For RSLs who are routinely contracting with housebuilders for golden brick delivery of affordable housing across multiple phases, we discuss the four key actions that can help if the housebuilder becomes insolvent.

1. Pre-Insolvency – Financial Distress Provisions and Due Diligence

    Before concluding missives, RSLs should carry out financial due diligence against the housebuilder to understand its financial covenant. To allow for regular monitoring after missives are concluded and throughout the life of the contract, RSLs should consider incorporating financial distress provisions into the missive. These provisions will create an enhanced disclosure regime which will allow RSL greater insight into the housebuilder's financial performance over the life of the contract, providing early warning of potential problems.

    2. Ascertain the Up-to-Date Position – Review Contracts

      Once it has been established that the housebuilder has gone into administration or liquidation, gather as much information as possible about the current status of the development – review the missives and building contract and consider the status of all of the housebuilder's obligations; what has been done, what is still to be done.

      3. Where Possible, Engage with the Insolvency Practitioner

        Details of the insolvency practitioner will be recorded against the housebuilder's file at Companies House. Making contact with the insolvency practitioner early and setting out the current position of delivery against the obligations in the missives and building contract could assist with moving discussions on potential next steps forward.

        4. Be Aware of the Commercial Drivers

          Remember that the insolvency practitioner is an officer of the court and has a duty to act in the best interests of the creditors of the housebuilder. This is likely to be the determining factor as to whether or not any existing contractual arrangements are performed.

          If you have concerns about housebuilder insolvency and affordable housing delivery, do get in touch.


          Jenna Monteith

          Legal Director