Criteria for registration
In exercise of the powers conferred by Article 16(2) of the Housing (Northern Ireland) Order 1992 ("the 1992 Order"), the Department has varied the criteria which should be satisfied by a housing association seeking registration with the Department. The revised criteria, which came into operation on 21 April 1995 are as follows:-
The 1992 Order requires the Department to maintain a register of housing associations. The Order also requires the Department to establish criteria to which the Department is to "have regard" in considering applications for registration.
The purpose of these notes is to provide guidance on the facing criteria. The guidance is not definitive, but is a summary of significant points.
1. Statutory Requirements
The association will be required to fulfil the statutory requirements relevant at the time of registration, the most important of which are set out in Appendix 1 to these criteria. Appendix 2 Is a summary of legislation applying to registered housing associations.
These are the statutory requirements which the association must satisfy before it is eligible for registration.
Associations that do not appear to satisfy the statutory requirements can contact the Department for advice on the steps they will need to take.
The form of rules chosen (for example charitable or non-charitable) has significant effects on the activities which the association can undertake, on its financial status and on whom it may house. Associations uncertain about the form of rules they should adopt should seek advice from their legal advisers, from an organisation such as the Northern Ireland Federation of Housing Associations or from the Department.
2. The Proposed Role of the Association
Particularly in the case of a newly formed association, the Department will wish to consider the proposed role and scope of operation envisaged by the association in relation to housing needs of the area in which it intends to work, the desirability of offering an appropriate range of housing alternatives to the community, the development plans of other associations in the area and the general need to make best use of public funding. The Department will also wish to consider whether registration is an appropriate and cost effective way for the association to achieve its aims of providing a housing service.
These criteria are about the applicant's role as a registered housing association in meeting housing need. The association will need to show evidence of the unmet housing need that it intends to meet, that existing associations do not or could not meet that need in an effective way and that it will be able to do so. Where appropriate, potential tenants should have been informed and consulted about the association's proposals. Usually, associations will need statements of support from the Northern Ireland Housing Executive or other public bodies (where appropriate) and organisations such as tenant bodies and voluntary groups.
The association will need to demonstrate that registration with the Department is necessary to achieve its aims and will be a cost-effective way of doing so. If the same results could be achieved more effectively or economically by remaining unregistered and working in partnership with an existing association, the Department may recommend this, although it recognises that, in some cases, registration may be desirable for other reasons.
Associations intending to serve a particular needs group (e.g. people with a physical or learning disability will need to present a 'Statement of Need', demonstrating that the group of people in question are not being served effectively by existing providers of housing. They will also need to demonstrate that their housing allocations policies are fair and based primarily on housing need.
Where associations are planning to use exclusively or mainly funding from the Department or other public bodies, they will in general only be registered when the funding is available to enable them to achieve their stated role. Applicants seeking Departmental funding should be aware that bids for funding greatly exceed the money available; only those associations able to provide housing in a cost effective way and meeting clear gaps in the implementation of the Housing Association Development Strategy will be able to achieve registration.
3. Control of Association
- The association must be under the control of responsible persons of appropriate skills and experience and be organised so as to be an acceptable body capable of handling public finance and the continuing proper stewardship of social rented housing and publicly funded assets. These criteria are about the association's Committee of Management. The first 2 sub-paragraphs are of the greatest importance. In deciding what are appropriate skills and experience, the Department will look at the type and level of the association's present and planned activities. It will be essential to have members of the committee with experience in such fields as finance, housing development, housing management or other relevant business or professional experience. Especially in the case of small newly formed associations, the Department will also take into account the existence of training programmes for committee members; the involvement of another registered association in a supporting capacity; the existence of formal service or development agreements between the applicant and other registered associations) and the presence of experienced co-optees on the committee.
- The rules of the association must provide that the full control of its affairs is vested in a Committee of Management. The skills and experience of the persons exercising this control should be such that the affairs of the association are likely to be conducted in a responsible and effective manner. But the association's Committee of Management, with any necessary support, must always be fully in control and in position to make properly informed decisions concerning all aspects of the association's business.
- The Committee of Management must be able to demonstrate that it is neither under the control of, nor subject to, influence which could prejudice its independence from any other person or organisation other than where that organisation is a registered housing association and that in these cases such influence or control operates in the best interests of the association. In the case of associations formed, sponsored or assisted by an organisation which is not a registered housing association, the Department will generally require that safeguards to ensure the association's independence are incorporated in its rules. These safeguards might for instance restrict the number of present and past employees or members of the sponsoring organisation, who could be members of the association's Committee of Management, to 20%of the total.
