Governance Guide - Article 31 Guidance Notes

This article outlines the rules around being a committee member of an association and provides appropiate guidance.


Article 31 of the Housing (Northern Ireland) order 1992 (the "1992 Order") affirms Article 135 of the Housing (Northern Ireland) Order 1981 (as amended by Article 82 of the Housing (Northern Ireland) Order 1983] and prevents committee members, officers and employees of a registered housing association from receiving any benefits or payments from the Association other than those listed in paragraph 5 of Article 31 (eg, expenses or sums due under contracts of employment).

Committee members of an association, which is registered with the Inland Revenue as having charitable status, are charity trustees of the Association's property.  This means that they must not put themselves in a position where their duty and personal interest conflict, or might conflict, and they must not gain a benefit in any way as a result of their connection with the Association.  Article 31, which is set out in Appendix 1 to this circular, provides for the discharge of those duties in the field of housing associations and is the legal embodiment of the good reputation of the housing association movement.  Associations registered with the Inland Revenue as having charitable status are covered by general charity law as well as Article 31.  Furthermore, Article 31 puts committee members, officers and employees of registered housing associations, which are not registered as having charitable status, in much the same position as if they were charity trustees.  It is important that associations uphold the spirit of the law as well as its letter in all their operations.

Article 31 also contains a new provision to enable the Department of the Environment for Northern Ireland ("the Department") to take determinations exempting specified payments and benefits from the effects of Article 31.  This will enable the Department to eliminate certain class or classes of payments and benefits where the operation of Article 31 would be unfair.  In using these powers the Department has issued the "Article 31(6) Housing (Northern Ireland) Order 1992 Determination 1994" (the "1994 Determination") and the 'Article 31 Housing (Northern Ireland) Order 1992 Determination 1995 (the 1995 Determination") which are contained in Appendices 2 and 3 respectively.  The 1994 Determination issued under Housing Association circular 06/94 dated 30 June 1994 and the 1995 Determination issued under Housing Association Circular 05/95 dated 3 May 1995.

If associations are of the view that in complying with the provisions contained in Article 31 and the Determinations certain anomalies or cases of unfairness arise they should write to the Northern Ireland Federation of Housing Associations providing details.

The following sections of this circular contain general guidance and advice in relation to the application of Article 31 and the Determinations.  The guidance does not purport either to be comprehensive or to provide legal advice.  Its sole intention is to give associations' committee members, officers and employees some insight as to how the law may affect them.

Associations should note  that the guidance and advice contained in this circular has been cleared by the Inland Revenue.

Guidance on Terms Used in Article 31 of the 1992 Order


A benefit would normally include (but is not confined to):

  • the sale of property, either at full market value, or for instance under an Improvement for Sale scheme;
  • the award of a contract of employment;
  • the award of any other type of commercial contract such as a building contract or contract for professional services.

Committee Member

A committee member is a member of an association's main committee and includes co-opted members.  Members of sub-committees or area committees, who are not on the main committee, are not specifically named in the 1992 order but, for the avoidance of doubt and as a matter of general good practice and probity, should be treated as subject to Article 31.

Members of purely advisory or consultative committees need not be regarded as within Article 31 although care should be taken to avoid possible conflicts of interest.  Members of the committees of independent tenants associations are likewise not subject to Article 31.


This term is not specifically defined in the 1992 Order although specific posts (eg, Chair, Vice-Chair, Treasurer, Secretary, etc) are referred to in the rules of associations.  An officer may be a voluntary committee member, a paid employee or otherwise hold office on an appointed or elected basis.  Auditors, who can neither be employees or committee members, are not officers.


An employee is a person who has a contract of employment with an association and can include anyone who is employed to do a particular job.  Normally an employee is paid a salary or wages and the Association deducts tax and national insurance contributions through the PAYE system.  But it is possible for a contract of employment to exist where someone is apparently working on a freelance basis.  This will depend on the amount of control the Association has over the individual's time and methods of performing the task.

A contract of employment should cover all the terms and conditions required by employment protection legislation.  It may be varied in correspondence, or even orally or through "custom and practice'.  The terms of the contract may therefore be found in different places and have been prepared at different times.

Associations are recommended to review contracts of employment on a regular basis to ensure that the formal document incorporates all variations that may have arisen in practice.  This will help to avoid queries about possible breaches of Article 31.

Close Relative

No set definition of this term exists for the purposes of Article 31 and each case must therefore be judged on its merit.  A close relative is a relative by blood or marriage who is so close to the committee member, officer or employee that there is a real risk that the decision of the Association to grant him/her a benefit could be influenced by that relationship.

