The Financial Services Act 1986 (Single Property Schemes) (Exemption) Regulations 1989

Requirements as to interests to be held when scheme formally constituted

4.—(1) The interest or interests which the operator, in the case of a corporate based scheme, or which the trustee, in the case of a trust based scheme, has in the land and the building or group of adjacent or contiguous buildings forming part of the property subject to the scheme must have been stated to have a current open market value of at least £5 million in a report made by a qualified valuer within the period of 6 months preceding the giving of any notice of a kind described in regulation 3(1)(a) or 3(2)(a) with respect to the scheme and prepared, in the case of a corporate based scheme, on the assumption that no rent is, or is to be, payable by the operator in respect of any leasehold interest.

(2) In the case of a corporate based scheme, the leasehold interest, or, if there is more than one, each leasehold interest which is not a leasehold interest in property which may reasonably be regarded as ancillary, which the operator has in the property subject to the scheme must fulfil the conditions described in paragraph (4).

(3) In the case of a trust based scheme, if the trustee has a leasehold interest in the whole or a substantial part of the property subject to the scheme, that interest, or, if there is more than one, each of those interests which is not an interest in property which may reasonably be regarded as ancillary, must fulfil the conditions described in paragraph (4).

(4) A leasehold interest fulfils the conditions described in this paragraph if–

(a) it has an unexpired term of not less than 110 years; or

(b) it is such that the operator, or, as the case may be, the trustee has the right unconditionally to renew the interest or interests for a term or terms which, together with the term or terms unexpired, amounts, in the case of each interest, to a term of not less than 110 years.

(5) Either–

(a) at least 50% of the area available for letting in the building or group of adjacent or contiguous buildings forming part of the property subject to the scheme (including any part of any such building which is being, or is to be, refurbished) must be subject to lettings for unexpired periods of not less than 5 years; or

(b) the following conditions are fulfilled–

(i) at least 50% of the area available for letting in the building or group of adjacent or contiguous buildings forming part of the property subject to the scheme (including any part of any such building which is being, or is to be, refurbished) is subject to lettings for unexpired periods of not less than 12 months;

(ii) there is an intention to carry out refurbishment or other works in respect of the whole or part of the relevant building or the group of adjacent or contiguous buildings;

(iii) where planning consents are necessary before the refurbishment or other works may be carried out, valid consents are held;

(iv) there are detailed specifications for the refurbishment or other works; and

(v) a qualified valuer has made a report giving his opinion as to–

(aa) the current open market value of the building or group of adjacent or contiguous buildings;

(bb) what the cost of the proposed refurbishment or other works will be; and

(cc) what the current open market value of the building or group of adjacent or contiguous buildings would be if the refurbishment or other works had been completed and the building or buildings let at full open market rental value at the time he made his report.

(6) For the purposes of paragraph (5), an area shall be regarded as subject to a letting if the only conditions precedent to its being let are conditions as to title.

(7) The amount of rental income payable in each year, or, if the scheme is not yet formally constituted, the amount of rental income which will, when the scheme is formally constituted, be payable in each year to the trustee, in the case of a trust based scheme, or to the operator, in the case of a corporate based scheme, must be sufficient to meet what, in the opinion of the operator, formed on the basis of such projections as to future expenditure as he may reasonably be expected to make, is likely to be the annual expenditure in respect of the scheme including expenditure in respect of the land and the building or group of adjacent or contiguous buildings forming part of the property subject to the scheme and also including payment of interest on, and repayment of, sums borrowed but excluding expenditure that is to be met out of sums borrowed.