La Ville Vautier: Acquisition of Homes by les Vaux Housing Trust

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A decision made on 13 December 2011:

Decision Reference: MD-H-2011-0088
Decision Summary Title :	DS – Proposed Acquisition of Homes at La Ville Vautier by Les Vaux Housing Trust		Date of Decision Summary:	8th December 2011
Decision Summary Author:	Director of Strategic Development		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	n/a
Written Report Title :	WR- Proposed Acquisition of Homes at La Ville Vautier by Les Vaux Housing Trust from Community Homes Limited		Date of Written Report:	7th December 2011
Written Report Author:	Director of Strategic Development		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Proposed Acquisition of Homes at La Ville Vautier by Les Vaux Housing Trust from Community Homes Limited
Decision(s): The Minister approved the acquisition of the 19 homes at La Ville Vautier by the Les Vaux Housing Trust from Community Homes Limited for the sum of £3.5m;
Reason(s) for Decision: To facilitate the transfer from one social rented landlord to another
Resource Implications: NIL
Action required: Director Strategic Development to liase with the Les Vaux Housing Trust once the agreement has been signed.
Signature:		Position: MINISTER
Date Signed:		Date of Decision (If different from Date Signed):

La Ville Vautier: Acquisition of Homes by les Vaux Housing Trust

Date of Report:- 7th December 2011

HOUSING DEPARTMENT

REPORT FOR THE MINISTER FOR HOUSING

PROPOSED ACQUISITION OF HOMES AT LA VILLE VAUTIER BY LES VAUX HOUSING TRUST FROM COMMUNITY HOMES LIMITED

Purpose

The Minister is asked to approve the proposals for the public to enter into a funding agreement with the Les Vaux Housing Trust (the Trust) and Barclays Private Clients International Limited (the Lender) to facilitate the acquisition of 19 social rented homes at La Ville Vautier, La Rue des Cosnets, St Ouen by the Trust from Community Homes Limited (CHL).

Background

On 4th October 2005 the Environment & Public Services Committee entered into a Planning Obligation Agreement (POA) with West View Developments Limited in respect of the construction of homes at West View Farm, La Rue des Cosnets, St Ouen. That Planning Obligation Agreement which was established under Article 10 of the Island Planning (Jersey) Law 1964, included at Schedule 2, a Funding Agreement between the Public of the Island, the Lender and CHL, who took on the management of the 19 social rented units created on the site when they were completed. That funding agreement, a copy of which is attached at annex a hereto, was entered into on 21st June 2006.

The 19 units at La Ville Vautier, 6 no. 1 bedroom flats, 12 No. 3 bedroom houses and 1 No. 4 bedroom house have been managed by CHL and occupied as social rented homes from that time.

Proposal

It is proposed that the 19 homes at La Ville Vautier will be acquired by the Trust for £3.5m. On the transfer of the properties, the occupants who are tenants of CHL will become tenants of the Trust. The Trust have provided assurance that the tenants have been informed of the proposed transfer and assurances have been given that the terms and conditions of their tenancies will not change. There has been no requirement for the existing landlord to abide by the Minister for Housing’s ‘fair rents’ and it is clear that the rents presently being charged by Community Homes do exceed fair rent levels. However, the Trust have confirmed that once they have acquired the homes they will ensure that the rents are frozen until the fair rent levels catch up. For the majority of homes that convergence will occur in October 2012, assuming that fair rents increase at the level suggested in the 2012 States Business Plan.

The acquisition will be facilitated by funding provided by the lender. The acquisition price and the funding model have been reviewed and are considered robust. Of particular note is that the Trust will be fixing its borrowing with the Lender for an initial 5 year period through the purchase of an interest rate cap and therefore will not be seeking a ‘letter of comfort’ to protect the Trust from the impact of rising interest rates.

The Lender is providing the finance for this acquisition and as with the initial loan to CHL is keen to ensure that in the event of default it is in a position to recoup the balance of the mortgage on the properties. The solution identified when CHL acquired the homes was the aforementioned funding agreement which required that in the event that CHL was declared ‘en desastre’ the Lender could take possession of the properties and would then offer the Public the opportunity to acquire them for the balance of the outstanding mortgage. In the event that the Public chooses not to exercise its option the funding agreement allows for the social rented use restriction on the properties to be lifted so as to allow the Lender the opportunity to sell the properties on the open market and in that way recover its outstanding lending.

Legal advice has been sought and it is apparent that:-

A new funding agreement is required to comply with the provisions of the POA and could only be avoided by a fundamental renegotiation of the POA.

The funding agreement does not create a financial risk for the Public in itself, however, in the event of the Trust becoming insolvent and the Public exercising its option to acquire the homes there would be financial consequences.

Entering into the funding agreement puts the Public in no worse or better position than it is presently, in that it is party to the existing agreement with CHL and the Lender.

The present funding agreement between CHL, the Lender and the Public will cease to have effect when the properties are transferred from CHL to the Trust.

A copy of the draft agreement is attached at annex b hereto.

Recommendations

That the Minister approve the acquisition of the 19 homes at La Ville Vautier by the Les Vaux Housing Trust from Community Homes Limited, for the sum of £3.5m;