Is the money in the bag?

Sir Bob Kerslake, chief executive of the Homes and Communities Agency, has said that the HCA will not be able to guarantee funding-approved schemes unless there is already a legal commitment in place (Inside Housing, 11 June).

So when does a grant approval become legally binding? The brief answer, as expanded on below, is that the HCA becomes legally committed to provide grant funding at the point at which it signs off the grant agreement online (ie on its Investment Management System).

The contract

Once grant funding has been approved, the HCA and the social landlord will enter into a legally binding contract which is known as the Programme Partnering Agreement.The PPA sets out the HCA’s and the social housing provider’s rights and obligations. Each PPA will include an annex listing the schemes to be developed, and stating the amount of the grant and the relevant forecast milestones. The programme of schemes, as detailed in the annex will be input into the HCA’s IMS.

Social housing providers must confirm within IMS that they agree to the terms of the PPA. Accordingly, the social housing provider will sign off online to accept the agreement. The HCA lead investor will then approve/accept the submission online. While the PPA itself is a legally binding agreement, it is the acceptance by the HCA of the online submission in IMS that forms the binding contract and the HCA’s commitment to fund.

Can grant be withheld?

The standard PPA model provides that ‘the corporation [as was] will make grant payments upon receipt of valid claims, in line with agreed liability dates’. It goes on to say that ‘where a scheme achieves start on site or practical completion in advance of its forecast milestone date (which has been accepted as the liability date as set out in IMS), the corporation is not obliged to make grant payments until that date. The corporation is not obliged to recognise the liability to make payment until the contractors start on site or completion date is reached.’

There are circumstances under which the HCA may lawfully withhold or reduce grant, for example, if the social housing provider fails to meet high Tenant Services Authority regulatory standards, if it breaches the grant conditions, or if the HCA is required by the European Commission under state aid rules to obtain repayment of the grant from the social housing provider. But in the absence of these circumstances, the HCA is legally obliged to make the payments on the milestone dates.

In the past, social housing providers have tended to treat written confirmation from the HCA that they have an allocation as sufficient to go ahead and enter into building contracts, without waiting for online grant confirmation on IMS. But in the the current economic climate, this may no longer be common, or indeed prudent, practice.

Naomi Goode is a partner at Lewis Silkin naomi.goode@lewissilkin.com

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