In the first instance I would like to acknowledge the stressful circumstances which the owners and residents of buildings face when defects occur in their homes.
HBFI was established late last year as a supply based measure to help address as shortage of new housing in the State. I have always been clear that HBFI was to be established on a commercial basis and that its activities would comply with State aid rules. Any funding provided by HBFI will be backed by appropriate security and normal banking terms and conditions will apply. Any deviation from this structure could give rise to State aid issues and may impact the expected balance sheet treatment of HBFI's activities.
While there is nothing contained in the Home Building Finance Ireland Act 2018 that excludes loans to owner management companies to cover remedial building costs, the Act requires that HBFI lend on commercial terms. The commerciality of funding such remediation is risky from two perspectives:
1. The projected costs of such projects can often exceed the estimates once the ‘opening up’ works are undertaken due to the discovery of other issues which were not evident or identified during the investigation work.
2. Management Companies do not generally have the ability to provide security for the sums being borrowed.
Based on the high level of risk that would pertain to such lending, it may not be considered commercial in many cases and could put HBFI in breach of its commercial remit.
HBFI will examine each application received on its own merits and particular circumstances. It is a matter for HBFI to assess and, if thought appropriate, issue a term sheet having regard to State aid rules and its commercial responsibilities.
I am advised by HBFI that only a very small number of calls and emails have been received in relation to this type of funding to date and that none of these enquiries have progressed to a full application at this time.