Q&As

Is a charge over a residential property owned by a director of a borrower a regulated mortgage?

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Produced in partnership with Thomas Samuels of Gough Square Chambers
Published on LexisPSL on 13/06/2017

The following Banking & Finance Q&A produced in partnership with Thomas Samuels of Gough Square Chambers provides comprehensive and up to date legal information covering:

  • Is a charge over a residential property owned by a director of a borrower a regulated mortgage?
  • Summary
  • What is a regulated mortgage?
  • Application and consequences
  • Non-corporate commercial borrowers
  • General obligations in any event

Is a charge over a residential property owned by a director of a borrower a regulated mortgage?

Summary

Insofar as the reference to residential property 'owned by a director' indicates that the borrower is an incorporated entity, the short answer to this question is ‘no’.

What is a regulated mortgage?

A regulated mortgage (or ‘regulated mortgage contract’) is a category of secured lending specifically defined by Article 61 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001/544 (RAO). Article 61 was amended from 21 March 2016 and now defines a regulated mortgage contract by reference to four characteristics:

  1. a contract under which a person provides credit to an individual or to trustees (the borrower)

  2. the contract provides for the obligation of the borrower to repay to be secured by a mortgage on land in the EEA

  3. at least 40% of the land is to be used:

    1. in the case of credit provided to an individual, as or in connection with a dwelling

    2. in the case of credit provided to a trustee which is not an individual, as or in connection with a dwelling by an individual who is a beneficiary of the trust, or by a regulated person

For the avoidance of doubt, prior to 21 March 2016, the definition was similar save that the second characteristic referred to the loan being 'secured by

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