Band 1 - Existing Satisfactory Purchases (ESPs)

Part of: Housing Association Guide, Development Guide, Scheme Approval

Certain milestones need to be achieved before payment of grant. These milestones should be detailed in the timetable.

Development Milestones

Prequalifications are the major scheme development ‘steps’ or ‘milestones’ that an Association must comply with in order to meet the agreed timetable in the Social Housing Development Programme (SHDP) and the Department’s project approval criteria.  Each ‘step’ or ‘milestone’ represents what must be achieved or obtained at a particular stage and, in association with other Certifications, allows the Association to apply for project approval and payment of Grant at Acquisition stage.   

 
Each ‘step’ or ‘milestone’ is an essential part of a project and uncertainty or failure in any of these steps can delay or put at risk the project.  It is essential that the Association works with the NIHE (DPG), various stakeholders, its Solicitor and Consultants on all the Prequalifications.  Each ‘step’ or ‘milestone’ completed or still to be completed allows the progress of a scheme to be measured by the Association.  

Housing Need

Housing need must be already identified and site/ scheme included in the Social Housing Development Programme (SHDP). The Association will require a letter from the NIHE supporting the need.  The Association will of course have to write to the NIHE requesting support for the Association’s proposals, a copy of which shall be retained on file. The breakdown of property types on both letters must correspond.

Valuation

This will require the valuation of the property prepared by an independent valuer engaged by the Association.  The Association will of course have to fully brief the valuer on the site, site boundaries, development constraints etc.  For further guidance Acquisition Issues & Valuations.

Consultation

Associations should note that consultation may not, as a rule, be required for Existing Satisfactory Purchases unless a number of ESPs are planned for a particular area or an ESP is likely to be considered novel or contentious.
For more information on consultation.

Land/ Property

Legal Aspects - All schemes with an Acquisition Stage will require the normal pre-purchase legal and site/ property checks by the Association’s Solicitor.  The land/ property to be acquired must offer good title.  Details of any restrictions, easements, covenants, pre-emption clauses or any provisions of the contract, draft lease or conveyance which might adversely affect the proposed scheme or its future use must be referred to the NIHE (DPG) for notification prior to the Association being committed to the acquisition of the property.

Leasehold - The interest to be acquired must be freehold or leasehold for a term of years certain.  Associations should always seek to acquire the vendor’s full interest in a site or property, rather than accepting a newly created lease or sub-lease.  In other words:

  • if the vendor owns the freehold, the Association should seek to buy the freehold;
  • if the vendor owns a long lease or sub-lease, the Association should seek to buy the residue of the leasehold estate, provided the lease or sub-lease still has at least 150 years to run

Where, however, an Association finds it impossible to negotiate a purchase on the above terms and judges that a HAG-subsidised scheme should still proceed on that site or property, the Association may acquire a newly created lease or sub-lease (depending on whether the vendor owns the freehold or leasehold interest, respectively). The terms of such a lease or sub-lease should be as long as possible and at least 35 years for Rehabilitation schemes.

Code for Sustainable Homes

ESPs are not required to meet the Code for Sustainable Homes rating level ‘3 stars’ or better. However Associations should be aware that, from 30 June 2008, Energy Performance Certificates (EPCs) are required.

Planning

Not normally, an issue for ESPs, however alterations may have been carried out since the original planning permission was granted. It is the Association’s responsibility to check the position and obtain all necessary permissions as required.

Tender Stage

In obtaining tenders for the works the Association must select the procurement method it considers most cost effective, subject to the criteria and advice contained in Procurement.

On receipt of tenders the Association must reassess the scheme costs.  If scheme costs at tender stage exceed the limit for works to ESPs the Association will need to consider reductions. More information on Scheme Types
The Association needs to take a view of:

  • either – whether the total amount of the cost increase remains within the ESP cost limit and how it will fund the cost of the increase;
  • or – whether the total amount of the cost increase exceeds the ESP cost limit and a revised approval is required

Consultants

The Association must appoint Consultants to assess the condition of the existing dwelling and its environs, and to prepare and cost proposals or necessary repairs/ checks/ upgrading etc to meeting the proposed need. Appointments must meet with the requirements of the Procurement.

Economic Appraisal

An Economic Appraisal must be prepared to take account of alternative sites and proposed solutions for the intended need.  As part of the EA process, Associations would be expected to reconsider the suitability of any property, where the identified repairs/ checks/ upgrading works would not achieve the Decent Homes Standard. The EA should include any qualitative benefits the project may bring to sustaining local communities.
Where costs exceed TCI levels, reasons for exceeding TCI must be provided.

