Why we are engaging with Sanctuary Scotland
We are engaging with Sanctuary Scotland because it is a systemically important landlord and about the transfer of assets from Thistle Housing Association (Thistle).
COVID-19 has significantly impacted the services provided by social landlords in 2020 and will continue to influence how services are provided in 2021. We will continue to monitor, assess and report upon how each landlord is responding and we will keep our regulatory engagement under review so that we can continue to respond to the challenges of COVID–19.
We refer to a small number of RSLs as systemically important because of their stock size, turnover or level of debt or because of their significance within their area of operation. We need to maintain a comprehensive understanding of how their business models operate, and how they manage the risks they face and the impact these may have. So we seek some additional assurance each year through our engagement plans. Given Sanctuary Scotland’s size, turnover and level of debt we consider it to be systemically important.
In January 2021 we used our statutory powers to direct Thistle to transfer all of its assets to Sanctuary Scotland under section 67 of the Housing (Scotland) Act 2010 (the 2010 Act). We did this to improve the management of Thistle’s assets and to safeguard the interests of Thistle’s tenants and service users. We consulted Thistle’s tenants and factored owners about the transfer proposal and the majority of those who responded were supportive. The transfer took place on 1 March 2021 and Sanctuary Scotland will now support Thistle as it progresses removal from the SHR Register of Social Landlords.
Sanctuary Scotland is one of the largest developers of new affordable housing in Scotland and receives significant public subsidy to help achieve this. Sanctuary Scotland plans to develop new homes for social rent, mid-market rent and low cost home ownership.
What Sanctuary Scotland must do
Sanctuary Scotland must:
- send us by 30 June 2021:
- its approved business plan and updated risk register;
- 30 year financial projections consisting of statement of comprehensive income, statement of financial position and statement of cash flow complete with assumptions and explanatory narrative;
- a comparison of projected financial loan covenants against current covenant requirement
- financial sensitivity analysis which considers the key risks, the mitigation strategies for these risks and a comparison of the resulting covenant calculations with the actual current covenant requirements; and
- the report to the Board in respect of the approved 30 year projections, sensitivity analysis and covenant compliance;
- ensure that the impact of the pandemic on its development plans is reflected in its business plan and tell us if there are any material changes to its development plans which might affect its financial position or reputation, in line with our notifiable events guidance;
- provide copies of its Board and audit committee minutes as they become available; and
- provide quarterly updates on progress with the integration of Thistle into Sanctuary Scotland and with the delivery of the commitments Sanctuary Scotland has made to Thistle’s tenants and service users. This includes progress with the actions Sanctuary Scotland is taking to remedy Thistle’s failings in relation to a major works contract and to tenant and service user health and safety.
What we will do
We will:
- review the minutes of the Board and audit committee and liaise as necessary;
- meet with Sanctuary Scotland’s senior staff to discuss the impact of the pandemic on its business model and business plan and any risks to the organisation particularly in relation to its services to tenants and other service users;
- engage as necessary on the integration of Thistle into Sanctuary Scotland and on the delivery of the commitments Sanctuary Scotland has made to Thistle’s tenants and service users; and
- update our published engagement plan in light of any material change to our planned engagement with Sanctuary Scotland.
Regulatory returns
Sanctuary Scotland 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.