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HCA downgrades Network Housing Group after tenants overcharged rent

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HCA downgrades Network Housing Group after tenants overcharged rent

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Published by Max Salsbury for 24dash.com in Housing and also in Regulation

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Image: Housing via Shutterstock

The Homes and Communities Agency has downgraded Network Housing Group after the provider failed to demonstrate compliance with the regulator's rent standard.

NHG was ruled to have not fully complied with the requirements of the rent standard concerning 153 properties where, because of errors in base capital values used in calculations, rents were charged in excess of the maximum permitted by the standard for a number of years.

A further 509 supported housing properties were also charged rents in excess of NHG’s own policy.

Consequently, NHG has had its governance rating downgraded one notch to 'G2'. Its viability rating remains untouched, at 'V1'.

The issues have led the HCA to question controls within the group, and specifically the basis upon which the board gained assurance on the accuracy of rents charged.

The agency received an allegation regarding the consistent calculation of rents and service charges across the group in October 2013.

Prior to receiving the allegation, NHG had, as part of its assurance on internal controls, already started to review rent charging practices across the registered providers within the group.

The housing provider found no basis for the service charge allegation but commissioned a comprehensive review with independent consultants to examine valuations used as the basis for rent setting across the group and to assess the calculation of rents for new and acquired properties.

The review found inconsistencies in the calculation of base values for 153 properties.

It also found two further vulnerabilities concerning the system for calculating rents and inconsistencies in management of the calculation of rent charges. Errors have now been rectified and those tenants charged in excess of the rent standard compensated.

The internal review also found that the calculation of rent uplifts for 509 properties in the Willow Housing and Care subsidiary was incorrect for a three-year period from 2007/08.

The HCA's assessment on compliance with the Governance & Financial Viability Standard is expressed in grade from G1 to G4 for governance, and V1 to V4 for viability. For both viability and governance the first two grades indicate compliance with the standard. A G3 or V3 assessment indicates a level of concern with the organisation’s performance that is likely to be reflected in intensive regulatory engagement.

A G4 or V4 judgement indicates a failure of governance or viability to the extent that the regulator is using its statutory powers.

In a statement, NHG said: "We recognise that errors were made and there was a weakness in our controls around rent setting. The specifics of this case are highly complex and technical and it took independent experts and our own staff considerable time to work through the nature of the error and whether it had a financial implication for any of our residents.

"To ensure we got our response right when our internal controls picked up the possibility of error, we conducted root and branch investigations of the property valuations used as the basis for rent setting for all properties across the group, using independent consultants, and had our internal systems and procedures examined in depth, again using independent external expertise.

"This included reviewing the valuations of over 13,000 properties, including a substantial number of on-site physical valuation reviews, and checking on the valuation methodology for new developments used in recent years. We also took detailed legal advice.

"We intend to regain our G1 rating for governance as soon as we possibly can."

NHG is made up of five housing providers - Network Stadium Housing Association, Riversmead Housing Association, Willow Housing and Care, London Strategic Housing, Community Trust Housing - which own and run 17,000 homes across London.

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