Why we are engaging with River Clyde Homes
We are engaging with River Clyde Homes about its financial management, governance, service quality, stock quality and because it is a systemically important landlord.
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 a combination of River Clyde Homes’ size, turnover and debt we consider it to be systemically important.
River Clyde Homes is forecasting a financial position with limited headroom that may restrict its capacity to respond to additional challenges, is reviewing charges for its district heating services and is continuing to review value for money in its subsidiary, Home Fix Scotland. We will engage with River Clyde Homes to get assurance about how it is managing the risks to the organisation arising from these.
In November 2021 the Housing and Property Chamber (First Tier Tribunal) found that River Clyde Homes breached the Property Factor Code of Conduct on two separate occasions. River Clyde Homes did not notify its governing body or us about this at the time. When this was brought to our attention in February 2023, we met with River Clyde Homes to discuss the governance of its factoring service. River Clyde Homes had already commissioned an independent review of the service which included the governance arrangements. River Clyde Homes is currently considering the outcome of the review and we will engage with River Clyde Homes about the actions it is taking to improve the governance of its factoring service.
To assess the risk to social landlord services we have reviewed and compared the 2022/23 service quality performance of all social landlords to identify the weakest performing landlords. We will therefore engage with River Clyde Homes about complaints, percentage lets to homeless people, void management and homeless tenancy sustainment. River Clyde Homes is progressing plans to make improvements in these areas.
River Clyde Homes has identified reinforced autoclaved aerated concrete (RAAC) in some of its homes. It has told us it has a plan in place to manage any associated risks.
What River Clyde Homes must do
River Clyde Homes must:
- send us copies of its Board and audit committee minutes as they become available;
- send us by 30 April 2024:
- 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 requirements;
- 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;
- the report to the Board in respect of the approved 30 year projections, sensitivity analysis and covenant compliance; and
- evidence of how it demonstrates affordability for its tenants.
- send us by 30 April 2024 for Home Fix Scotland:
- its approved business plan;
- financial projections consisting of statement of comprehensive income, statement of financial position and statement of cash flow complete with assumptions and explanatory narrative;
- financial sensitivity analysis which considers the key risks and the mitigation strategies for these risks; and
- reports to the Boards of Home Fix Scotland and River Clyde Homes in respect of the approved financial projections and sensitivity analysis.
- send us quarterly management accounts and accompanying reports within one month of each quarter end on an ongoing basis;
- send us the information we require about the actions it is taking to improve the governance of its factoring service;
- continue to implement its plans to improve performance in complaints, percentage lets to homeless people, void management and homeless tenancy sustainment and continue to review its performance in these areas; and
- tell us if there are any material adverse issues which might affect its capacity to manage the risks associated with RAAC.
What we will do
We will:
- review the minutes of the Board and audit committee meetings and liaise as necessary;
- observe River Clyde Homes’ Board;
- review the management accounts and engage as necessary;
- review the business plans and financial information;
- meet with River Clyde Homes’ senior staff to discuss the business plans, financial information and any risks to the organisation;
- review the information that River Clyde Homes provides about its work to improve the governance of its factoring service and engage as necessary;
- review River Clyde Homes’ service quality performance as part of our 2024/25 risk assessment;
- review any information River Clyde Homes provides about RAAC in its homes and engage as necessary; and
- update our published engagement plan in the light of any material change to our planned engagement with River Clyde Homes.
Regulatory returns
River Clyde Homes 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.