Arches compliance downgrade – what can we learn?

Arches Housing Association (Arches) self-referred to the Housing and Communities Agency (HCA) in July 2017 following its inability to provide assurance that it was compliant with statutory health and safety requirements.  Within the self-referral Arches cited that they wanted to be transparent and share with the regulator their plan to rectify the issues they identified.

About Arches and its downgrade

Arches are a Yorkshire based landlord which owns and manages around 1,130 homes principally in Sheffield and Rotherham.  In July, following a self referral to the regulator, their Governance rating was downgraded from G1 to G2, and they joined the 10 other registered providers who have had governance judgements served against them this year.

The Governance and Financial Viability Standard requires registered providers to have an effective risk management and internal controls assurance framework in place. In Arches’ case, the HCA deemed in the Regulatory Judgement that they needed “to strengthen its operational control arrangements to ensure adherence to all relevant health and safety legislation and regulatory requirements.”

The first downgrade in the sector of its kind

Although these comments from the HCA may sound similar to those we’ve heard before, the point of interest surrounding the Arches case is the reason for their downgrade.

The inability to provide assurance that it was compliant with statutory health and safety requirements specifically related to being able to evidence they had carried out water hygiene risk assessments and asbestos management surveys to their non-domestic stock and, primarily, outstanding electrical testing in respect of their domestic stock in the form of Electrical Installation Condition Reports (EICRs). As a result, this was the first time the regulator passed a governance downgrade ruling which referenced electric, asbestos, and water hygiene.

Cyclical electrical obligations

Arches had identified 130 domestic homes where they had not carried out an electrical inspection and test (and thus an EICR) in the last 10 years and therefore could not demonstrate that they had maintained the electrical installation in a safe condition as per the requirements of the Landlord & Tenant Act 1985. We share the view that the Landlord & Tenant Act 1985 is the principle reference point in terms of electrical safety within domestic stock.  This, in our view, removes any ambiguity as to whether domestic cyclical electrical inspections are required on your domestic stock – they are.

Domestic EICRs are required on a 10 yearly basis as a minimum, however registered providers should take a risk managed approach to ensure their cyclical programme reflects their portfolio and occupants. Most registered providers are either operating or moving towards on 5-yearly cycles which we would recommend is best practice.  The Electrical Safety Council also shares this view.

Following this ruling we expect to see similar cases throughout the sector as there are undoubtedly numerous providers who are in a similar, if not worse, position than Arches were.  The silver lining however, is we now have certainty on where the regulator stands when it comes to electrical inspection and testing and we know they are willing to act if they deem a provider to be in breach of their electrical safety obligations.

The future for Arches

Although downgraded, Arches are still deemed compliant with a G2 rating and have demonstrated the benefit of engaging with the regulator.  They have been open about the issues within the organisation and have since implemented a plan to ensure compliance moving forward.

As the compliance consultant that originally reviewed Arches’ statutory health and safety arrangements (in respect of gas, electric, asbestos, fire and water hygiene), as well as providing support throughout the voluntary disclosure, we continue to work with Arches’ Board to ensure arrangements are robust and that there is a firm grip on compliance within their business.

To learn more about how we can help you ensure effective statutory property compliance, as well as support in managing a referral to the regulator, or respond to the regulator, please contact JNeville@pennington.org.uk