The Building Societies (Designation of Qualifying Bodies) (No. 3) Order 1993

Meaning of lending certification condition for lending bodies

12.—(1) In this Schedule “the lending certification condition for lending bodies” means a condition to the effect that where a society holds shares or corresponding membership rights in a lending body–

(a) the society shall for each financial year of the body ending more than 18 months after the acquisition of such shares or corresponding membership rights seek to obtain within four months after the end of that year a certificate signed by a director of the body stating that throughout that year the body complied with the determined requirements, and

(b) if no such certificate is so obtained by the society for two successive financial years of the body, the society shall dispose of its shares or corresponding membership rights, as the case may be, in that body, as soon as it is conveniently practicable to do so without undue loss.

(2) In sub–paragraph (1)(a) above, “the determined requirements” means the following requirements–

(a) a requirement that the body shall maintain a system for ensuring (or shall satisfy itself that adequate arrangements are made for ensuring) the safe custody of all documents relating to property mortgaged to the lending body and property which is subject to a syndicated loan made by the lending body;

(b) a requirement that the arrangements made for assessing the adequacy of the security for any advance secured on land which is to be made by the body or for a syndicated loan made by the lending body shall be such as may reasonably be expected to ensure that–

(i) an assessment will be made on the occasion of each advance or on any other occasion on which the body is required to be satisfied of any of the matters referred to in paragraph 13(3) below relating to the value of the land;

(ii) each assessment will be made by a person holding office in or employed by the body who is competent to make the assessment and is not a person disqualified from assessment;

(iii) each person making the assessment will have furnished to him a written report on the value of the land and, as appropriate, the expected value of the land at the date of report and any factors likely materially to affect its value made by a person who is competent to value the land in question and who is not a person disqualified from valuation, and

(iv) no authorisation of any loan will be made by a person disqualified from assessment, and

(c) a requirement that the lending body will make such arrangements as may be reasonably expected to ensure that, where a lending body lends money on the security of land, other than where the lending body makes a syndicated loan, the body will not lend money on the security of land in circumstances where, if the borrower were a member of the society, the society itself would be unable to make the loan.

(3) For the purposes of sub–paragraph (2)(b) above–

(a) in relation to any land which is to secure an advance (or, for the purposes of making a syndicated loan, a proportion of the advance where appropriate) where the advance (or for the purposes of making a syndicated loan a proportion thereof where appropriate) is to be made following a disposition of the land, the following persons are persons disqualified from assessment, that is to say–

(i) any person, other than the lending body or any society of which the lending body is a subsidiary, having a financial interest in the disposition of the land and any director, other officer or employee of his or of an associated employer, and

(ii) any person receiving a commission for introducing the parties to the transaction involving the disposition and any director, other officer or employee of his; and

(b) in relation to any land which is to secure an advance (or, for the purpose of making a syndicated loan, a proportion of the advance where appropriate), the following persons are persons disqualified from valuation, that is to say–

(i) the directors and any other officer or employee of the body who makes assessments of the adequacy of securities for advances by the body or who authorises the making of such advances;

(ii) where the body has made, or undertaken to make, to any person a payment for introducing to it an applicant for the advance, that person;

(iii) where the advance (or where appropriate, a proportion of the advance) is to be made following a disposition of the land, any person having a financial interest in the disposition of the land and any director, other officer or employee of his or of an assoicated employer, and

(iv) where the advance (or where appropriate, a proportion of the advance) is to be made following a disposition of the land, any person receiving a commission for introducing the parties to the transaction involving the disposition and any director, other officer or employee of his.

(4) For the purposes of sub–paragraph (3) above–

(a) any two employers are associated if one is a body corporate of which the other (directly or indirectly) has control, or if both are bodies corporate of which a third person, directly or indirectly has control; and the expression “associated employer” shall be construed accordingly;

(b) “commission” includes any gift, bonus or benefit, and

(c) a person shall be taken to have a financial interest in the disposition of any land if, but only if, he would, on a disposition of that land, be entitled (whether directly or indirectly, and whether in possession or not) to the whole or part of the proceeds of the disposition.