Housing Act 1974

2 After section 24 there shall be inserted the following sections:—

“24A The appropriate limit for loans.

(1) In relation to a loan in respect of which an option notice has been signed (in this section referred to as " the relevant loan ") the appropriate limit referred to in paragraph (c) of subsection (3) of section 24 of this Act is £25,000 reduced by the amount or, as the case may require, the aggregate amount outstanding by way of capital on the date referred to in paragraph (b) of that subsection in respect of every loan—

(a) the whole or any part of the interest on which is payable (whether alone or jointly with any other person) by the borrower who signed the declaration under the said paragraph (c) or, in the case of joint borrowers, by any of the borrowers who signed that declaration or, where that borrower or any of those joint borrowers is married and is not treated for income tax purposes as living apart from his spouse, that spouse; and

(b) which falls to be taken into account by virtue of subsection (2) below and is not to be disregarded by virtue of subsection (4) below.

(2) Subject to subsections (3) and (4) below, a loan falls to be taken into account under subsection (1) above if—

(a) it is a loan in respect of which an option notice for the time being has effect; or

(b) it is a loan to which Part I of Schedule 9 to the Finance Act 1972 (loans for purchase or improvement of land on which interest is eligible for relief in full) for the time being applies (either in respect of the whole loan or subject to any limit of amount), and the land or caravan referred to in that Part is not used in such circumstances that it falls within paragraph 4(1)(b) of Schedule 1 to the Finance Act 1974 (commercial lettings).

(3) Without prejudice to section 34(2) of this Act, the reference in subsection (2)(b) above to Schedule 9 to the Finance Act 1972 is a reference to that Schedule either as amended by Schedule 1 to the Finance Act 1974 (restrictions on relief for interest) or (if interest on the loan is excepted from section 19(3) of that Act) as originally enacted ; and in the case of a loan to which the said Schedule 9 applies as originally enacted, the reference in subsection (2)(b) above to the use of land or a caravan in circumstances falling within paragraph 4(1)(b) of the said Schedule 1 shall be construed as a reference to use which would fall within that paragraph if that Schedule applied in relation to interest on the loan in question.

(4) Notwithstanding anything in subsection (2) above, a loan (in this subsection referred to as a " previous loan ") which falls within paragraph (a) or paragraph (b) of that subsection shall be disregarded in determining the appropriate limit in relation to the relevant loan if—

(a) the relevant loan is made with a view to the repayment by means of the relevant loan of the amount outstanding on the previous loan ; or

(b) the previous loan is an existing loan which is specified in a declaration made for the purpose of satisfying, in relation to the relevant loan, the condition in section 24(3)(d) of this Act; or

(c) the previous loan was in connection with the only or main residence of a person who is, or is a qualifying relative of, the borrower or any of the joint borrowers under the relevant loan and the relevant loan is made for or in connection with any one or more of the purposes specified in section 24(1)(b) of this Act in such circumstances that the dwelling referred to in that section is to be used instead as that person's only or main residence.

(5) In any case where the option notice in respect of the relevant loan is one to which a direction under section 24(5) of this Act applies, the preceding provisions of this section shall have effect subject to such modifications as may be prescribed.

24B The residence condition.

(1) For the purposes of this Part of this Act, the residence condition is fulfilled with respect to a dwelling to which a declaration under section 24(3)(c) of this Act relates if and so long as—

(a) the dwelling is occupied wholly or partly as his only or main residence by the borrower himself or, in the case of joint borrowers, by each of them ; or

(b) at any time when the borrower or any joint borrower does not occupy the dwelling as mentioned in paragraph (a) above, the dwelling is so occupied by a qualifying relative of his.

(2) For the purposes of this Part of this Act a person is a qualifying relative of a borrower (or a joint borrower) if he or she is—

(a) the borrower's spouse and is living apart from the borrower;

(b) the borrower's former spouse ;

(c) the mother of either the borrower or his spouse and is widowed or living apart from her husband or, in consequence of dissolution or annulment of marriage, is a single woman; or

(d) such a relative of the borrower or his spouse as is specified in subsection (3) below and is either over the age of 65 or incapacitated by infirmity from maintaining himself, in whole or in part.

(3) The relatives referred to in subsection (2)(d) above are—

(a) a parent or grandparent;

(b) a brother or sister who is over the age of 16; and

(c) a child or grandchild (in either case whether legitimate, adopted or illegitimate) who is over the age of 16.

(4) A person shall be treated for the purposes of this section as living apart from his or her spouse if he or she would be so treated for income tax purposes.

(5) If, after the delivery of a declaration under paragraph (c) of subsection (3) of section 24 of this Act (other than a declaration delivered in respect of an option notice to which a direction under subsection (5) of that section applies), the residence condition is not, within the period of 12 months specified in that paragraph, fulfilled with respect to the dwelling concerned, then, within the period of one month beginning on the day following the expiry of that period of 12 months, the borrower or, in the case of joint borrowers, each of them shall notify the lender in writing to that effect.

(6) If, at any time after—

(a) the delivery of a declaration under paragraph (c) of section 24(3) of this Act, and

(b) the residence condition has been fulfilled with respect to the dwelling concerned,

the residence condition ceases to be so fulfilled, then, within the period of one month beginning on the date on which that condition first ceased to be so fulfilled, the borrower or, in the case of joint borrowers, each of them shall notify the lender in writing of the date on which the condition ceased, and of the fact that it has ceased, to be so fulfilled.

(7) Any person who knowingly fails to notify the lender as required by subsection (5) or subsection (6) above shall, on conviction on indictment, be liable to imprisonment for a term not exceeding 2 years”.