • Total recycled grant transferred from other Registered Providers (Line D)
  • Total interest after tax as of 31 March (Line E)

7.2.10 Registered Providers must show separately within the Financial screen what the withdrawals from the Recycled Capital Grant Fund have been spent on:

  • To build new Affordable Rent units (Line F)
  • To build new Social Rent units as part of the 2011 to 15 programme (Line G). This should also include any recycled grant uses to fund Accelerated Starts from the 2015 to 18 AHP
  • To build new Social Rent units outside of the 2011 to 15 programme (Line H)
  • Re-improvement of own stock (Line I)
  • To provide additional rehab units and ESPs as part of the 2011 to 15 programme (Line J). This should also include any recycled grant uses to fund Accelerated Starts from the 2015 to 18 AHP
  • To provide additional rehab units and ESPs outside of the 2011 to 15 programme (Line K)
  • To convert or re-improve existing owned larger properties into smaller units for Affordable Rent (Line L)
  • Major repairs and miscellaneous works to existing stock (Line M)
  • To build or purchase new Affordable Home Ownership units as part of the 2011 to 15 programme (Line N) This should also include any recycled grant uses to fund Accelerated Starts from the 2015 to 18 AHP
  • To build or purchase new Affordable Home Ownership units outside of the 2011 to 15 programme (Line O)
  • For flexible tenure (downward staircasing) as per Recovery section 6.5 (Line P)
  • Combined with allocations of new Social Housing Grant/Social Housing Assistance and sums in Disposal Proceeds Fund as part of the 2011 to 15 programme (Line Q) This should also include any recycled grant uses to fund Accelerated Starts from the 2015 to 18 AHP
  • Combined with allocations of new Social Housing Grant/Social Housing Assistance and sums in Disposal Proceeds Fund outside of the 2011 to 15 programme (Line R)
  • Transferred to another RP (Line S)
  • Repaid to the Agency (Line T)
  • Other withdrawals (Line U)
  • Committed reinvestment of funds (Line V– Please see section 5.10.4)
  • Land acquisition (Line W)
  • Mortgage Rescue where allowed as per CFG Recovery section 6.2.5 (Line WX)

This screen will also include details of prior year adjustments at line Y and closing balances (after tax at 31 March) at line Z. Registered Providers are also required to record amounts of 0, 1, 2 and 3 year-old recycled grant at lines AA through to AD and 3 year interest at line AE.

7.2.11 In the Analysis of Inputs screen, Registered Providers must show separately the origin of sums credited to the fund as a result of different kinds of relevant events. Please see the online guide for details of these.

7.2.12 Registered Providers will need to retain relevant records for the analysis of balances by local authority screen. These must cover the following data in respect of each relevant local authority:

  • Opening balance
  • Inputs
  • Withdrawals
  • Transfers

7.2.13 In the Analysis of Housing Completions screen, Registered Providers must show in their end of year return details of units completed in the year of the return, including:

  • Scheme number
  • Scheme address
  • Additional rented units
  • Additional affordable home ownership units
  • Reimprovement of own stock
  • Supported housing
  • Property code
  • Local authority code
  • Local authority area
  • Total scheme cost
  • Contribution from the Recycled Capital Grant Fund
  • Other public subsidy (excluding Social Housing Grant/Social Housing Assistance)
  • Reserves contribution
  • Private finance contribution

7.2.14 In the statement of intentions screen, Registered Providers are required to indicate proposals for the reinvestment of two year-old recycled grant.

7.2.15 The Registered Provider Certification and Signature screen should only be completed once the Registered Provider is satisfied that all other screens are complete and correct and must be signed off (and dated) by the Registered Provider’s authorised signatory.

7.3 Collection and administration of the annual returns

7.3.1 The Agency collects the end of year returns via IMS and Registered Providers who need to submit an end of year return will require access rights. For details of how to submit the end of year return, please see the IMS guidance page (please scroll to the bottom of the page).

7.3.2 Registered Providers who do not have access to IMS and require help should follow the link, and then do one of the following:

  • Go to the IMS guidance page
  • Contact the Provider Management Team
  • Call the service desk on 01908 353 604

For further advice on what information will be needed regarding IMS access and/or end of year returns, including what to do regarding any previous end of year returns that may be due, Registered Providers should contact their relevant contract manager or, if they do not have an Agency contract manager, then the relevant Agency operating area business support team.

7.3.3 After reviewing the electronic end of year returns the Registered Provider’s contract manager will contact the Registered Provider in writing detailing any errors and/or adjustments required.

7.3.4 Any adjustment will be effected in the following year’s return. Where a prior year adjustment is made, notional interest should be recalculated (and credited to or debited from the fund) using the adjusted balance and across the full term of the adjustment. If a further explanation on this is required, the Registered Provider should contact the relevant contract manager.

7.3.5 Having reviewed the annual returns the Agency will also consider requiring repayment of three year old grant as per section 5 and invoice Registered Providers accordingly

7.4 Role of the external auditor

7.4.1 The Recycled Capital Grant Fund return is an integral part of a Registered Provider’s annual independent audit. Therefore, Registered Providers’ auditors must have regard to the disclosure of Recycled Capital Grant Fund balances and transactions and the overall accuracy of the return within their sign-off of a Registered Providers’ accounts (see section 5.4)

7.4.2 Registered Providers must keep a record of external auditors’ examinations of their Recycled Capital Grant Fund accounts. Any observations by the external auditor should be communicated to:

  • The relevant contract manager in the relevant Agency operating area
  • The Social Housing Regulator