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 and the Regulatory Standards of Governance and Financial Management. 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 and 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. Reidvale must now 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.
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 Regulatory Standards. This review, completed in September 2019, found that there were a number of areas where Reidvale was non-compliant with Regulatory 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. It also appointed an interim senior officer following the retirement of the previous post holder.
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 Regulatory 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 which has found the costs are far higher than it had estimated, and this has slowed the pace of the stonework repairs programme. In addition, Reidvale recently notified us about another incident of falling stonework which raise serious concerns regarding tenant and resident safety. 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 Regulatory 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 by 24 February 2024 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 advised it required further time to develop its plan and financial projections and these will now be submitted by 4 March 2024.
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 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 a plan by 4 March 2024 setting out how it will address its serious weaknesses and comply with all its legislative and regulatory obligations; and
- provide us with updated 30 year financial projections and supporting assumptions.
What we will do
We will:
- consider Reidvale’s plan to address its serious weaknesses and become compliant with its legislative and regulatory obligations;
- consider Reidvale’s updated 30 year financial projections and supporting assumptions: and
- update our published engagement plan when we have considered Reidvale’s plan or in light of any other 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.