Under most construction contracts, the contractor takes on the ground conditions risk. However, a recent case has demonstrated that the risk can fall on the employer.
Final proposals are to be published by October, with April 2015 as the earliest date for the introduction of fees.
Summary of proposals
- The discussion paper’s key points are:
- The Regulator is seeking views on introducing both a registration fee and annual regulation fee;
- It sets out the various options for setting the fees, but the Regulator’s preferred options are a flat registration fee (set at such a level so as not to discourage applications) which will only be payable if registration is successful and an annual regulation fee based on an RP’s number of social housing units, with a minimum annual fee (suggested at £300);
- The average cost of dealing with registration by the Regulator is stated to be £10,000 – one consultation question is what the registration fee should be set at, as clearly this would discourage most applications;
- The annual fee will be payable per group, rather than by each RP in the group (which could mean smaller RPs in groups benefit);
- It is suggested that fees be invoiced at beginning of each financial year (April) – this could have implications for RPs with different year ends;
- On registration, an RP will need to pay the registration fee plus the annual fee for the whole year (no fee will be payable for new registrations due to mergers, amalgamations etc);
- On de-registration there will not be a part-year refund of fees already paid;
- Indicative costs of regulation by the Regulator are £12.5m for 2013/14 – one question is whether this should be met solely by fees or some continued governmental (grant-in-aid) funding;
- The Regulator suggests that the move towards the introduction fees will make it more accountable – it will publish transparency statements and welcome input into its business plan;
- There will be scope for the Regulator to charge further fees e.g. for inspections;
- No fees will be payable by local authorities.
Preparing a response
The deadline for responses on the 16 consultation questions is 21 March. While the logic behind the chosen options for charging fees set out in the discussion paper is arguably sound, it does appear that smaller RPs are likely to be penalised at the expense of larger. The chosen basis for deciding fees (per social housing unit) also does not sit well with the reasoning of introducing fees in order to better equip the Regulator to deal with an increasingly diver sector, as it does not necessarily equate that an RP with a larger asset base (who will therefore pay more) will carry out any or more diversified activities.
We will ourselves be preparing a response to the discussion paper, and propose posing, amongst others, the following questions:
- How will the Regulator demonstrate value for money whilst meeting its conflicting obligations, for example to the Government, the wider HCA, RPs and funders?
- What will the Regulator do with any surpluses created? Will they be used to allow a subsequent reduction in fees?
- How will increases in fees be determined?
- Will RPs be permitted a greater say in the Regulator’s remit if they are required to fund its existence? As part of the transition from the Tenant Services Authority to the current Regulator, we understand that there was a two-thirds cut to the previous regulatory function of the TSA. Will there be scope for the Regulator’s role to move beyond mere regulation to acting as a supporting body for RPs, to assist them in weathering the storms of external pressures?
- What would happen if an RP chose not to pay, for example as an indication of dissatisfaction with the Regulator? Would they receive a downgrade or some other form of penalty?
- Is it really appropriate for the Regulator to be funded by RPs while it still sits within the HCA?
- How will groups with non-registered parents (especially those containing more than one RP) be treated under the proposals?
- As we understand a specialist separate for-profit team has been established by the Regulator on the basis that the Regulator anticipates that this will be a growth area, will there be scope for for-profit providers to pay more for both registration and on-going regulation?
- Has the Regulator considered including an additional payment which could be used to establish an "insurance fund" to deal with Cosmopolitan situations?
It is to be hoped that these proposals will be a stimulus for a wider discussion on the role of the Regulator, and it will be interesting to see if the introduction of charges will affect the current relationship between RPs and the Regulator. It certainly begs the question – will the Regulator have the teeth (and the appetite!) to bite the hand that feeds it?
For more information or advice on the impact of these changes, please contact Victoria Jardine - firstname.lastname@example.org, Anne Adamthwaite - email@example.com, Gemma Bell - firstname.lastname@example.org or your usual contact within Anthony Collins Solicitors.
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