- Persons with whom the association has a contract of employment and their close relatives shall not be members of the Committee of Management of the association. The association is not prevented from appointing an appropriate employee as its Secretary (usually the Director or Chief Executive). However, he or she may not be a voting member of the Committee of Management.
- The association will be required to demonstrate that there is no duality or conflict of interest between the association and the members of its Committee of Management and their close relatives. After registration, the association is prohibited by Article 31 of the 1992 Order from granting any benefit or payment, except as permitted under statute or by virtue of a determination under Article 31, to its committee members, officers or employees. This extends to any close relatives of these individuals and any business owned or managed by them and will apply for 12 months after they cease to hold office or employment with the association. Subsidiaries of all registered housing associations will also be expected to comply with the requirements set out in Article 31. Applicant bodies and the individual members of their Committees of Management must familiarise themselves with the provisions and effects of Article 31 of the 1992 Order and relevant determinations which the Department might make and ensure that problems or potential problems are resolved before registration. If in doubt, associations should get early advice from their legal advisers and the Department.
4. Financial Requirements
These criteria are about the need for the association to demonstrate continued financial viability and the strength to cope with financial risks. Satisfying them is key to achieving registration.
The association must be able to demonstrate that it is operating, or will operate, on a sound and proper financial basis and in particular:
- The association must prepare annual budgets, keep proper accounting records, have adequate systems of control (including the production of regular management accounts) and produce annual accounts which have been audited by properly qualified auditors. After registration, the association will be required to produce annual accounts in the format laid down under Article 19 of the 1992 Order, to have those accounts audited by qualified auditors and to submit them to the Department within six months of the end of each accounting period. The association will be expected to require its auditors to conduct audits in accordance with Auditing Standards issued by the Auditing Practices Board. Newly formed associations which have not yet traded will not be able to provide past annual accounts. In such cases, the Department will wish to be satisfied that proper arrangements exist (or will exist) to ensure that the association ca comply with the financial requirements after registration; this includes the preparation of annual budgets and the monitoring of progress against predictions at intervals specified by the' Department. It will be necessary that the association has financial expertise on the Committee of Management and the services of an accountant and auditor with experience of housing association accounts.
- In order to demonstrate its future viability, the association must provide detailed financial projections for at least three years to show that:
- its current and known future commitments in relation to capital expenditure are, or can be, fully financed by loans, grants or other permanent sources of capital;
- its income will be sufficient, having regard to present circumstances and taking one year with another, to meet its outgoings and provisions;
- as appropriate, its property equity and available free reserves will achieve a sufficient level for anticipated levels of financial risk; and
- the association's overheads, e.g. salaries and expenses, must be reasonable having regard to the size and level of activity of the association and must be properly allocated in a consistent manner to its various functions.
Financial viability and the strength to cope with anticipated levels of risk are essential pre-requisites for registration and it is important for the association to give full details with its application and to submit full budgets and past accounts. Assumptions in the budgets, particularly concerning future income and likely levels of financial risk, should be supported where possible with documentation including copies of any professional advice received. Associations will wish to prepare full business plans and have these professionally validated. This information will be scrutinised by the Department. Associations may be asked to provide further explanatory information.If in the view of the Department, an association does not have the necessary financial strength to achieve registration in its own right, it may recommend that it works as the subsidiary of an existing registered housing association or as a partner until it has adequate free reserves and proper) equity.
Financial viability will be of particular importance for associations using or planning to use private finance for the development of schemes or the acquisition of existing stock. Full financial details will be required, including cash-flow forecasts for the period of any loan, together with a copy of the offer of advance from the lending body. If the association is planning to purchase existing housing stock, the Department will wish to see details of how the purchase price of the stock was calculated. The association must also show how it will meet the likely repair and improvement needs of the stock. Associations showing a deficit which cannot befunded will not be considered to meet this criterion.
Applicants for registration with plane to participate in development activity, whether publicly or privately funded, should be fully aware of the financial risks involved and will need to discuss their plans with:h the Department. Clearly most new organisations will not be in a position to satisfy fully this requirement at time of registration, but will need to provide projections over an appropriate period to reach the necessary position.
The requirements for the preparation of accounts are set out in the Registered Housing Associations (Accounting Requirements) Order 1993 (SR 1993 No 70). Associations must ensure that their auditors are familiar with these requirements and that the records the association keeps contain sufficient information for the auditors to certify a proper apportionment of income and expenditure between the various functions/activities of the association.
