- Latest available (Revised)
- Original (As enacted)
Building Societies Act 1986, Section 11 is up to date with all changes known to be in force on or before 23 December 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations.
Revised legislation carried on this site may not be fully up to date. Changes and effects are recorded by our editorial team in lists which can be found in the ‘Changes to Legislation’ area. Where those effects have yet to be applied to the text of the legislation by the editorial team they are also listed alongside the legislation in the affected provisions. Use the ‘more’ link to open the changes and effects relevant to the provision you are viewing.
Whole provisions yet to be inserted into this Act (including any effects on those provisions):
(1)The provisions of this section and section 12 define what is a class 1 advance and what is a class 2 advance for the purpose of the requirements of this Part for the structure of commercial assets and when an advance may, for those purposes, be treated partly as a class 1 advance and partly as a class 2 advance.
(2)Class 1 advances are advances as to which the society when it makes the advance is satisfied that the advance is an advance secured on land and that—
(a)the borrower is an individual;
(b)[F2where the advance is not an advance secured on third party land,]the land is for the residential use of the borrower or a dependant of his of a prescribed description;
F3[(ba)where the advance is an advance secured on third party land—
(i)the borrower intends that the advance will be used for the purpose of acquiring land for the residential use of himself or a dependant of his of a prescribed description; and
(ii)the land on which the advance is secured is for the residential use of the mortgagor or a dependant of his of a prescribed description;]
(c)the amount advanced will not exceed the value of the basic security (after deducting from that value any [F4outstanding amount secured by a mortgage of the land in favour of the society)]; and
(d)subject to subsection (5) below, no other mortgage of the land which is to secure the advance is outstanding in favour of a person other than the society;
and which are not made on terms as respects the capital element of the mortgage debt authorised by section 10(10)(b) or (c).
(3)Subject to any order made under section 12(1),
[F5(a)]the requirement in subsection (2)(b) above shall be treated as satisfied if no less than 40 per cent. of the area of the land is used for the residential purposes by the borrower or a dependant of his of a prescribed description;
[F6(b)the requirement in subsection (2)(ba)(i) above shall be treated as satisfied if the borrower intends that no less than 40 per cent. of the area of the land will be for the residential use of himself or a dependant of his of a prescribed description; and
(c)the requirement in subsection (2)(ba)(ii) above shall be treated as satisfied if no less than 40 per cent. of the area of the land is used for residential purposes by the mortgagor or a dependant of his of a prescribed description.]
(4)Class 2 advances are advances as to which the society when it makes the advance—
(a)either is not satisfied that the requirements for the time being of subsection (2) above are fulfilled or is satisfied that any of them is not fulfilled, but
(b)is satisfied that the advance is an advance secured on land, and
(c)is satisfied, where the amount advanced will exceed the value of the basic security (after deducting from that value any [F7outstanding amount secured by a mortgage of the land)], that the excess will be secured by the taking of security of a prescribed description in addition to the basic security, and
(d)is satisfied that no, or no more than one, other mortgage of the land which is to secure the advance is outstanding in favour of a person other than the society.
(5)The requirement in subsection (2)(d) and (4)(d) above shall be treated as satisfied if the advance is made on terms that the other mortgage is redeemed or postponed to the basic security.
(6)An advance for a deposit for the purchase of land is also a class 1 or class 2 advance according as it is made with a view to the making of a class 1 or class 2 advance secured on the land.
(7)Advances which would be class 2, and not class 1, advances by reason only that the extent of the residential use of the land is not such as to satisfy the requirement in subsection (2)(b) [F8or (2)(ba)(i) or (ii)] above shall be treated as class 1 advances if and to the extent prescribed by an order under section 12(5).
(8)For the purposes of the requirements of this Part for the structure of commercial assets—
(a)class 1 advances constitute class 1 assets, and
(b)class 2 advances constitute class 2 assets,
and accordingly the aggregate amount of mortgage debts outstanding in respect of class 2 advances counts in accordance with section 20 towards the limit applicable to class 2 assets under that section.
(9)For the purposes of subsections (2) and (4) above, where a building society makes an advance by instalments, any reference to the time when the society makes the advance is a reference to the time when it pays the first of the instalments, disregarding for this purpose any instalment which is to be applied towards payment of the deposit in respect of the purchase of the land which is to secure the advance.
(10)Subject to subsection (11) below, any land to which a building society becomes absolutely entitled by foreclosure or by release or other extinguishment of a right of redemption—
(a)shall as soon as may be conveniently practicable be sold or converted into money; and
(b)shall, until the sale or conversion, constitute a class 1 asset if the advance secured on the land was a class 1 advance and a class 2 asset if it was a class 2 advance.
