Social housing watchdog critical of long-term lease obligations

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Bespoke Supportive Tenancies Ltd (BeST) – a provider of homes for vulnerable adults – is falling to meet governance and financial viability standards, a notice issued by the Regulator of Social Housing (RSH) has said.

The watchdog said there was a lack of assurance from the provider that its framework was effective in identifying and managing risks associated with its strategy to enter into long-term lease obligations with real estate investment trusts such as Civitas.

The notice said: ‘BeST has repeatedly made decisions to enter into a series of long-term lease agreements with no break clauses. We lack assurance that BeST has taken a suitably long-term view on managing risks associated with this strategy, nor does it have a long-term financial plan in place underpinned by appropriate assumptions.

‘We lack compelling evidence that BeST undertakes adequate stress testing against a range of scenarios, with appropriate mitigation strategies in place, to ensure its long-term viability.’

Data in 2018 showed that BeSt owned and managed 996 units of social housing, providing accommodation for vulnerable people including adults with learning disabilities, physical disabilities, sensory impairment, mental health needs, mothers fleeing domestic abuse and the homeless.

It is one of 15 housing associations working with Civitas and represents 11.5% of the REIT’s net asset value and 9.5% of its gross asset value.

As at 9 May (Thursday), BeST remained fully up to date with all lease payments due to Civitas.

Paul Bridge, Civitas Housing Advisors chief executive officer, said: ‘The announcement was as anticipated, after the initial grading notice and does not affect our ongoing, successful relationship with BeST, nor the vital services which BeST provides.

‘Civitas is in regular and productive dialogue with BeST and the RSH and firmly supports the general review. We operate in a sector which is evolving and maturing, and we work with our housing association partners and care providers to continue to enhance the sustainability of our sector.’

As BeST has fewer than 1,000 units it is classed as a small provider and the regulator publishes notices rather than judgements.

It is considering what further action should be taken, including whether to exercise any of its powers.