Why we are engaging with Reidvale Housing Association (Reidvale)
We are engaging with Reidvale about its governance, financial management and stock quality.
Reidvale does not comply fully with regulatory requirements including the Regulatory Standards of Governance and Financial Management (the Standards). Reidvale had concluded that it was in the best interests of its tenants to seek a transfer of engagements to a Registered Social Landlord (RSL) which met these requirements including the Standards. The majority of tenants who voted in a ballot of all Reidvale’s tenants supported the proposed transfer to Places for People Scotland. However, Reidvale did not secure the two-thirds of voting shareholders that it requires to approve the outcome of the ballot of its tenants, and on that basis, it cannot proceed with the transfer of engagements to Places for People Scotland. We asked Reidvale to provide us with a clear plan, including revised financial projections, for how it will address the serious weaknesses it has, and so comply with all of its legislative and regulatory obligations. Reidvale provided its plan on 1 March 2024.
We originally engaged with Reidvale in March 2019 as our annual risk assessment had identified that a majority of board members had been in place for more than nine years. We were also aware that Reidvale had not assessed its compliance with Regulatory Standards.
Following our engagement, Reidvale commissioned an independent review of its compliance with the Standards. This review, completed in September 2019, found that there were a number of areas where Reidvale was non-compliant with the Standards. The areas of non-compliance included demonstrating strategic control, the development and monitoring of its Business Plan, risk management, the lack of appropriate processes to assess the skills and experience needed on the management committee, the appraisal processes for staff and board members and succession planning.
Reidvale developed a Governance Improvement Plan. It co-opted three individuals on to its management committee to support it to take forward the necessary improvements.
Reidvale commissioned a further review of its compliance with regulatory requirements in November 2020. The review identified some progress in relation to delivering improvements but found continued serious weaknesses in compliance with regulatory requirements. The review specifically raised matters relating to Reidvale’s Business Plan and rent affordability.
During the strategic options appraisal process it became apparent that Reidvale’s expenditure in some areas such as staff salaries was high in comparison to similar RSLs. Reidvale commissioned an organisational review to consider this further. It highlighted serious weaknesses in Reidvale’s organisational structure and raised further additional concerns regarding Reidvale’s compliance with the Standards.
Reidvale also carried out a stock condition survey in order to understand its future maintenance requirements and incorporate that information into its strategic and financial planning. The stock condition survey report was produced in January 2022 and highlighted significant investment requirements. Reidvale developed a one-year investment programme which is prioritising failing stonework in its pre-1919 properties. It developed a pilot programme to establish the extent of the work required to its stonework and the likely costs involved. The programme found that these costs are far higher than it had estimated, and this has slowed the pace of the stonework repairs. There have been a number of incidents of falling stonework which raise serious concerns regarding tenant and resident safety. As Reidvale takes forward its programme of stonework repairs it has found that the work required to address the failing stonework is significantly more extensive than originally anticipated and it is clarifying the extent of the work required and the associated costs.
The estimated maintenance costs from the stock condition survey, the stonework repairs, the higher than average operating expenditure identified during the strategic options appraisal and historically low rents put significant stress on Reidvale’s ongoing financial position and rent affordability.
In its most recent Annual Assurance Statement submitted in 2023, Reidvale confirmed its continued non-compliance with the Standards and that it was working to resolve these issues by taking forward its plans to seek a partnership with another RSL.
Reidvale is engaging openly and constructively with us. Following the outcome of the shareholders vote regarding the proposed transfer we will engage with Reidvale to understand the steps it will take to address these serious weaknesses, including how it will fund the investment required to its homes and ensure that it complies with its legislative and regulatory obligations.
We asked Reidvale to provide us with a plan setting out how it will address its serious weaknesses and comply with all its legislative and regulatory obligations. We also asked Reidvale to provide us with updated 30 year financial projections and assumptions. Reidvale has done this and we are engaging with it to seek assurance that the plan will address its serious weaknesses and ensure compliance with its legislative and regulatory obligations.
Reidvale has confirmed its plan and financial projections will require to be updated when it has clarified the cost of the stonework repairs.
In March 2024 Reidvale put in place new interim senior officer arrangements and provided us with assurance about the skills, expertise and track record of its new arrangements to support it as it addresses its current challenges.
Reidvale notified us that some of its shareholding members have requested a Special General Meeting (SGM) be held to remove some governing body members and replace them with new members. The SGM took place on 25 March 2024. We are engaging with Reidvale about the outcome of the SGM.
We will continue to engage with Reidvale as it further develops these plans over the coming weeks to provide us with assurance that it will be able to comply with regulatory requirements including the Standards.
The Housing (Scotland) Act (2010) requires us to monitor and assess the financial well-being, governance and performance of each Registered Social Landlord (RSL).
Our current assessment is that Reidvale is non-compliant and is working towards compliance with the Regulatory Standards of Governance and Financial Management. We set out below the information that Reidvale must provide in order to assure us that it can achieve compliance.
What Reidvale must do
Reidvale must provide us with the information we require on its plan to address its serious weaknesses and ensure compliance with its legislative and regulatory obligations.
What we will do
We will:
- review Reidvale’s plan to address its serious weaknesses and ensure compliance with its legislative and regulatory obligations and engage as necessary;
- review our regulatory strategy in the light of this; and
- update our published engagement plan in the light of any material change to our planned engagement with Reidvale.
Regulatory returns
Reidvale must provide us with the following annual regulatory returns and alert us to notifiable events as appropriate:
- Annual Assurance Statement;
- audited financial statements and external auditor’s management letter;
- loan portfolio return;
- five year financial projections; and
- Annual Return on the Charter.
It should also notify us of any material changes to its Annual Assurance Statement, and any tenant and resident safety matter which has been reported to or is being investigated by the Health and Safety Executive or reports from regulatory or statutory authorities or insurance providers, relating to safety concerns.