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Civitas and one other investment fund have agreed to reduce lease payments from a non-compliant housing association.
Trinity Housing, which leases specialist supported housing from investment funds, revealed in its accounts that last month, it “reached written agreements with its two main landlords to reduce the payments due under the leases”.
Inside Housing understands that Civitas was one of these landlords, and had agreed to temporarily reduce the payments to provide short-term support for Trinity. It is understood that the main lease terms for these deals remained unchanged.
The funds lease homes to housing associations in return for monthly inflation-linked payments, as part of a model that has been heavily criticised in a recent report by the Regulator of Social Housing.
Trinity is one of five associations operating this model to have been declared non-compliant by the regulator, which said that the association was “potentially putting its tenants at risk”.
A spokesperson for the company said: “We have not amended any of our leases or changed any lease terms. Our portfolio is almost fully let and all rents have been independently tested for reasonableness.
“As a responsible landlord we will sometimes provide temporary lease support if required as part of building a long-term relationship as is normal in real estate asset management. We don’t comment on any cases individually.”
In its accounts, Trinity said that as well as reducing payments to the funds, the agreements “deal with areas where Trinity is currently in breach of the leases and commit to reviewing lease terms where necessary”.
Trinity made a loss of £2.4m in the 12 months to 30 June last year and has been “living beyond our means”, thanks in part to the association making “rent agreements that are not sustainable”, according to the accounts.
These agreements, the accounts said, were made “with a lack of control” and “a lack of appropriate due diligence”.
Many of the homes included in the agreements were left empty for longer than expected, meaning that Trinity was not receiving any rent from the local authority through housing benefit but still had to pay the funds.
Councils have also been unwilling to pay the high levels of rent Trinity was attempting to claim for the tenants, the company’s accounts state.
Inside Housing has previously reported that a number of lease-based providers face these issues.
Although Trinity is still seeking to recover some of these rents, it has decided to account for £1.6m of bad debt, assuming this will not be recovered.
In September 2018, one of Trinity’s creditors agreed to freeze rents on certain properties for six months, to re-assign leases to another housing association and to loan the association £1.5m.
However, the costs required for recovery, according to Trinity’s accounts, were “grossly underestimated” and so this support was only a short-term solution.
Last month’s agreement with creditors, according to Trinity’s board, means that the association will continue to operate “for the foreseeable future”.
The accounts also show that on future lease payments Trinity owes to its creditors total £184m.