The association will be required to maintain its bank/building society or other accounts in Northern Ireland, unless the consent of the Department has been given. This will allow the Department to protect the assets of the association more effectively should the need arise.
5. Managerial Efficiency
The Department will take into account the property development, finance, housing management and maintenance skills of associations. Having regard to the size of the association and its present and planned level of activity, an association must be able to show that it has made proper arrangements to ensure the efficient provision, and management to a high standard, of housing, either from its own staff or from other housing associations, persons or firms. The applicant will also need to demonstrate that these arrangements are cost effective, are fully under the control of the association's Committee of Management, serve its objectives and the best interests of its tenants and do not restrict its independence.
These criteria cover the need for the association to make proper arrangements to carry out its business in accordance with the Department's published Performance Standards for registered housing associations.
The way in which this is achieved will vary between associations. In some associations, the Committee of Management may intend to carry out some of the necessary tasks on an unpaid voluntary basis; others will be planning to employ staff; most will have arranged to engage the services of other organisations. In the case of small new associations, it will almost invariably "an understanding of registration that the association does work in formal partners" with an existing registered association. Agreements should cover at least the more complex areas of work, including development and financial administration. Associations should ensure that any agreements do not restrict their ability to make free decisions about the best way of carrying their business. If requested, the Department will be pleased to suggest suitable partner associations. Full and properly financed training programmes for committee members and staff will also need to be planned and provided for in the budgets submitted.
In all cases associations will be expected to provide a caring and responsive service to tenants in a cost effective way and in accordance with the terms of the Tenants' Guarantee. The association should provide full details of the arrangements it has made together with copies of any relevant supporting documents.
6. General conduct
The association must be able to demonstrate by reference to its actual or proposed policies, procedures and practices that it will conduct its business in accordance with good practice and will follow guidance and standards as set down or endorsed by the Department, either under its general powers or under specific power conferred by Article 11 of the 1992 Order (the guidance issued under this power is known as the 'Tenants Guarantee'). The issue of such guidance will normally follow consultation with the Northern Ireland Federation of Housing Associations.
These criteria are aimed at ensuring that new associations uphold the high standards and good practice which are now associated with the housing association movement.
Under the 1992 Order the Department has the specific power to give guidance on, inter alia, management and maintenance standards for registered associations. Such guidance, known as the Tenants' Guarantee, can only be issued following consultation with the representative bodies of housing associations. The Department also issues guidance on other areas of work under its general supervisory powers and, depending on the circumstances, usually consults representative bodies before doing so.
As an alternative to issuing its own guidance, the Department may endorse (usually by issuing a Housing Association Circular) guidance issued by other bodies, e.g. the Northern Ireland or the National Federation of Housing Associations (NFHA).
The association should provide details of its actual or proposed policies and procedures and should indicate which policy documents it has formally adopted. Possible examples include the NFHA Code of Practice and the NFHA Standards for Housing Management. Small newly formed associations are not expected to have comprehensive policies and procedures in place at registration but should at least provide such key documents as their allocations policy, equal opportunities policy and tenancy agreements. Larger associations will be expected to provide more comprehensive documentation covering all areas of planned activity.
7. Equal Opportunities
The association must be able to demonstrate that, within the scope of their rules and objects, there will be equality of opportunity for all sections of the community, regardless of age, disability, family circumstances, gender, marital status, race, religion, sexuality, political beliefs or other factors which could prevent the implementation of fair policies and operations. In particular, the applicant must be able to demonstrate that equal opportunities measures will be adopted and implemented in relation to religious and gender record keeping and monitoring, policy reviews and training of staff and members of the Committee of Management.
These criteria concern the need for the association to show that, within the scope of their rules and objects, there is or will be equality of opportunity in its policies and operations.
Associations are expected to apply the principles of equal opportunities to all sections of the community. This means that the association's actual or proposed procedures and practices should ensure equality of access and opportunity in all its areas of work, including the employment of staff; the composition of the association's membership and Committee of Management; the purchase of goods and services; the disposal, letting and management of property; and the allocation of resources and delivery of services for which the association is responsible. Associations will be expected to join and participate fully in any system set up by the Department or the Northern Ireland Federation of Housing Associations to record and monitor on a continuous basis lettings made by housing associations.
Associations catering primarily for a particular needs group (see commentary at criterion 2 above) will be expected to ensure opportunities within the scope of the rules and objects. Their lettings policies must be based primarily on urgent housing need, with secondary qualifications such as an ex-service record, only coming into consideration when all other factors are equal.
