Q&As

A parent wishes to make a loan to his son, similar to a loan made to their daughter the year before. Both loans are interest free and secured by a first legal charge. Would the second loan made to the son mean that the parent is entering into regulated mortgage contract by way of business?

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Published on LexisPSL on 19/02/2016

The following Financial Services Q&A provides comprehensive and up to date legal information covering:

  • A parent wishes to make a loan to his son, similar to a loan made to their daughter the year before. Both loans are interest free and secured by a first legal charge. Would the second loan made to the son mean that the parent is entering into regulated mortgage contract by way of business?

No person may carry on regulated activities ‘by way of business’ in the UK unless he is an authorised person or an exempt person: Financial Services and Markets Act 2000 (FSMA 2000), s 22. The Regulated Activities Order 2001, SI 2001/544 (RAO 2001) sets out six regulated mortgage activities requiring authorisation or exemption if they are carried on in the UK:

  1. arranging regulated mortgage contracts

  2. making arrangements with a view to regulated mortgage contracts

  3. advising on regulated mortgage contracts

  4. entering into a regulated mortgage contract as lender

  5. administering a regulated mortgage contract where that contract is entered into by way of business on or after 31 October 2004; and

  6. agreeing to carry on any of the above

A regulated mortgage contract is defined in RAO, reg 61 as a contract that, at the time it is entered into, satisfies the following conditions:

  1. the contract is one where a lender provides credit to an individual or trustees (the borrower)

  2. the contract provides for the obligation of the borrower to repay to be secured by a mo

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