AGENDA ITEM 10

BOROUGH OF POOLE

CABINET

10 DECEMBER 2013

RENEGOTIATION OF THE PHP MANAGEMENT AGREEMENT AND COMPOSITION OF THE PHP BOARD: REPORT OF THE HEAD OF LEGAL AND DEMOCRATIC SERVICES AND MONITORING OFFICER

1.0 PURPOSE OF REPORT

1.1 To report to Cabinet on the renegotiation of the PHP Management Agreement and to seek instructions regarding an issue raised by PHP over the number of Directors appointed to the Board. Final recommendations will need to be made to Council, subject to Cabinet’s views.

2.0 RECOMMENDATION

2.1 Cabinet consider the request from PHP to alter the composition of the Board as set out in paragraph 6.3 below:

2.2 Subject to 2.1 above, Cabinet recommend to Council to approve the terms of the renegotiated Management Agreement with PHP and revised Memorandum and Articles.

2.3 That training for Members appointed as Council representatives to the PHP Board be undertaken to ensure that the purpose and responsibility of the role is clear

3.0 BACKGROUND/INFORMATION

3.1 In 2004, the Council established Poole Housing Partnership (PHP) as its ALMO under the Housing Act 1985. The Council retains ownership of its housing stock and PHP manage the stock and tenant related matters on behalf of the Council. PHP are in effect contractors undertaking a service for the Council for which they receive an annual management fee. PHP is established as a company registered at Companies House, however, the company is wholly owned by the Council.

3.2 PHP performs well and they have been assessed as being one of the leading ALMOs in the country and are recognised exemplars of good practice.

3.3 With the immediate incentive of the Decent Homes Standards funding having been removed following completion of the project, and with changes in legislation generally, many local authorities are re-examining relationships with their ALMOs. ALMOs are not the only model for housing management, a variety of arrangements now exist across the country ranging from traditional housing authorities who still retain and manage their own housing stock, ALMOs who manage stock or authorities who undertook large-scale stock transfers to housing associations and who now only retain statutory strategic housing duties.

3.4 It is considered that Poole has been well served by PHP since 2004. PHP have met or exceeded the standards and requirements set for them by the Council and, as set out above, have received recognition at a national level. Tenant satisfaction is high and the relationship between the Council and PHP is a constructive one.

3.5 The initial Management Agreement with PHP was for five years and this was extended for a further five years with Council approval in 2009. Members have previously indicated that they wish to consider extending the term offered to PHP on the basis of a revised and modernised Management Agreement, containing a number of provisions specified by Members. Alternative courses of action such as transferring stock to another third party or housing association, or bringing the service back in house have been considered, but neither Members nor Officers see any merit in exploring these any further in the light of the current situation. There would be considerable financial, TUPE, and practical implications for such a step which is not considered to be in the Council’s interests at this time.

4.0 THE RENEGOTIATED MANAGEMENT AGREEMENT

4.1 Previous decisions of the Council highlighted a number of areas where the revised Management Agreement should focus its attention. These were:

·  Agreement over an extended term which would give certainty to the organisation.

·  Reinforcing the focus on Poole.

·  Focus on providing additional affordable housing.

·  Provisions with regard to undertaking other work or opportunities for outside bodies.

4.2 At a previous meeting of the Overview and Scrutiny Committee Members also asked for some provisions with regard to the use of premises for political purposes and the term of Office for the Directors and Chairman.

4.3 The revised Agreement has been based on the model ALMO Agreement recently produced by Trowers and Hamlins Solicitors. Trowers and Hamlins are the acknowledged market leaders in giving advice on social housing issues and they regularly give advice to both Local Authorities and ALMOs with regard to management, governance, and housing law issues. Trowers have assisted in the drafting of this Agreement.

4.4 The Agreement, which is still in draft, has been shared with PHP for the purposes of further negotiation and consultation. The Board have advised that they support the Agreement in its revised form.

4.5 As required by legislation, consultation has also been undertaken with the tenants through the agency of the Housing Strategy Panel and the Tenants Scrutiny Panel. Both Bodies have expressed themselves extremely supportive of the Council’s desire to enter into a longer Agreement with PHP.

5.0 SUMMARY OF THE AGREEMENT

5.1 The service to be provided by PHP will be determined with reference to a revised and updated specification which reflects the latest good practice in the world of ALMOs. Key performance Indicators are also to be overhauled and will deal with:

·  Complaints and compliments

·  Finance

·  Allocations

·  Housing Management

·  Quality and Diversity

·  Staffing

·  Resident Involvement

5.2 Provisions have been included in the Agreement to facilitate the Council and PHP working together to maximise opportunities to carry out new development of affordable housing directly or in partnership with others. Work is already ongoing to identify opportunities which can be explored.