Scheme Documentation

Submissions for the Existing Satisfactory Purchases need to include various documents, if these supporting documents are not present the Association will be contacted by NIHE.

 ESP Submissions – Scheme Documentation

ESP Submissions (including Disposals Proceeds Fund schemes) must include:

  • economic appraisal;
  • copy of NIHE letter supporting need;
  • form NT1 (non-tariff funded schemes); or
  • form TA1 (tariff schemes);
  • form SFN1;
  • a copy of the valuation prepared by independent valuer, and an accompanying plan, endorsed by the valuer (i.e. signed and dated), that clearly identifies the site/property valued. More information on  Acquisition Issues & Valuations;
  • condition report;
  • site Layout Plan - A ‘Google’ type map where the property location and boundaries are clearly marked and property postcode is normally sufficient

Except where external works are to be carried out

  • site layout plan - (1:200) is required instead;
  • dwelling plans - (1:50) including sections, elevations etc. Plans must be fully dimensioned and show the minimum required furniture layout. The scale must be adequate to enable assessment, if required.
  • a copy of the Association’s brief to the valuer will be required where there are evident issues affecting the property value not clearly taken account of in the valuation report.
  • for information on Internal Environment which includes:
    - minimum standards for kitchen storage units and appliance spaces
    - minimum standards for living furniture space recommendations
    - minimum standards for dining furniture space recommendations
    - minimum standards for bedroom furniture space recommendations

For more see Forms

  • TA1 Explanatory Notes
  • NT1 Explanatory Notes
  • Scheme Submission Documents – Ready Reckoner

Costs over TCI

The Association’s explanation for costs exceeding TCI and the structural/condition report should together cover all abnormal cost factors and ensure that the content of the proposals can be understood. The Association should also include a cost analysis.

Note: In order to expedite matters the Association should submit readily available documentation in support of this paragraph.  Supporting documentation will vary depending on scheme type but should, as a minimum, include a Consultant’s or Technical Agent’s report confirming that the scheme represents value for money.  Where submitted documentation does not contain sufficient detail to permit assessment the NIHE (DPG) will contact the Association.

Project Approval

The Project Approval Forms [NT2/TA2] will set out any specific conditions attached to the approval, which have to be met by the Association.

Practical Completion for Non-Tariff Schemes

Associations must determine the estimated final costs, if these differ from the estimate they may have to apply to NIHE for additional costs.

Practical Completion is deemed to have occurred when the works/repair contract has reached Practical Completion or in the case of MTC, when the relevant work order is completed.  

At the outset associations must have fully identified the works cost requirement and therefore the scheme approval is based on ‘firm’ determined costs not estimated costs. There is no cost overrun facility to adjust works costs upwards for ESPs. However if, due to unforeseeable events, the actual costs are in excess of the ESP ceiling then a re-approval of the scheme will be necessary. More information on Scheme Types.

Associations should seek advice from NIHE (DPG) in this instance. Where actual works costs are less than the approved costs the grant payable to the Association will be recalculated on the GP2 form and the revised amount of grant outstanding will be paid by NIHE (DPG).

Given the nature of the purchase, associations may opt to claim the acquisition and completion as one tranche claim. This is permissible provided the required scheme pre-qualifications have been reached, the acquisition date is in the past and all the required documentation is available and all relevant certifications can be met.  

Associations must follow the instructions for claiming payment set out in Table 9.

Download:

Recoverable costs post practical completion

Where, following a final grant claim, the Association is able to recover costs as the result of a claim by or against a third party, that proportion of the costs represented by the grant rate for the scheme must be forwarded to NIHE (DPG).
If the actual purchase price is lower than the valuation figure, where the scheme approval was based on the latter amount, an overpayment of HAG may have occurred and will be recoverable from the Association. 

Practical Completion for Tariff Schemes

When practical completion stage has been reached and costs need to be recovered, the proportion of the costs represented by the grant rate for the scheme must be forwarded to NIHE.

Practical Completion is deemed to have occurred when the works/repairs are completed.

Associations must follow the instructions for claiming payment set out in Table 10.

For more information on Grant Timetable.

Download:

Recoverable costs post practical completion

Where, following a final grant claim, the Association is able to recover costs as the result of a claim by or against a third party, that proportion of the costs represented by the grant rate for the scheme must be forwarded to NIHE (DPG).
If the actual purchase price is lower than the valuation figure, where the scheme approval was based on the latter amount, an overpayment of HAG may have occurred and will be recoverable from the Association. 

Back to top