However, it will normally include a person's spouse, parent, grandparent, child, grandchild (including illegitimate children and grandchildren), brother and sister.  Technically, the term 'relative' does not include any relationship that in not by blood or marriage, however close.  Where such relationships exist, and are close, associations are strongly advised to act as though Article 31 did in fact apply.

Business trading for profit

A business trading for profit is one which is able to distribute its surpluses or profits to its members, shareholders or directors for their personal use.

Principal proprietor

No legal definition of this term exists - a principal proprietor is thus someone whose degree of ownership is such that there is a real risk that the decision of the Association to make a payment or grant a benefit to the business could be influenced by that fact.  This degree cannot be set at any particular percentage of share ownership but will depend on the facts of each case.

A person is a proprietor if he/she can vote on questions affecting the management and conduct of the business or its internal constitution, or has the right to any shares of the business, or has the right to any share of the capital of the business on a winding-up.

Directly concerned in the management

A person is directly concerned with the management of a business trading for profit if he/she has power to make decisions for the business such that there is a real risk that the decision of the Association to make a payment or grant a benefit to the business could be influenced by the interests of the business.

Guidance on the Application ff Article 31

Committee member's expenses

The payment of expenses must be limited to meeting actual out-of-pocket expenses all of which must have been reasonably incurred in connection with the duties of a committee member.  Payments to babysitters, or to other carers of dependent relatives, are lawful so long as they relate to actual expenses incurred.

If allowances rather than actual expenses are paid to meet out-of-pocket expenditure (eg, for subsistence and travelling), the scale of the allowances must be no more than that payable under the current National Joint Council for Local Authorities Administrative, Professional, Technical and Clerical Services rates (Purple Book).  The payment of expenses in a way that constitutes an allowance for attendance at committee or general meetings of the Association or for services rendered by committee members is not allowed.  This includes honoraria and payments for loss of earnings or other notional losses.

Contracts of employment

Article 31 does not prevent an association changing the contracts of employment of its staff, but these should be formally agreed by the appropriate mechanisms and recorded in writing.  A contract of employment cannot be retrospectively amended after an employee has left the Association.

Severance payments

Where an association is faced with the need to dispense with the services of an employee, on the grounds of efficiency, reorganisation, redundancy, or early retirement, great care should be taken not to breach Article 31.  Any payment or benefit which is specified by the individual's contract of employment, or the Association's established conditions of service, is lawful.  It is also proper to consider any pay due in lieu of notice, any accrued leave entitlement, any return of pension contributions and any increase in salary to which the employees would have been entitled.

In the case of redundancy, payments may be made under the statutory formula in the Contracts of Employment and Redundancy Payments Act (Northern Ireland) 1965 (as amended).  There may be other circumstances in which it could be considered reasonable and proper for an individual to receive some compensation for the determination of his/her contract of employment.  It is an implied term of every contract of employment that the employer will not wrongfully or unfairly dismiss the employee.

If the circumstances are such that the employee would have a prima facie case for action against the Association for unfair or wrongful dismissal, the Association should seek legal advice to establish the likely level of compensation that a court or tribunal would award in the event of a successful action against the Association.

The committee will need formally to consider the advice, and if it concludes that a payment should be made which involves any ex gratia element, the Association is advised to write to the Department setting out full details of the case.  This will ensure that the Department does not raise any questions at a later date.

Where it is clear that the committee's decision took into account this guidance, was not subject to any improper influence and was taken in the full belief that the sole and best interests of the Association were being served, it is unlikely that the Department will hold such arrangements to be a breach of Article 31.  Where a severance payment is to be made, it is important for the terms to be properly documented by an appropriately experienced firm of solicitors.


Loans to people falling within the Article 31 definition are prohibited unless expressly provided for in the contract of employment, such as a staff car loan.


Gifts of any value to people within the Article 31 definition are a benefit, and as such are not lawful.  This includes leaving presents for staff and committee members which should be paid for by a collection from those wishing to contribute.  Standard long service or similar awards to staff can reasonably be regarded as a "custom and practice” part of the contract of employment.

Associations should be aware that Article 30 of the 1992 Order prevents the making of any gift or the payment of any dividend or bonus to:

  • a present or former member of the Association;
  • a member of a present or former member's family;
  • a company of which a person within (a) or (b) is a director

The only exceptions to this are that under Article 30, payments of interest on capital lent to or subscribed by way of shares in the Association in accordance with its rules are permitted; payments by co-ownership associations to former members due under the tenancy or membership agreement are also allowed.

Contractors and Consultants

An association cannot engage or pay any contractors or consultants where any partner, director or person directly concerned in the firm's management (or close relative of such a person) falls within the Article 31 definition.  This is the case whether or not the Association pays the firm directly for services rendered or whether payment is made via a third party.