The association should provide a copy of an equal opportunities statement formally endorsed by its Committee of Management and appropriate to its level and type of activity. The documents referred to in criterion 6 above should also be aimed at ensuring equal opportunities. Associations, which will be employing staff, will need to adopt formal equal opportunities policies and procedures for recruitment and employment and state this in job advertisements and other published material.
8. Other Requirements
An application for registration must be made on the form HAR3 (NI), provided by the Department's Housing Associations Branch, and shall be taken as conveying the agreement of the association:
- to ensure that the requirements these criteria are observed at all times in the future:
- to comply with the requirements of Article 21 of the 1992 Order, which confers on the Department specific powers to monitor the activities of registered associations;
- to allow the Department access at all reasonable times to the accounting and other records, offices and housing schemes of the association and of any subsidiary;
- to authorise its auditors, bank, solicitors and any other consultants, agents or advisers to disclose to the Department such information as the Department may require;
- to submit within two months of date of issue, an annual return (for 31 March of each year) in such form as the Department may determine, and to validate or substantiate within a reasonable time limit any information provided on the application form or the annual return, and furnish any other information aa the Department may require from time to time;
- to notify the Department of any changes to the association's rules and to obtain the Department's consent to such changes when required by Section 9 of the Industrial and Provident Societies Act (Northern Ireland) 1969 (as amended by Article 29(6) of the 1992 Order), to notify the Department in writing within four weeks of any changes in the membership of the Committee of Management or in the managerial and executive staff separately identified in the application form (HAR 3 (NI)) or most recently submitted annual return;
- to the maintenance at all times of a complete register of all properties in which the association has an interest; and
- to observe any procedures or conditions which the Department may from time to time specify in pursuance of its functions under Article 4 of the 1992 Order to exercise supervision and control over registered housing associations.
Continuing compliance with the requirements of the criteria is checked by the Department through its programme of visits to registered associations by Monitoring Staff and by examination of annual returns and accounts submitted by registered associations. Associations are encouraged to review regularly and monitor their performance to determine how well they are achieving their goals (perhaps every year). As a part of this, they should consider whether they still satisfy the criteria for registration.
Associations are expected to co-operate fully with the Department in the exercise of its monitoring and supervisory powers. New associations will generally be first monitored about one year after registration. It is not the Department's intention to examine or monitor the detailed operation of subsidiaries, which are not registered housing associations, but to have an investigatory safeguard in cases where there may be leakage of public funds in breach of associations' rules or contrary to the purpose for which the funds were allocated by the Department.
The annual return has two parts; the first is concerned principally with Committee of Management details and is kept on a public register file; the second is a statistical return on an association's activities and is used by the Department, for example to produce performance indicators for associations.
The Department has a general statutory duty to exercise supervision and control over registered housing associations. (This is not the same as the specific power referred to under criterion 6 above to set standards for the management and maintenance of properties). The Department issues such documents as Housing Association Circulars, procedure guides and others under this general duty. Registered associations will automatically receive copies of relevant documentation.
- Under the terms of Article 3 of the 1992 Order a housing association is defined as a society (see 2 below), body of trustees or company:-
a) which is established for the purpose of, or amongst whose objects or powers are included those of, providing, constructing, improving or managing, or facilitating or encouraging the construction or improvement of housing accommodation; and
b) which do not trade for profit or whose constitution or rules prohibit the issue of capital with interest or dividend exceeding such rate as may be prescribed by the Department of Finance, whether with or without differentiation between share and loan capital."
- To be eligible for registration with the Department a housing association must be a society registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 (i.e. housing associations which are companies or bodies of trustees are not able to register).
- The association must also fulfil the conditions set out in Article 15(2) and (3) of the 1992 Order, which require that the association does not trade for profit and is established for the purpose of, or has among its objects or powers, the provision, construction, improvement or management of:
a) houses to be kept available for letting, or
b) houses for occupation by members of the association where the rules of the association restrict membership to persons entitled or prospectively entitled (as tenants or otherwise) to occupy a house provided or managed by the association, or
c) hostels,and that any additional purposes or objects are permissible.
