14th April 2010

Compliance Tip April 2010 - Sale and Rent Back Activities

The SRB interim regime commenced on 1 July 2009 and firms already carrying on SRB activities should be interim authorised to do so by FSA. From 30 June 2010, the interim authorisation regime for SRB business will come to an end and will be superseded by the full regime.

What is a regulated SRB agreement?

Broadly speaking, this is an arrangement under which, at the time it is entered into, a person (the "agreement provider") buys all or part of an interest in land (other than time share accommodation) in the United Kingdom from a homeowner (being an individual or a trustee whose beneficiary is an individual) ("the agreement seller") on the basis that the individual or a related person is entitled under the arrangement, and intends, to use at least 40% of the land as a dwelling. However such an arrangement is not a regulated SRB agreement if it is a home reversion plan.

As regards the requirement that the conditions need to be met 'at the time the arrangement was entered into', it should be noted that a regulated SRB agreement is an arrangement that may actually comprise several agreements. For example, a regulated SRB agreement may include an agreement for the sale of a freehold interest in land and a subsequent tenancy agreement relating to the occupation of that land. Just because the tenancy agreement was not completed at the same time as the sale of the freehold interest does not mean there is no regulated SRB agreement. Further definition details can be found in PERG 14.4A.

An arrangement that was established before 1 July 2009 can also be a regulated SRB agreement. However, regulated activities carried on in relation to a SRB agreement established before 1 July 2009 will only be subject to regulation when carried on: on or after 1 July 2009 and in other certain circumstances (see PERG 14.4A Q37Q for a summary).

Regulated activities

The regulated SRB activities cover those of provider (entering into or administering a SRB agreement) and/or intermediary (advising on entering into, arranging or making arrangements with a view to a SRB agreement).


Key Action Points

Firms that;

• Are currently interim authorised to undertake SRB activities and wish to continue to so , after the FSA interim regulation period ends on 30 June 2010; or
• Are currently authorised firms who plan to begin SRB activities before 30 June: or
• Are not currently authorised and need to apply for authorisation for SRB business on or after the full authorisation of SRB activities begins on 30 June 2010 now need to take further action to maintain or create their ability to undertake SRB activities

If you are interim authorised and you wish to continue undertaking SRB business from 30 June 2010, you must again apply for and receive approval for the full regime. You must apply as soon as possible to ensure your application can be dealt with before the full regime starts.

The FSA cannot accept applications that include activities you are not currently interim authorised to carry out until 30 June 2010. If you are interim authorised and you intend to apply for additional permissions in the full regime, you should apply for the permissions currently held and apply for a VoP (for which an additional fee will be payable) if and when your application has been granted.

Non-SRB authorised firms who plan to begin SRB activities before 30 June may still apply for an interim VoP.

If you were not carrying on SRB business on or before 1 July 2009, are not a currently interim authorised firm and are intending to commence SRB activities on or after 30 June 2010 you may submit your full regime application pack ahead of the rules coming into force on 30 June.

You are not allowed to carry out any SRB activities until your application for full authorisation is approved. This is a change from the interim regime. So, if your application isn't approved on 30 June 2010, you need to stop SRB activities until you are authorised. This includes making arrangements for an authorised SRB administrator to take over the administration of any existing regulated SRB agreements.

Help

If this is an area you would like assistance with, or indeed if you have any queries on this subject please contact your usual Consultant or the Resources Compliance Birmingham office on 0121 616 3480.

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