Part 10AAlternative finance arrangements

Arrangements that are alternative finance arrangements

F1564DDiminishing shared ownership arrangements F2: initial acquisition

(1)

This section applies to arrangements if under them—

(a)

a F3person (“F4the financier”) acquires a beneficial interest in an asset,

F5(aa)

either—

(i)

F4the financier is a financial institution or a regulated home purchase plan provider, or

(ii)

the arrangements are regulated electronic system facilitated arrangements,

(b)

another person (“F6the customer”) also acquires a beneficial interest in it,

(c)

F6the customer is to make payments to F4the financier amounting in aggregate to the consideration paid for the acquisition of F7the financier’s beneficial interest (but subject to any adjustment required for such a reduction as is mentioned in subsection (5)),

(d)

F6the customer is to acquire F7the financier’s beneficial interest (whether or not in stages) as a result of those payments,

(e)

F6the customer is to make other payments to F4the financier (whether under a lease forming part of the arrangements or otherwise),

(f)

F6the customer has the exclusive right to occupy or otherwise to use the asset, and

(g)

F6the customer is exclusively entitled to any income, profit or gain arising from or attributable to the asset (including, in particular, an increase in its value).

F8(1A)

Arrangements are regulated electronic system facilitated arrangements if—

(a)

the arrangements substantially consist of an article 36H agreement in relation to the enjoyment by F6the customer of the rights referred to in subsection (1)(f) and (g) before F9the customer’s acquisition of F7the financier’s beneficial interest,

(b)

F6the customer would be regarded, for the purposes of that agreement, as the borrower under it,

(c)

F4the financier would be regarded, for the purposes of that agreement, as the lender under it, and

(d)

F10the customer and the financier becoming parties to the agreement was facilitated by an electronic system operated by a person who has permission under Part 4A of FISMA 2000 to carry on, in relation to that system, the regulated activity specified in article 36H(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) (operating an electronic system in relation to lending).

(2)

For the purposes of subsection (1)(a) it does not matter if—

(a)

F4the financier acquires its beneficial interest from F6the customer,

(b)

F6the customer, or another person who is not F4the financier, also has a beneficial interest in the asset, or

(c)

F4the financier also has a legal interest in it.

(3)

Subsection (1)(f) does not prevent F6the customer from granting an interest or right in relation to the asset if the conditions in subsection (4) are met.

(4)

The conditions are that—

(a)

the grant is not to—

(i)

F4the financier,

(ii)

a person controlled by F4the financier, or

(iii)

a person controlled by a person who also controls F4the financier, and

(b)

the grant is not required by F4the financier or arrangements to which F4the financier is a party.

(5)

Subsection (1)(g) does not prevent F4the financier from—

(a)

having responsibility for any reduction in the asset's value, or

(b)

having a share in a loss arising out of any such reduction.

(6)

This section is subject to section 564H (provision not at arm's length: exclusion of arrangements from section 564C, this section and sections F11564DA to 564G).

F12(7)

In this section—

“article 36H agreement” has the meaning given by article 36H(4) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

“borrower” and “lender” are to be construed in accordance with article 36H(9) of that Order;

“regulated home purchase plan provider” means a person who—

(a)

is carrying on the regulated activity specified in article 63F(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (entering into regulated home purchase plans as home purchase provider), and

(b)

has permission under Part 4A of FISMA 2000 to do so.