The Government first announced plans for a shared ownership right to buy in October 2019. At the time the sector raised concerns about the impact the plans would have on housing associations ability to borrow. An election and a pandemic later the Government announced, during the CIH Housing Festival last week, the return of the right to shared ownership as part of its Affordable Homes Programme (AHP).
Things are moving very quickly, and it is difficult to predict what will happen, but we would advise you to consider the following potential issues sooner rather than later.
Financial covenants: if there either has been or could be a drop in income, then this could affect any interest cover covenant in your loan agreements. This is often reported quarterly and so may not be reported until the next quarter-end of 30 June. However, please see below the ‘No Default’ representation. Knowing that you are very likely to breach a financial covenant could be a Potential Event of Default.
Events of Default: the following events may be triggered over the next three months:
- Breach of financial covenants – non-compliance with any financial covenants will be an event of default without any grace period;
- Auditors’ qualification – will they have to make a material qualification to your accounts or make a material qualification to the audited accounts of any other member of your group;
- Cross-default, insolvency-related events or cessation of business – if your events of default extend to other members of your group and they are in financial difficulty, could their situation cause an event of default?
- Material Adverse Change – could this crisis and any related cashflow issues be “any event or circumstance or series of events or circumstances” that “has or could reasonably be expected to have a Material Adverse Effect”?
Representations: when you are requesting a loan or at the time of making any loan, on the first day of each interest period, and on each day a finance document is entered into, the borrower has to repeat certain representations to the lender. These include:
- No Default – no event of default [or potential event of default] has occurred and is continuing or would result from the making of any loan;
- Accounts – save as previously disclosed in writing to the lender there has been no material adverse change in its financial condition since the date to which those accounts were drawn up.
Drawdown of loans and representations: As mentioned above, it is usual that you will have to repeat most if not all the representations before you can drawdown a loan. If there has been an actual event of default or a potential event of default, then the lender can refuse your request to drawdown any loan. Potential Event of Default generally means an event or circumstance that, with the giving of notice, the expiry of a grace period, the making of any determination under the finance documents or the fulfilment of any other applicable condition (or any combination of the foregoing), would constitute an event of default.
Information covenants: Most loan agreements require you to notify the lender of any event of default or potential event of default promptly upon it becoming aware of its occurrence.
Recommendations: Stress test your cashflows, check your loan arrangements, and if there are any concerns be open and transparent with your lenders. If a waiver is needed, request it as soon as possible.
Two final pieces of the possession jigsaw have been published on 15 September 2020. Mr Justice Knowles’ working group on possession proceedings has issued its guidance on the “overall arrangements” for possession proceedings.
One change proposed by the Building Safety Bill is the introduction of a duty holder regime, which will see statutory responsibility for the safety of higher risk buildings placed on key individuals
Throughout this pandemic, the Competition and Markets Authority (CMA) has been publishing various “Statements on Coronavirus” (Statements) which provide guidance on consumer rights during this time.
A recent increase in COVID-19 cases in the UK means new measures are being put in place in an effort to reduce the risk of a second wave. Whilst the impact of COVID-19 continues to be felt, it is important to remain focused on the sector’s road to recovery.
Sometimes half an hour at a conference gives you the reality that has been staring you in the face all along. That was my experience watching “Change is on the Horizon”
Following our recent e-briefing on Possession Notices, Helen Tucker and Emilie Pownall from our housing litigation team discuss the impact of the changes on social landlords.
Not only has the possession stay been extended until 20 September, the notice periods to be given to tenants has been extended in certain circumstances with some important exceptions.
The Court has confirmed that a party cannot withhold its consent in order to re-write the original bargain.
Following the Grenfell Tower tragedy, building safety continues to be a key concern for social housing providers and their residents.
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