Band 2 - off the shelf purchases

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.

Band 2 - development milestones

Prequalifications are the major scheme development ‘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 the Tranche payment of Grant at Acquisition stage.

Each ‘step’ or ‘milestone’ is an essential part of a project and uncertainty or failure in any of the ‘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 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 site and properties 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.  Read Acquisition Issues and Valuations for more guidance.

Consultation

Associations are statutorily obliged to consult secure tenants on decisions of housing management as defined in Article 40(2) of the Housing (Northern Ireland) Order 1983.  However to secure best value and enhance public involvement when making decisions, the range of issues on which Associations should consult needs to be more extensive. For further guidance read Consultation - Scheme Approval.

Land/property

Mostly covered by certifications on scheme forms.  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 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 65 years for New Build schemes at the date of start on site.

Code for sustainable homes

Off the Shelf properties are not required to meet the Code for Sustainable Homes rating level ‘3 stars’ or better. However, where an OTS does meet the CSH standard the supplementary multiplier will be allowed but only paid on production of the certificate of compliance. In addition, Associations should be aware that, from 30 June 2008, Energy Performance Certificates (EPCs) are required.

Planning

In this type of scheme, the responsibility for obtaining all necessary permissions rests with the Developer/ Contractor.  However, Associations must be satisfied that all the necessary permissions have been obtained.

Site appraisal

In this type of scheme, the responsibility for assessing the site and ground conditions rests with the Developer/ Contractor. However, Associations must be satisfied that the scheme complies with Department’s Design Standards.

Consultants

The Association must ensure that the completed properties have been inspected by a consultant to confirm that it is satisfied the property(s) have been completed to Department’s required standards.  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. 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.

Band 2 - scheme documentation

Off the Shelf submissions need to include various documents, if all supporting documents are not present the Association will be contacted by NIHE.

Off the Shelf submissions – scheme documentation

Off the Shelf Submissions must include all schemes (including Disposals Proceeds Fund schemes):

  • Economic Appraisal
  • copy of NIHE letter supporting need
  • form NT1 (non-tariff funded schemes) or TA1 (tariff schemes)
  • form SFN1
  • 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 and Valuations
  • Site Location Plan (1:1250 or 1:2500) the plan must contain either the Association’s licence number or Ordnance Survey acknowledgement
  • Site Layout Plan (1:200)
  • Block Plans (1:100) (if applicable;
  • Dwelling Plans (1:50) including sections, elevations etc. the scale must be adequate to enable assessment, if required. Plans must be fully dimensioned and show the minimum required furniture layout
  • copy of the Association’s brief to the valuer will be required where there are evident issues affecting the land/property value not clearly taken account of in the valuation report
  • Outline Specification - report to cover internal and external fabric of the building, M&E services, and external works

For information on Internal Environment visit the Design standards section 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 Housing Association Guide - Scheme Approval 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 outline specification 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 of the works elements.

[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].

Supported Housing Schemes only

Memorandum of understanding or letter of support from sponsor agency
Copy letter from JMA Partner confirming agreement in principle to enter into a JMA.

Project approval

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

Acquisition stage for Band 2

Normally Off the Shelf grants are paid in one tranche however grant can be paid in two tranches (10% & 90%), the initial 10% is to cover initial deposit to vendor.

Distinct grant requirements

Grant for Off-the-Shelf Schemes is normally claimed by the Association in one Tranche (100%), after Project Approval has been issued and when the construction work has been completed. Therefore the Acquisition stage grant application in Off-the-Shelf schemes represents the final claim and no further advances of grant will be made.  More information on Grant Timetable.

Partial acquisition

In certain conditions, grant for OTS schemes may be claimed in two Tranches, with a first Tranche of 10% being claimed by the Association to cover situations where work has started and the vendor (contractor/developer) requires an initial deposit to allow a purchase contract to be signed and the work completed.  The remaining 90% Tranche is paid when the Association takes possession of the dwelling etc. Normal rules governing the acquisition claim apply, see Table 5  in the Housing Association Guide - Scheme Approval Guide tables section for details.

This facility is available to cover situations where contractor/developers will only complete properties to a particular stage – e.g., DPC level or ‘shell’ state – unless they have a firm commitment from a buyer.  In such cases, the Association will be required to enter into a formal Development Agreement with the contractor/developer. A deposit is normally required (usually around 10% of the purchase price). The Association will need to satisfy the additional criteria and certifications for receipt of grant described in Table 5.

Phased possession acquisition for Band 2

With prior agreement from NIHE, part or parts of the completed dwellings that have been taken into Association possession, the Association may submit a grant claim to the NIHE. Only those parts that the Association has taken possession off will receive grant.

This facility is only available with the prior agreement of the NIHE (DPG).  It is available, by exception, in medium to large schemes where the dwellings will be completed and handed over to the Association in a number of phases.

When part or parts of the completed dwellings have been taken into Association possession, or within 30 days thereof, the Association may submit a grant claim to the NIHE (DPG).  Grant must only be claimed on those completed units which the Association has taken into its possession.  [Note: In contractual terms this is known as ‘Partial Possession by Employer’] See Table 6  OTS – Phased Possession Acquisition - Band 2 in the Housing Association Guide - Scheme Approval Guide tables section for details.

Grant must be claimed based on a ‘sub-phase’ of the approved scheme, as follows:

  • Grant Rate Type (Line 2 – SFN1 Form)
  • Number of Units Completed x Adjusted TCI per Unit/ Person x Unit Grant Rate x Scheme Cost Index x Acquisition Tranche Percentage

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 will have occurred and will be recoverable from the Association. 

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