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The judgment could change the way registered social landlords are treated if they became insolvent. This could mean lenders ask for more security on borrowing and charge higher prices.

The court ruled on 9 May that European law and the 1986 Insolvency Act allowed Salvage Association, a pension provider established by royal charter, to go into administration.

Lenders, rating agencies, the government and trade bodies are now asking lawyers whether the ruling applies to other bodies not registered as companies, such as industrial and provident societies 鈥� about 80% of RSLs are industrial and provident societies.

If the Salvage ruling applied to industrial and provident societies, RSLs that go bust would go into administration 鈥� and the administrator would be less likely to prioritise the needs of lenders.

Lenders and rating agencies are concerned that the change would make lending to associations more risky.

They are also looking at whether the problem can be removed by altering

existing legislation.

At present, the Housing Corporation has

28 days to sort out associations that are about to go bust. If this fails, lenders can nominate a receiver who would look out for their interests if an association becomes insolvent.

The case comes less than a year after the sector got a late amendment to the Enterprise Act so that insolvent RSLs would go into receivership rather than administration.

We are still investigating this. We need to know what the situation is and whether the implications are adverse

Andrew Heywood, Council of Mortgage Lenders

Andrew Heywood, senior policy adviser at the Council of Mortgage Lenders, said: 鈥淲e are still investigating this. We need to know what the situation is and whether the implications are adverse 鈥� and, if so, how adverse.鈥�

Bob Wilson, finance policy officer at the National Housing Federation, said: 鈥淚f there were lender anxiety, it could affect their approach to the market or even borrowing costs. But we do not yet know if there is a problem.鈥�

An ODPM spokesman said: 鈥淭he ODPM and Housing Corporation understand the concerns of lenders about the implications for registered social landlords if a court was to take the view that industrial and provident societies were included in the meaning of a company.

鈥淲e are seeking legal advice.鈥�

CUT

Nicholas Lindstrom, vice-president and senior credit officer for Moody鈥檚, said: 鈥淭he reason we held off putting them on review is because we think it will be addressed through a change to applicable law. It鈥檚 possible other transactions could join the list as we look into it but these are the ones most obviously affected. Even if we carried out a review, it doesn鈥檛 necessarily mean they would be negatively affected.鈥�

Lawyers are investigating whether this change has been overruled by EU insolvency legislation and the 1987 Insolvency Act.

Ratings agency Moody鈥檚 has flagged up several transactions whose ratings could come under review if the judgment was applied.

They included the Haven bond vehicle run by Royal Bank of Canada and one of Sanctuary Housing Association鈥檚 transactions.