The Council of Mortgage Lenders, the National Housing Federation and the Housing Corporation have all hurriedly sought assurances from the DTI that housing associations will be exempt from the complex insolvency rules in the controversial Enterprise Bill.
The organisations hope to wring a concession from the DTI before the end of this week, when the deadline for amendments to the bill passes.
Clive Barnett, head of housing finance at the Royal Bank of Scotland, said: "We will be very reluctant to lend money to the sector if the legislation goes ahead."
The problem centres on an amendment to include industrial and provident societies – a category that includes most registered social landlords – in the insolvency section of the bill.
It would mean protection from creditors, which is currently enjoyed by most companies, would be extended to industrial and provident businesses.
Crucially, it would deny lenders their present powers to appoint their own administrative receivers in the event of a housing association failing.
Barnett said: "To create another layer of bureaucracy will lead to us reviewing our position in the market.
"We have lent to the sector on the basis that we could handle most foreseen problems, but this legislation would lead us into the situation where this could no longer happen."
A source inside the negotiations said that the National Housing Federation was also concerned there would be a scramble by lenders to secure their loans.
It is understood this would be done by invoking "floating charges", which cover all the assets of an RSL, allowing lenders greater security on their investments.
"It would be real hassle for all concerned," said the insider.
Liz Potter, policy director at the NHF, said: "This [situation] is an unintended effect which will cause some difficulties for our members. We are in touch with the government departments concerned to ensure that the bill is amended."
The Housing Corporation is understood to be pursuing a similar course.
Source
Housing Today
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