Bank Managers

Banks are businesses trading for profit and their branch and other managers are directly concerned in their management.  This means that an association may not do business with a particular branch or department of a bank if the manager of the branch or department, who has authority to make agreements with the Association on behalf of the bank, falls within the Article 31 definition.  Where a senior director or manager of the whole bank falls within the Article 31 definition, an association may not do any business with that bank.

Building Societies

In strictly legal terms, building societies are not regarded as trading for profit (unless they have converted into a company).  An association is thus not prevented from having an account with a building society if a manager of the building society falls within the Article 31 definition.

However, in practice, the relationship between an association and a building society will be the same as with any other lender.  To avoid conflict of interest associations are therefore advised to treat building societies as though they were banks.

Purchase of Property

The purchase of property, whether for full market value or at a discount, from a person falling within Article 31 or any business trading for profit of which such a person is a principal proprietor or in whose management he/she is directly concerned, is unlawful.

Business Expansion Scheme (BES)

Associations may not lawfully provide services to a BES company if a person falling within Article 31 is a shareholder, principal proprietor or is directly concerned in its management.  To avoid any possibility of conflict of interest, associations are recommended to require that their committee members, officers and employees do not invest in BES companies to which the Associations are providing services.


An association with an unregistered profit-making subsidiary needs to ensure that arrangements for any services it provides to its subsidiary are not rendered unlawful by Article 31.  However, if all the shares of the subsidiary are held by the Association and therefore any profits can only be distributed to the Association (which cannot itself distribute its profits to members for their private enjoyment), the Department's view is that the subsidiary is not a business trading for profit.

The existence of arrangements to covenant profits from subsidiary to parent is recommended to establish the position beyond doubt.  Article 31 is not interpreted by the Department as applying to any payments or benefits given by the Association to such a subsidiary.

The Department expects associations to ensure that any unregistered subsidiaries adopt the same standards of conduct set by Article 31.

Tenants on committees

Charitable associations have to bear in mind that notwithstanding the payments and benefits permitted under Article 31 their committee members must nevertheless act within the constraints of them being charity trustees of the Association.  Article 31 does not give them a licence to avoid these responsibilities.  As it is a central principle of general charity law that charity trustees may not receive benefits from their charities it could be argued that tenants should not serve on the committee of a charitable association or that committee members of charitable associations should not accept tenancies of the Association's property.

The Department's view is, however, that this is too strict an interpretation for social housing and considers that, subject to the safeguards set down in paragraphs 3.24, 3.25 and 3.28 - 3.31 below, existing tenants may serve on the committee of their landlord associations and committee members may accept tenancies from their associations.  In the case of the former this is primarily because having received the benefit (ie, the tenancy) the relationship between the tenant and the Association is essentially contractual.

Account must be taken however of the fundamental principle set out in paragraph 3.22. A charitable housing association is not a mutual benefit society, it has a prime responsibility under its rules and charitable objects to the community - not just its members.  Whilst this is not a matter for the Department to make judgement on, our view is that an association would be able to demonstrate that this underlying principle was being adhered to if at least 20% of its management committee was drawn from those who are not tenants.

In addition, individual tenant committee members need to ensure that their "trustee" status cannot be questioned.  They can achieve this by ensuring that they do not vote on matters which would significantly affect their personal position or on matters of direct impact such as:-

  • their own or a relative's rent arrears;
  • eviction of a relative;
  • proposed improvements affecting their own or a relatives home.

Instead under NIFHA Rules Model Hll 1974 NI, they should declare their interest under Rule 39 and not participate in discussion or vote on the matter.

In the Department's view, tenant committee members are entitled to all the usual rights associated with their tenancy, such as the right to a transfer, home loss and disturbance payments, and any other statutory or contractual rights.

Committee members, former committee members, employees, former employees and close relatives thereof

Article 31(5)(e) of the 1992 Order enables an association to grant or renew a tenancy to any person, or close relative of that person, who is, or has been within the past 12 months, a committee member, officer or employee of the Association.  Where an association is regarded by the Inland Revenue as having charitable status account must be taken of the general principles of charity law, including those outlined in this guidance.  Failure to take such principles into account may lead to a review by the Inland Revenue of the charitable status of the Association.

The Department's view is that an association may grant a tenancy to a committee member, former committee member, employee, former employee or close relative provided that:
 (a)   the committee member, former committee member, employee or former employee has, or had, no involvement or influence over the process by which the Association granted the tenancy; and
 (b)   the granting of the tenancy conformed to the Association's Tenant Selection Scheme which was approved by the Department.

