Amidst reports of the construction industry seeing its worst month since April 2009, contractors furloughing staff and delaying payments of dividends, what does this mean for registered providers and what role can they play in supporting the sector while protecting their interests?

Liquidity is the critical issue for construction companies which face the choice of breaching contracts and going into disputes or looking at how contractors and suppliers can work together safely. Many have faced the conflict of whether they can, or should, continue on-site, particularly following the Government’s letter published on 31 March 2020 confirming that construction can continue provided the Site Operating Procedures which align with the latest guidance from Public Health England are followed. 

So, what does that mean for registered providers (RPs) and what role can they play in supporting their contractors and the economy while protecting themselves, mitigating risks, protecting their staff and ensuring regulatory and charitable objects compliance? A balanced but carefully considered approach will be needed.

RPs will have an important and fundamental role to play in rebuilding the economy once the current restrictions are lifted. In the meantime, they are forced with having to take stock of current schemes and look more closely at future schemes with an emphasis on mitigating risk while still trying to proceed. 

On current schemes contracts are being revisited, particularly looking at force majeure, long stop dates and developer insolvency. Developers may see projects with registered providers that are close to completion as a way to keep cash coming into the business, but RPs will need to balance the desire to proceed and complete now against the risk of taking residential units for sale at a value which would not have foreseen the current climate where sales offices are closed and buyers unable to readily obtain mortgages. 

However, despite on-site sales suites closing, sales staff being furloughed and lenders scrapping new mortgage deals daily unless borrowers have increasingly large deposits, this position will not last forever. It is currently unclear whether the change to mortgage offers is due to staffing issues, the influx of customers requesting mortgage holidays or concern that house prices could fall. 

Despite the Government guidance that house moves cannot take place, this does not apply where the property is empty, i.e. new build properties. We are still seeing completions take place with the RP’s sales staff finding different, and safe, ways of carrying out handovers, particularly as existing mortgage offers seem unaffected.

A more cautious approach to new schemes may be being taken, particularly around the structure and mitigation of risk but amidst the current uncertainty what is known is that the need for affordable housing will only increase once we emerge from the current situation.

For more information 

Please contact Lucy Worrall.