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Hi Oliver.

olliemy:

I have published a complete set of proposals to cirrcumvent the fsas rules.  If anyone is interested, please contact me!!

I haven't seen your proposals yet, so I can't comment specifically (I have asked you for them - but not received yet).   It might be that you have a clever approach to things - and that you actually mean "alternatives to SRB" rather than "doing SRB by disguising it".

I'll give my thoughts for others to read...

One idea of an "alternative" is obvious... if someone calls you asking for rent back - and you say you can't because you're not FSA Regulated, but you offer to buy their house with vacant possession and move them into a different property instead, then this would be wholly acceptable by the FSA.  You need to be careful, though, that you don't say to them that it would be a better solution - this would be construed as offering advice, and would firmly fall foul of the FSA regs and result in a public flogging.

One idea for "doing SRB by disguising it" is also obvious... persuade the seller to sell with vacant possession to a 3rd party (e.g. send the seller away on holiday for a week); the 3rd party sells to you with vacant possession; you then invite the seller to become a tenant.   This would fall foul of the FSA Regs for two reasons...

(1) The FSA has made it clear (in their London Briefing) that the Regs will be based upon "intent" rather than technical implementation.  If you have constructed a transaction chain that ends up with the previous owner renting the property - then the intent was clearly to achieve SRB by disguising it.  A 2 year prison sentence will result (again - made clear in the FSA's London Briefing).

(2) You will have had to negotiate the deal with the seller, explaining what the process would be.  This activity requires FSA Regulation.  Again, a prison sentence would probably result.

Even if you can get the seller to go along with the deception, if the seller-come-tenant later gets cross with you (you don't re-paint his lounge as often as he wishes! ;-), or if he finds out that you aren't FSA regulated and that he can get his house back plus compensation from you - he *will* shop you to the FSA and you'll end up in prison.

My words above aren't aimed at your proposals, Oliver, because I haven't seen them.  People need to be aware of the basic traps I've outlined above - because by the very unreliable nature of tenants - they almost certainly *will* shop a rogue trader - especially when the FSA starts its planned high profile public awareness campaigns, and associated public floggings of those who have breached the regs.

Update: I have now received and started to read Oliver's proposals.

I have to say that I am impressed with some of Oliver's ideas (and I haven't finished reading yet).  Most proposals depend upon "technical interpretation" of the FSA rules.  The key unknown question, though, is whether or not FSA will follow through on its statement that it will be basing breaches upon "intent" - if this is the case, then it will knock a few of Oliver's ideas down.  The other ideas require quite a bit of work and resourcefulness - but possibly not quite as much as would be required to become FSA Regulated. 

Best regards,
Alan

olliemy:

I have published a complete set of proposals to cirrcumvent the fsas rules.  If anyone is interested, please contact me!!

 

Have PM'd you Oliver, thanks

Just spoke to the FSA regarding the July 1^st legislation. I explained that I was looking to buy a property from my friend who was desperate to sell. (His House has been up for 6 months). He has a mortgage and a secured loan, which is crippling him each month. He also has arrears and other debts.

My question was to the FSA could I buy his property and rent it back to him. The answer was that the FSA has no power to take away the human rights of my friend to sell, me to buy and for him to rent. They have said that in this circumstance it is perfectly fine. ?????????

They stated that the reason for the regulation is for firms that advertise, market and offer in this market. Someone that has a few properties like myself who  doesn’t do business in SARBs cannot be penalised for buying my pals house and letting him rent it back. ?????????

 

Im still very confused !!!!!!!!!!!!!!

the issue with all new legislation, it first gets tested when the first case is brought before the court

only then will we get an insight into interpretation of the legislation and its efficacy

remember the HIP issue with lead generators..... if they advertise a lead will the property need a HIP? not heard anything about any sort of prosecution as yet or anybody being pulled up for it

the trouble with the FSA is that will not tell you what to do, just offer you the legoislation.... if they think you are breaching it they may mount a case, if the court agress yoiu get convisted, if they don't you go free..... thats the problem here, with the work arounds what is or is not sailing too close to the wind

 

I'll try to un-confuse you, MIQ.   There's a "by way of business" qualification criteria that defines whether or not a transaction comes under the FSA's juristiction.

