Regulatory judgements: 28,000-home landlord found in breach of Rent Standard

The self-referral came after the RSH carried out an internal audit review of YHG’s rent and service charge-setting, which identified concerns about the adequacy of its internal controls.

As well as rent-setting errors, a customer complaint identified issues with rents in the landlord’s extra-care schemes.

As a result, the regulator concluded that the association has not complied with the Rent Standard or the legislative requirements in respect of a significant number of its social and affordable rent tenancies.

YHG is now carrying out further investigations as to what happened to cause the error and is now taking action to remedy these issues.

This includes establishing the full level of overcharge and reimbursing tenants and addressing immediate control weaknesses.

Richard Groome, chair of Your Housing Group, said: “Today’s Regulatory Notice comes following an internal audit in which we identified a recent financial discrepancy in rent charges for a small percentage of residents. Unfortunately, the cause was identified as a human error. We immediately informed the regulator and appointed an independent expert to verify the findings and our calculations.    

"Across the wider Group, we have completed a full investigation of rent setting and as a result are improving processes and procedures. Additional controls have also been implemented to ensure this error does not occur again in the future.     

"We’ve apologised to those customers who have been affected, contacting each resident directly and informed them that all monies owed will be fully refunded. And we are continuing to cooperate fully with the Regulator during their investigation”.

In a separate regulatory notice, the RSH found that Industrial Dwellings Society (IDS), which manages roughly 1,500 properties in London and the east of England, has breached the Home Standard.

IDS self-referred to the regulator after tenants raised concerns about the conditions in one scheme, Evelyn Court in London, including damp, mould, condensation, and draining and flooding issues. 

According to the RSH, tenants at this and other schemes had complained about poor repairs and maintenance and a lack of response from IDS.

Information provided to the regulator by IDS during its investigation demonstrated that there was no “cohesive” remediation plan for Evelyn Court or across the wider IDS stock before tenants raised concerns, the notice said.

The RSH also found that “the repairs process was difficult to navigate and there was poor tenant engagement”. 

As a result of the information uncovered during its investigation, the regulator found that IDS breached the Home Standard, meaning there was a potential for serious detriment to tenants. 

The regulator said IDS has now carried out a root-cause analysis and is seeking to understand the full extent of the issues across its whole stock.

An action plan for Evelyn Court is now in place involving each individual property and tenant engagement has commenced to resolve the issues, the RSH said. 

The regulator has also downgraded 60,000-home Sovereign on governance matters, giving the landlord a ‘G2/V1’ grading. 

The G2 grading means that Sovereign still complies with the governance element of the Governance and Financial Viability Standard, but it needs to improve some aspects of its governance arrangements to support continued compliance.

The judgement comes five months after the RSH found Sovereign had breached the Home Standard following its self-referral due to issues with its health and safety compliance data. 

In today’s judgement, the regulator said it has discovered that concerns about Sovereign’s health and safety data first surfaced in 2017 following the landlord’s merger with Spectrum Housing Group. 

Remedial action commenced in 2018, but “did not completely address all concerns and weaknesses identified through a range of indicators, including internal audits”, the regulator added. 

The RSH said Sovereign is now making good progress in implementing actions designed to systematically address the issues after having commissioned a root-cause analysis in December last year.

This work will “improve the effectiveness of the board’s oversight of landlord health and safety compliance by ensuring it is based on robust and reliable data”, the judgement added. 

Sovereign is also undertaking work to ensure it understands how its overall internal controls and assurance framework failed to manage this strategic risk over a number of years.

The association has maintained its top V1 rating for financial viability.

Mark Washer, chief executive at Sovereign, said he recognised that the gaps in the landlord’s historic building safety data meant Sovereign has to accept the downgrade, adding that he was pleased the regulator acknowledged the landlord was making good progress. 

He said the landlord has made “significant appointments” to its property services, health and safety and risk management teams over the past three years (see Mr Washer’s full response below). 

Croydon Churches Housing Association (CCHA) saw its governance downgraded to a G2. The regulator said the landlord continued to meet the requirements on governance set out in the Governance and Financial Viability Standard, but improvements were required to its financial reporting and treasury management.

It also found that board oversight of business and financial planning, including stress-testing, requires improvement.

In its assessment, the RSH said the board needed to assure itself that its decision-making is based on timely and accurate information by strengthening controls around the preparation and review of financial information presented to board.

Financial control weaknesses were also found to have resulted in data errors in key regulatory returns.

Nevertheless, CCHA maintained its top V1 grading for financial viability.

The RSH said the association has an adequately funded business plan, sufficient security in place, and is forecast to continue to meet its financial covenants under a wide range of adverse scenarios.

Heather Thomas, chair of CCHA, said: “We believe that the judgement is a fair assessment of our current position, and we already have improvement plans in place to address some of the areas which the regulator has highlighted.

“We are disappointed but feel confident that we can rise to the challenge and return to our G1 status in good time.”

Today the regulator has also confirmed the existing G1/V1 grades for Connect Housing, Karbon Homes, Look Ahead, Warrington Housing Association and Westcountry Housing Association.

A2Dominion, Newlon Housing Trust and Cambridge Housing Society had their existing G1/V2 grades confirmed, however the bases for the financial viability aspect have been changed.