Associations wishing to grant a tenancy to a committee member, former committee member, employee, former employee or close relative must do so with caution to avoid the risk of being seen to be unfair.  The person in question should receive exactly the same consideration as any other applicant for accommodation.

Under no circumstances should accommodation be offered with jobs except where it is necessary for the performance of the job (eg warden, caretaker, etc).  In such cases the contracts of employment should refer specifically to the provision of accommodation.

Where an employee or committee member has been granted a tenancy by his/her association procedures for dealing with maintenance, rent arrears, neighbour disputes and other housing management matters must be implemented in a scrupulously fair way to avoid the possibility of discrimination in favour of the employee or committee member.  Situations where a conflict of interest might arise should be avoided eg an employee must not be responsible for pursuing his/her own rent arrears.

Associations might also wish to consider the inclusion of a clause in employment contracts, setting out the conditions (see above) under which a tenancy might be granted to an employee, former employee or close relative.


All associations must disclose in their annual return to the Department any interests relating to the Association's business which have been declared by committee members, officers or employees in any business trading for profit in which they or a close relative are concerned.

Breaches of Article 31

Legal Advice

Where an association has any doubt whether a particular transaction might infringe Article 31 it should seek its own legal advice.  The Department and/or the Northern Ireland Federation of Housing Associations might also be in a position to provide informal guidance on the basis of past decisions.  In neither case should this be regarded as a substitute for the Association’s own legal advice.


Where a sum has been paid or a benefit granted in contravention of Article 31, associations may recover the payment or the value of the benefit. Associations are required by law to take proceedings for such recovery if the Department so directs.

Void contracts

Any contract granted in breach of Article 31 is null and void.  This means that it is as if it had never been granted and therefore all payments made or the value of any benefit granted are recoverable.


The use of a third party to pass payments and benefits from an association to a person within Article 31 risks being unlawful and in any case the Department advises strongly against such measures on policy grounds.

The Determinations

The Department's power to make determinations

Article 31(6) of the 1992 order gives the Department the power to make determinations to allow registered housing associations to make payments or grant benefits in specified classes of case beyond those allowed in Article 31.  This new power does not enable the Department to make individual exemptions in particular cases.  In exercise of its new power the Department has made the 1994 Determination and the 1995 Determination which are contained in Appendices 2 and 3 respectively.

Policy considerations

The main purpose of these Determinations is to try and eliminate classes of case where in the past the operation of Article 135 of the Housing (Northern Ireland) order 1981 (as amended) and Article 31 of the 1992 Order has or might have resulted in situations which could be regarded as unfair or anomalous.

It is not the purpose of the Determinations to alter or undermine the intention of Article 31.  Nor may it go against the principles of charity law for associations that are registered with the Inland Revenue as having charitable status.  For this reason they are relatively restricted in scope and specify a number of safeguards to ensure that the exemptions are applied in an open, fair and accountable way.

The 1994 Determination exemptions

The first exemption in designed to allow an association to employ close relatives of employees.  The previous absolute ban which Article 31 imposed has no parallel in any other area of public service.

The second exemption allows an association to give a contract of employment to a person who was employed by the Association in the previous 12 months.

The 1995 Determination exemption

This exemption allows an association to sell to tenants, who are (or have been within the last 12 months) committee members, officers or employees or close relatives thereof, land which is in their possession.  Such sales must be in accordance with the Association's voluntary sales policy.


The exemptions contained in the Determinations are subject to conditions aimed at ensuring that they are applied in a fair and open manner.  These are set out at: paragraph 1(2) of the 1994 Determination (a further condition applies to the first exemption - see paragraph 4(2) of the 1994 Determination); and paragraphs 1(2) and 4 of the 1995 Determination..-No exemption may be exercised unless all of the relevant conditions are met in full.

The exemptions require that in each case the decision shall be taken by the Association's committee of management and should be recorded in the minutes.  These decisions may be formally delegated to a properly constituted subcommittee with appropriate terms of reference.

Associations wishing to take advantage of the exemptions will also need to set up a separate public register of cases falling within the exemptions.  The register details should include: the name of the applicant; their connection with the association; the job title of the post concerned/the property concerned; and the date and minute number of the committee meeting at which the decision was made.


In future the annual returns which associations submit to the Department will require associations to report the number of exempt cases for each class of exemptions.

Monitoring visits

Associations should ensure that applicants for housing and employment declare whether or not they fall within Article 31 - the relevant application forms should include a question on this.

When associations are being visited by monitoring staff, the Department will pay particular attention to policies and practices for dealing with exempt cases, and may wish to review register entries and the files relating to them.  The Department may from time to time request copies of entries in the register, as part of its general supervision of associations.

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