Somerset Co-opertive Community Land Trust has undertaken a series of mitigation measures to reduce the risks stated below, and confirmed that this project is still affordable even at the minimum investment.
This list is not necessarily comprehensive and you should read the business plan to see what mitigation strategies Somerset Co-operative CLT have in place for each risk and consider other risks which may impact upon your investment.
Failure to secure further planning permissions
While the offer will not proceed without planning permission at East Reach, there is the possibility that SCCLT find it difficult to secure a viable planning permission for the Exmoor Ales site. SCCLT have tested the sensitivity to this outcome, and in fact it is possible to trade profitably from the Taunton units alone. This means they can take the time to develop a proposal that can win the support of the local planning authority. In the course of pursuing further acquisitions and developments, SCCLT will incur additional costs not considered in this offer. In order to avoid this damaging the interests of members, they will commit to only spending resources on speculative property development (that is, lacking pre-application guidance from planners and a secure opportunity to acquire the site) when those costs are either separately funded, fully ‘at risk’ or pro bono.
At all stages from early inception though to planning determination, SCCLT ensures that there is local community engagement and an on-going dialogue with all relevant planning and other key officers and teams at local authorities and other stakeholders. This will help to ensure plans reflect local needs and planning requirements. And of course, their members have considerable opportunity to set the right course.
Loss of key personnel
No person in the CLT is indispensible, given the large and confident board and the excellent support from a range of specialist bodies including Third Sector Accountancy and Clarity CIC. However, they will ensure that signatories are regularly updated and information shared among board members to increase the organisational intelligence and mitigate this risk.
Availability of suitable finance for subsequent phases of development
SCCLT has consulted widely with social lenders and have gone to some lengths to structure their business plan in ways that will meet their concerns about debt servicing and future income. There are very diverse sources now, including some funds specialising in CLTs; and over time there is a sustained trend to increasing sums available for social investment. In addition, they have the opportunity to seek low interest loans from local authorities, who can secure finance from the public works loan board. Residential property remains well regarded as an investment and they think it unlikely that credit will dry up entirely.
Damage to files and records
Electronic copies of most files are kept on cloud storage that can be accessed by multiple board members.
Cost overruns on building work
SCCLT will ensure that their architects monitor the costings and that work does not commence until they have secured fixed price contracts from contractors. In the event that an overrun seems possible, they will work with contractors and stakeholders to identify potential cost-savings. Cost overruns may be mitigated by variations to specifications and/or the introduction of a self-finishing programme. SCCLT retain the power to sell individual units on the open market as a means of subsidising the stock that remains in their ownership and maintaining an offer of affordable rental.
Lack of demand
At all stages of the planning and development SCCLT involve the relevant local authority’s housing team to ensure that schemes meet local housing need not being met by current or planned provision. Where appropriate they also draw on the work of other bodies or conduct their own research into need, such as for workspace demand.
SCCLT now has access to sophisticated project management tools, and has established robust project monitoring and reporting procedures.
Objections from neighbours
SCCLT will maintain close contacts with neighbours and will aim to be considerate builders with regular working hours and with noisy operations on designated days.
SCCLTs procedures for enforcing the tenancy agreements are now much more robust, and they continue to benefit from expert advice from an experienced lettings consultant. They have processes and template documents ready for either section 21 or section 8 evictions as necessary.
SCCLT have adopted tighter procedures for working with UC claimants, and are now able to more closer monitor the progress of claims especially in the crucial first six weeks. They have also prepared a library of templates so that we can submit claims promptly, and will also make increased use of guarantors for tenancies.
Cash shortages prevent withdrawal
This risk does not necessarily affect the value of your shares but may prevent you from withdrawing as much as you want immediately. If this is the case, the board is committed to pursuing alternative finance options to enable withdrawals to meet demand, subject to the need to maintain profitability. This may include remortgaging, appealing for fresh investment from new and existing members, and selling assets where it clearly benefits the community for them to do so.
It is evident that the pandemic, and the economic shocks resulting, will be a serious consideration. The policy of pricing flats at benefit levels means that loss of income from tenants should not in itself be a critical factor; similarly lockdowns are consistent with the design of single person units that SCCLT are building.