Due diligence

Due diligence – general

1. In business generally “due diligence” is the process of carefully and thoroughly investigating a potential investment or business opportunity to make an informed decision.

2. The process can involve a wide range of activities, such as:

  1. reviewing financial records and contracts,
  2. conducting market research, and
  3. consulting with experts in relevant fields.

3. The goal is to identify and assess any potential risks or challenges associated with the opportunity, as well as to evaluate its potential benefits and returns.

4. By conducting due diligence, investors and business people can make more informed decisions and avoid potential pitfalls or mistakes.

Due diligence – council oversight of supported HB exempt accommodation

5. Councils are encouraged to carry out a standard assessment through which supported housing providers and schemes can proceed.1‘Local Authority Interventions to Improve Quality in Supported Housing’ (GOV.UK),  accessed 13 December 2022 This includes conducting due diligence checks of the provider, organisational structures and professionalism of those involved in the scheme’s running. 

6. The DLUHC advises that due diligence checks can help a council to ensure that a provider complies with all requirements on supported housing, including that they are a not-for-profit organisation.2‘Local Authority Interventions to Improve Quality in Supported Housing’ (GOV.UK),  para 55, accessed 13 December 2022

7. The research and evidence collected at this stage will support Revenues and Benefits teams in making informed decisions once Housing Benefit claims are made.

8. Councils are told that “considerations should include:

  1. who is involved in the organisation, e.g., owners, partners, support providers, managing agents, social landlords, charities, trustees, 
  2. which organisation or people are responsible for which scheme services e.g., accommodation, support, or funding, 
  3. what the reporting structure of those in the organisation looks like, 
  4. whether the provider is registered with a regulator, e.g., the Regulator of Social Housing (RSH), the Care Quality Commission (CQC), the Charity Commission, Ofsted (Office for Standards in Education, Children’s Services and Skills), or the Office of the Regulator of Community Interest Companies, and what level of scrutiny the provider would receive through this,
  5. who residents pay rent and service charges to and what the rent structure looks like,
  6. if there are lease arrangements and what the terms of the leases are,
  7. whether the rental costs and service charges are justified and meet regulatory requirements (if providers are registered with the Regulator of Social Housing),
  8. any links between involved parties that could present a conflict of interest,
  9. whether all parties are conducting professional activities with the goal of providing quality support and housing to residents.

9. To answer the above questions councils are advised to “consider requesting the following from providers:

  1. proof of funding for support costs to ensure that providers have a separate funding stream for support, 
  2. information on staff structures, job descriptions, hours worked and salaries (rotas may provide a good example of the level of staff cover on shifts), 
  3. the Service Level Agreement between the landlord and support and/ or care provider to determine what responsibility each party has for the provision of care, support and supervision, to determine the accommodation’s status, 
  4. the lease agreement particularly where a core rent comprises a charge for a lease to a Superior Landlord, 
  5. assurances on how any conflicts of interest of those within the organisation are appropriately managed, 
  6. invoices and receipts to verify who is responsible for paying all outgoing costs.” 

10. Councils are told that “assessments can be complemented by extra research into the provider through:

  1. online searches, 
  2. checking whether they are registered with Companies House or the Charity Commission, 
  3. enquiries to other local authorities in which the provider delivers supported housing, 
  4. phone calls or meetings with the provider.” 
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