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

Qualification of regulations 19 and 20

21.—(1) Notwithstanding the provisions of regulation 19(2), in the case of a corporate based scheme, or regulation 20(2), in the case of a trust based scheme, the terms of a scheme may provide that sums which could not otherwise be borrowed except in contravention of whichever is applicable of those provisions may be borrowed if–

(a) subject to the provisions of paragraph (2), the borrowing is approved by a majority representing at least 75% in number of the units held by participants present and voting at a meeting convened in accordance with the terms of the scheme by a notice which informed participants of the period during which the sum to be borrowed is to be repaid and of the effect which repayment is likely to have on the income to which participants would otherwise be entitled;

(b) the sums borrowed are to be repaid within a reasonable period having regard to the purpose for which the sums are borrowed and, in any event, in a case in which sums are borrowed for the purpose of carrying out works involving the refurbishment, repair, extension or redevelopment of the whole or a substantial part of the building or group of adjacent or contiguous buildings forming part of the property subject to the scheme, within the period of 24 months beginning with whichever is later of the date on which–

(i) any work which is being carried out is certified as being practically completed in accordance with the building contract by the architect or other person specified in the contract as the person responsible for giving such a certificate; and

(ii) it is reasonable to regard all material covenants on the part of the employer or contractor under the building contract as having been substantially fulfilled,

and, in any other case, within the period of 15 months beginning with the date on which the sum, or, if the sum was borrowed in instalments, the first instalment, was borrowed; and

(c) the sums borrowed do not exceed either–

(i) one third of what, in the reasonable opinion of the operator; or

(ii) two thirds of what, in the opinion of a qualified valuer,

will be the value of the property subject to the scheme upon fulfilment of the purpose for which the sums were borrowed.

(2) Regulation 12(3) shall apply for the purposes of paragraph (1) in the same way as it applies for the purposes of regulation 12(1) but taking the reference to the proposed purchaser to be references to the person from whom it is proposed to borrow the money.