MHA | The lease-based model of supported housing – risks and guidance…

The lease-based model of supported housing – risks and guidance for charities

Stuart McKay · Posted on: December 21st 2023 · read

Aerial view of back terraced houses

Supported housing is provided by local authorities, housing associations and private landlords and in many cases by charities in order to meet the needs of vulnerable people; accommodation is provided alongside support, supervision and care to help such people live as independently as possible. Examples of supported housing may include group homes, hostels, refuges, supported living complexes and sheltered housing.

Increasingly, the Charity Commission is becoming aware of charities providing this type of accommodation via the ‘lease-based model’. Under the model, a charity does not own the property through which it provides accommodation but instead holds lease agreements with third parties such as investors and property developers.

In some instances, a charity may even sell property that it owns to a third party and then lease the property back from that third party. The Charity Commission have recently reminded charity trustees of the risks associated with this model – as the regulator of charities, a key part of the Commission’s role is to alert the sector to emerging risks so that trustees can take the appropriate action.

Close up of brick wall

The Commission highlights four major risks:

  1. Taking on obligations that are difficult or impossible to meet The contractual property agreements associated with the model are often complicated and if entered into without full understanding can lead to obligations, such as repair and upkeep of property, which are difficult or impossible to meet.
  2. Having insufficient income to meet the terms of the lease Much of the income of supported housing providers derives from Housing Benefit, which has complex rules that can change without warning. As trustees, the risks of entering into long term contracts should be carefully considered and only entered into if they are confident that the charity will have sufficient income, over the full term of the lease, to cover all future costs.
  3. Conflicts of interest The Commission has seen cases where trustees of supported housing charities are in receipt of personal benefits from the charity, raising questions about trustees’ ability to make decisions based only on what is best for the charity.
  4. Rapid growth in operations Adopting the lease-based model has led to some charity’s experiencing rapid growth but also difficulties adapting to this change. Relevant guidance designed to help charity trustees navigate these risks is available, and the Commission have encouraged trustees to take appropriate professional advice where necessary.
Read the Charity Commission's report

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To discuss this topic further and how the risks may impact you and your organisation, please contact our Not for Profit team.

This insight was previously published in our Not for Profit eNews

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