5.3 The provisions with regard to PHP undertaking other activities or working for other organisations have been modernised and brought into line with the Council’s financial regulations where they provide the opportunity to generate additional income. Any activities must be consistent with PHP’s objects and their abilities to discharge their obligations to the Council must not be affected. None of these additional activities must affect the primary focus on Poole, and the activities which are likely to generate income in excess of £100,000 (cumulatively) must be approved by the Council through the Council’s normal procedures.

5.4 In terms of the length of the Agreement, it is recognised that the organisation needs a degree of certainty to plan for the future. At the same time, the Council needs to retain the flexibility to respond to changing legal, policy, and social conditions in the future. It is proposed that the Agreement will be for a term of 30 years. The Council will, nevertheless, have the opportunity of giving notice to terminate the Agreement every five years (without fault on either side) in addition to the ability to bring the Agreement to an end in the event of serious default or non-performance by PHP.

5.5 The revised Agreement also requires PHP to ensure premises managed by them are not used for political events and Directors are not to pursue political aims and objectives through PHP.

6.0 THE MEMORANDUM AND ARTICLES

6.1 Although the Management Agreement governs the actual relationship between the Council and PHP, and specifies the services that PHP will provide as contractor, PHP is a limited company and is controlled by its Memorandum and Articles of Association which are effectively its Constitution. Because of practical changes that are being made to the Management Agreement, changes are required to the Memorandum and Articles. Although the majority of changes are technicalities, the Board of PHP have asked the Council to consider making changes to the provisions regarding the number and term of Directors.

6.2 As stated above, PHP is an Arms Length Management Organisation wholly owned by the Council. It was set up in 2004 and it is governed by a Board of Directors, comprising 15 people - 5 independent Directors recruited for their skills and knowledge, 5 residents’ representatives, and 5 Council representatives.

6.3 PHP propose that the number of Council representatives should be reduced to 3 and the number of others increased to 12, thus retaining the overall size of 15 but reducing the Council’s appointees by 2. They also propose a 3 year term of office with an overall cap of a maximum of 3 terms. They would have the ability to exceed the 9 year overall term on a case by case basis with the Council’s agreement if they are unable to recruit suitable Directors or need to retain a specific skill. The rationale for this is stated as the need to bring greater skills and expertise to the Board at a time when PHP is expanding its activities. PHP propose a two year transitional period in order to put these arrangements into effect for the purpose of succession planning.

6.4 It is suggested the training for elected Members of the Council be undertaken for those nominated as Council representatives on the Board to ensure clarity of their roles and responsibilities to the Board and Council

6.5 Cabinet are informed that in terms of the revised Management Agreement it has been agreed that whilst some flexibilities will be permitted in terms of PHP’s operations, their primary focus will remain on Poole. This means that any significant issues they are likely to become involved such as redevelopment, regeneration, new build, etc., are likely to involve the Council as we are already seeing with the Trinidad Extra Care proposal. Cabinet may also consider that there is a difference between changing the proportions of Directors on the Board and changing the size of the Board. For instance, if it was considered that the Board was too big, the Board could be reduced in proportion.

6.6 Research has been carried out and the majority of ALMOs have Boards which represent parity between the Council and other classes of Director. A number who have moved away from this have done so in order to give greater representation to residents.

6.7 Council Board members owe their primary duty to the Company. Whilst part of the role is to be a critical friend, it is a difficult role to perform well and requires skills and abilities that may not be the same as those for being a Councillor. The Council retains overall control as the sole owner, but Members need to consider whether the case for abandoning parity (and perhaps influence) is well made,

7.0 FINANCIAL AND LEGAL IMPLICATIONS

7.1 The current arrangements are working well for the Council in financial terms and the Agreement provides the framework for monitoring this and ensuring that the relationship between the two parties continues on a proper legal footing. The Council has the power to enter into such an Agreement to delegate its housing management to the ALMO and to extend the Agreement subject to consultation as set out above.

8.0 EQUALITIES IMPLICATIONS

8.1 There are no direct equalities implications arising out of the decision to renegotiate the Management Agreement. PHP provide a good service in connection with tenant relations, and deal properly with equalities issues on an ongoing basis.

9.0 CONCLUSIONS

9.1 Considerable work has been done between the Council and PHP to renegotiate the Management Agreement. It is now in a form which can be recommended to Council for agreement and would provide a firm basis for going forward for the next contractual period. Cabinet will need to resolve their view with regard to the number and composition of the Board members and make a recommendation to Council accordingly.

T M Martin

Head of Legal and Democratic Services

22 November 2013

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