Registered Providers (RPs) are under the twin pressures of finding alternative sources of finance and maximising efficiency under the new Affordable Housing Programme. Stock transfers, either for cash or as part of a stock swap, will be increasingly popular as RPs look to create efficiencies in their overall portfolio management and as a method of creating capital to invest in their core areas.
We are keen to facilitate this process for our clients and set out below the main points to consider, prior to seeking legal advice, which will help avoid undue delays during the course of the transaction; unexpected obstacles to progress; and unnecessary legal fees.
What are the commercial terms?
You should ensure the heads of terms are as detailed as possible at an early stage to prevent unexpected issues causing a hold up mid-way through the process. For example, make sure the following are covered: How are arrears to be dealt with? How is the grant to be dealt with? How are existing loans to be dealt with? To this end, we can provide you with pro-forma heads of terms to ensure relevant points are covered and advise on different options if required
How do I deal with the practical issues?
- consider who will be carrying out the due diligence on the properties. Will it be more cost effective for the seller's solicitor to provide certificates of title which can be relied on by the buyer and its lender? If so, is the seller's covenant strong enough to rely upon, in case there is a misrepresentation?
- is the disposal of sufficient size to justify any electronic data room? Who can provide that most cost effectively?
- how are you dealing with existing charges over the properties? Will substitute security be required?
- are there any staff transferring with the properties? Will TUPE regulations apply?
- what tenant consultation process do you need to complete?
- who is project managing the collation of documentation?
What do I need to provide by way of documentation?
Be clear about what information you need and how you will obtain it. Solicitors can spend a great deal of time chasing their clients for documents required by the buyer. If you can assemble a complete package early on in the process, much time (and accordingly legal fees) will be saved later in the day. If documents are missing or presumed lost, your solicitor can make provision for this in the contract rather than constantly chasing you for it. The list below provides guidance to the usual information required.
Information checklist for stock transfers
- arrears records
- asbestos reports
- condition survey
- construction documentation
- grant information
- health & safety files
- insurance claims record
- NHBC certification
- ongoing litigation record
- planning/nominations agreements
- recent major work details
- replies to standard enquiries
- s172 consent (and other consents)
- service contracts
- staff/pensions information
- supporting people contracts
- tenancies etc
- utilities information
When should I instruct a solicitor?
If you are able to answer all the questions above and collect all the necessary documentation, only then will you need to instruct us to draft and negotiate the contract and related documents with the buyer's solicitor and carry out the necessary conveyancing procedures, saving you time and money. We would, as a matter of good practice, assist in the disclosure process by checking the information you have gathered is relevant and complete, and advising you in relation to replies to the buyer's enquiries.