(11)Where a building society which has for the time being adopted the powers conferred by section 17 becomes entitled to land as mentioned in subsection (10) above, and the land is land that may be held under that section, then, if the society—
(a)elects to hold the land under that section, or
(b)without such an election, retains the land after the expiry of the period of twelve months immediately following the date on which it so becomes entitled to the land.
the society shall be taken to hold the land under that section.
(12)An election under subsection (11) above shall be made by resolution of the board of directors and shall be irrevocable.
(13)If a building society contravenes subsection (10) above the society shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale and so shall any officer who is also guilty of the offence.
(14)For the purposes of this Act, the mortgage debt at any time, in relation to an advance secured on land, is the total amount outstanding at that time in respect of—
(a)the principal of the advance;
(b)interest on the advance; and
(c)any other sum which the borrower is obliged to pay the society under the terms of the advance.
(15)The reference in subsection (10) above to land to which a building society becomes absolutely entitled by foreclosure includes a reference to land which a building society has acquired by virtue of a decree of foreclosure under section 28 of the M1Conveyancing and Feudal Reform (Scotland) Act 1970.]
Textual Amendments
F1Pt. III (ss. 10-23) repealed (1.12.1997 in specified cases and for specified purposes and otherwise in accordance with art. 2(2)(3)(5) of S.I. 1997/2668) by 1997 c. 32, ss. 12(1)(a), 46(2), 47(3), Sch. 9; S.I. 1997/2668, art. 2, Sch. Pts. I(b), II(j)
F2Words in s. 11(2)(b) inserted (3.1.1995) by 1994 c. 40, ss. 16(3)(a), 82(2)(a)
F3S. 11(2)(ba) inserted (3.1.1995) by 1994 c. 40, ss. 16(3)(b), 82(2)(a)
F4Words in s. 11(2)(c) substituted (3.1.1995) by 1994 c. 40, ss. 16(3)(c), 82(2)(a)
F5Words in s. 11(3) renumbered as s. 11(3)(a) (3.1.1995) by 1994 c. 40, ss. 16(4), 82(2)(a)
F6S. 11(3)(b)(c) inserted (3.1.1995) by 1994 c. 40, ss. 16(4), 82(2)(a)
F7Words in s. 11(4)(c) substituted (3.1.1995) by 1994 c. 40, ss. 16(5), 82(2)(a)
F8Words in s. 11(7) inserted (3.1.1995) by 1994 c. 40, ss. 39, 82(2)(e), Sch. 11 para. 7(3)
Modifications etc. (not altering text)
C1S. 11(1)(2)(4)–(7)(9)–(13)(15) excluded by S.I. 1987/1498, art. 7, Sch. 2 para. 2
C2S. 11(1)-(7), (9)-(13)(15) restricted (1. 7. 1992) by S.I. 1992/1547, arts. 5, 6, Sch. 2
C3S. 11(2)(b) extended by S.I. 1986/2169, art. 5(2)
C4S. 11(3) excluded by S.I. 1986/2169, art. 5(2) and by S.I. 1987/1498, art. 7, Sch. 2 para. 2
Marginal Citations
The Whole Act you have selected contains over 200 provisions and might take some time to download. You may also experience some issues with your browser, such as an alert box that a script is taking a long time to run.
Would you like to continue?
The Whole Act you have selected contains over 200 provisions and might take some time to download.
Would you like to continue?
The Whole Act you have selected contains over 200 provisions and might take some time to download. You may also experience some issues with your browser, such as an alert box that a script is taking a long time to run.
Would you like to continue?
The Schedules you have selected contains over 200 provisions and might take some time to download. You may also experience some issues with your browser, such as an alert box that a script is taking a long time to run.
Would you like to continue?
Latest Available (revised):The latest available updated version of the legislation incorporating changes made by subsequent legislation and applied by our editorial team. Changes we have not yet applied to the text, can be found in the ‘Changes to Legislation’ area.
Original (As Enacted or Made): The original version of the legislation as it stood when it was enacted or made. No changes have been applied to the text.
Geographical Extent: Indicates the geographical area that this provision applies to. For further information see ‘Frequently Asked Questions’.
Show Timeline of Changes: See how this legislation has or could change over time. Turning this feature on will show extra navigation options to go to these specific points in time. Return to the latest available version by using the controls above in the What Version box.
Access essential accompanying documents and information for this legislation item from this tab. Dependent on the legislation item being viewed this may include:
This timeline shows the different points in time where a change occurred. The dates will coincide with the earliest date on which the change (e.g an insertion, a repeal or a substitution) that was applied came into force. The first date in the timeline will usually be the earliest date when the provision came into force. In some cases the first date is 01/02/1991 (or for Northern Ireland legislation 01/01/2006). This date is our basedate. No versions before this date are available. For further information see the Editorial Practice Guide and Glossary under Help.
Use this menu to access essential accompanying documents and information for this legislation item. Dependent on the legislation item being viewed this may include:
Click 'View More' or select 'More Resources' tab for additional information including: