Watch out for collateral damage

Housing Today's predictions for 2004 might have made you reach for the bottle– claret, codeine or both. The real danger, though, is not from legislation designed to affect the housing sector, but collateral damage from upheavals in other sectors.

Last week the super-heavyweight litigation between the Bank of England and BCCI's liquidator began. The liquidator is claiming more than £800m for misfeasance in public office by the bank, on behalf of those who lost money when BCCI collapsed in 1991.

Put in simple terms, the law protects regulators and other public sector bodies from the negligence standard that applies to consultants, lawyers, accountants and so on. This is because it is in the public interest that these bodies are not inhibited when carrying out their duties.

Regulators can be sued for misfeasance but to establish misfeasance, the claimant has to prove that the mistake – the lack of care – was a reckless or wilful disregard of duty.

Could this apply in social housing? Say the regulator knows a landlord is in severe financial difficulties. Its lenders have enough security but if the regulator steps in, the damage to the sector could be huge. Say it stays silent, hoping for a white knight.

In the mean time, debts continue to grow. When Sir Galahad arrives, the price of the rescue means stakeholders lose nomination rights on properties they sold at a discount, and tenants' rents have to rise at a faster rate.

Is this misfeasance? Probably only if the losses to stakeholders become significant because the regulator continues to deal with the lame duck landlord.

But the fact that the BCCI liquidator is willing to spend big money on a misfeasance claim could mean that regulators become much more cautious in the future. This would not be in the best interests of the social housing sector.

Industrial and provident societies
From the name, one would think the 2003 Cooperatives and Community Benefit Societies Act was about self-builders and credit unions, but in fact the act changes the "ultra vires" rules – that is, the rules governing what is beyond a body's legal responsibility – for industrial and provident societies. It increases the risk burden for an industrial and provident society because the society must prove that its contractor knew that the society was acting unlawfully. They too may become more defensive.

What seems like good news in the act – making it simpler to execute deeds – hides an iceberg: section 5 means societies could inadvertently assume liability earlier than they intend, unless they make very explicit the actual date when deeds take effect.

Human rights and public bodies
The European Commission's view that registered social landlords are public bodies affected by EU procurement directives will mean more than delay and costs to procurement if it is upheld (HT 23 January, page 37). The more RSLs are seen as public bodies, the more they are exposed to the plague of Human Rights Act litigation that torments councils and other – inarguably public – authorities. Currently there is ambiguity: in some areas RSLs are caught, but largely they have escaped the lawyerfest that the Human Rights Act has become so far.

Meanwhile, the Committee on Standards in Public Life has started its re-examination of the rules governing appointments and the declaration of interests, so 2004 is likely to see another round in the battle between governance's roundheads and cavaliers.