- The permissible additional purposes or objects are:
a) providing land, amenities or services, or providing, constructing, repairing or improving buildings, for the benefit of the association's residents, either exclusively or together with other persons;
b) acquiring, or repairing and improving, or creating by the conversion of houses or other property, houses to be disposed of on sale, or lease or by equity-sharing lease;
c) constructing houses to be disposed of by equity-sharing lease;
d) managing houses which are held on leases or other lettings (not being houses falling within paragraphs 3(a) and (b) above), or blocks of flats;
e) providing services of any description for owners or occupiers of houses in arranging or carrying out works of maintenance, repair or improvement, or encouraging or facilitating the carrying out of such works;
f) encouraging and giving advice on the formation of other housing associations or providing services for, and giving advice on the running of, such associations and other voluntary organisations concerned with housing, or matters connected with housing.
- A housing association shall not be ineligible for registration by reason only that its powers include power -
a) to acquire commercial premises or businesses as an incidental part of a project or series of projects undertaken for purpose or objects falling within Article 15(2) and (3) of the 1992 Order; and
b) to repair, improve or convert any commercial premises acquired as mentioned in sub-paragraph (a) above or to carry on, for a limited period any business so acquired.
Appendix 2 - Summary of relevant legislation
- The Department's main functions in relation to registered housing associations are:
a) to establish and maintain a register of housing associations (Articles 14-18 of the 1992 Order);
b) to promote, assist and facilitate the development and proper performance of registered housing associations (Article 4 of the 1992 Order);
c) to exercise supervision and control over registered housing associations (Article 4 of the 1992 Order);
d) to make grants (Article 33 of the 1992 Order) or loans (Article 6 of the 1992 Order) to registered housing associations; and
e) to publish guidance as to the management of accommodation by registered housing associations (the "Tenants' Guarantee") (Article 11 of the 1992 Order).
- Associations and their professional advisers should also be aware of the legislation relevant to their primary registration with the Registrar of Credit Unions for Northern Ireland ((a) below) and of those Articles in the 1992 Order that are relevant to the supervision and control of registered housing associations by the Department:-
a) The Industrial and Provident Societies Act (NI) 1969 (the 1969 Act) - sets the statutory framework for associations registered with the Registrar of Credit Unions for Northern Ireland;
b) Article 17 of the 1992 Order - provides that, once registered, an association may only be removed from the Register under certain narrowly defined circumstances;
c) Article 13 of the 1992 Order - the need for registered housing associations to obtain the Department's consent before they dispose of land (this includes taking out a loan on security of land). This requirement extends to land owned by unregistered associations which have received public grants;
d) Article 25 of the 1992 Order - the Department's general power to remove a committee member of a registered housing association and appoint committee member;
e) Section 9 of the 1969 Act (as amended by Article 29(6) of the 1992 Order) - the need for registered housing associations to obtain the Department's consent to rule amendments;
f) Article 29 of the 1992 Order - the need for registered housing associations to obtain the Department's consent to amalgamation, transfer of engagements, dissolution or winding up;
g) Article 27 of the 1992 Order - the Department's power to petition for the winding up of a registered housing association;
h) Article 28 of the 1992 Order - on the dissolution or winding up of a registered housing association its net assets must be transferred to the Department or to such registered housing association as the Department directs. Where the association is a charity, the property can only be transferred to another charity with like objects;
i) Article 19 of the 1992 Order - lays down accounting and audit requirements for registered housing associations;
j) Article 20 of the 1992 Order - the legal duty and liabilities upon each person directly concerning with the conduct and management of the affairs of a registered housing association (and in that capacity responsible for the preparation and audit of accounts) in relation to compliance with Article 19 of the 1992 Order;
k) Article 21 of the 1992 Order - the power of the Department to monitor registered housing associations;
l) Article 23 of the 1992 Order - the Department's power to conduct an inquiry into the affairs of a registered housing association;
m) Article 24 of the 1992 Order - the Department's power to conduct an extraordinary audit of a registered housing association's affairs for the purposes of a Article 23 inquiry;
n) Article 25 of the 1992 Order - the Department's general powers exercisable as a result of an inquiry or an audit under Article 23 or 24; and
o) Article 26 of the 1992 Order - the Department's power to direct transfer of land from one registered housing association to another.
- In addition all associations with charitable status should be familiar with the principles of general charity law.
- The attention of associations is also drawn to:-
a) Articles 30 and 31 of the 1992 Order.
b) The Housing Association Grant for eligible Housing Activities. General (Northern Ireland) Determination 1992 issued under Articles 33, 35 and 36 of the 1992 Order and describing the principles by which Housing Association Grant is allocated, recovered, etc; and
c) The Department's published Performance Standards for registered housing associations.