The threat arose after a High Court judgment appeared to change the way associations are treated if they go bust (HT 19 September, page 15).
The judgment, on 9 May, suggested some bodies that are not companies – including the hundreds of associations that are industrial and provident societies – would go into administration rather than receivership if they went out of business.
Banks feared this would make it more difficult for them to reclaim the money they lent to an association. They warned charges could increase to reflect the extra risk of lending to the sector.
The DTI is consulting its lawyers to see whether the law needs to be altered. It says any changes could be done as soon as March. The preferred method is to introduce regulation to clarify the law, but other options include leaving the decision to judges in individual cases or, if regulation is impossible, adding the changes into another bill, if a suitable one can be found.
Steve Leinster, assistant director of the policy unit at the DTI's insolvency service, said: "We are aware it's a pressing issue.
"I have passed it onto our lawyers and it's a live issue now.
"We could leave it and let the courts sort it out next time, but that's probably not a very attractive option. The simplest way would be by regulation. If our legal advisers in the DTI are advised [by outside lawyers] that it's a possibility, then it's relatively straightforward.
"It could be done in a matter of months, but would take longer if we were advised it wasn't a possibility to change it by regulation."
The sector welcomed the DTI's intervention.
Bob Wilson, head of finance policy at the National Housing Federation said: "As far as we are concerned, it would be another example of the government being willing to listen when the right case is made.
"The Council of Mortgage Lenders and the Housing Corporation deserve a lot of credit too for galvanising themselves on this."
Source
Housing Today
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