Before I explain any further, though, let me add a quick disclaimer - that what follows is purely my own interpretation, it should not be construed as advice...

The FSA is only interested in SRB transactions where you are "doing business".  For instance, if a family member or chum approaches you for help, then the transaction would not need to be authorised by the FSA.  You not only need to be satisfied in your own mind, of course - you need to think about how the FSA will see it if it comes to their attention.

There is one point of "greyness" in this... I believe that FSA rules MCOB 5.9.3R and MCOB 5.9.4R require you to make a declaration to the seller that it is an "FSA unauthorised SRB transaction", there are risks involved, and that there will be no compensation available from FSA if things go wrong?   The rules are very unclear though.

To anyone reading this and thinking they'll simply say that "everyone" is a "friend", then I'm sure that if the FSA sees you to be making a "business" out of "friends" and "family", then they will take a dim view on matters.  I believe, however, the real risks of being caught for doing SRB deals without the necessary authorisation will be because of a disgruntled/enterprising tenant grassing on you.  Also, I have been led to believe that new clauses and checks are likely to be introduced by CML via solicitors - which might make even a one-off "private" SRB transaction impossible to finance.

Hope that helps.  Cheers,
Alan

Hi everyone

 

Im currently looking into the case law on this with a view to publishing a new article in the next few days for clarification.

 

However I have been advised of the following from a source:

Wright and Wright solicitors said the following:
 
This clause is there to prevent certain peripheral activities from being caught such as inter-family transfers or occasions when a seller may leave some of their furniture behind for a short while after selling. It does not protect an investor.
 

The FSA has explicitly stated on its latest report 09/09 on p 10 of the pdf document that "one off transactions are likely to fail the "by way of business" test."  So it looks like everyone can do 1 transaction unauthorised without fear of prosecution (I disclaim all liablity arising from this statement and advise you to seek independent legal advice)

You must be careful.  The critical test is laid out in PERG 14.5 of the FSA handbook which reads as follows:

Whether or not any particular person will meet the requirement that he carries on a regulated activity by way of business and so needs authorisation
or exemption will invariably depend on that person's individual
circumstances. A number of factors need to be taken into account in
determining whether the test is met. These include:

Corporate plan providers and those who provide professional services to them or to home occupiers are likely to be carrying on their activities by way of business. Unpaid individuals who act as trustees for home occupiers are not likely to be.

With home reversion plans, it is quite possible that the reversion provider may be an individual who is acting purely in the capacity of investor. Such a person may not be acting by way of business when the criteria listed above are applied to his particular circumstances.

 Like I said, there is again massive scope for interpretation and shades of grey, so I'm looking into the case law with a view to publishing an article in the next few days to clarify the point.

Ollie 

 

Hi everyone

 

Im currently looking into the case law on this with a view to publishing a new article in the next few days for clarification.

 

However I have been advised of the following from a source:

Wright and Wright solicitors said the following:
 
This clause is there to prevent certain peripheral activities from being caught such as inter-family transfers or occasions when a seller may leave some of their furniture behind for a short while after selling. It does not protect an investor.
 

The FSA has explicitly stated on its latest report 09/09 on p 10 of the pdf document that "one off transactions are likely to fail the "by way of business" test."  So it looks like everyone can do 1 transaction unauthorised without fear of prosecution (I disclaim all liablity arising from this statement and advise you to seek independent legal advice)

 

You must be careful.  The critical test is laid out in PERG 14.5 of the FSA handbook which reads as follows:

 

Whether or not any particular person will meet the requirement that he carries on a regulated activity by way of business and so needs authorisation
or exemption will invariably depend on that person's individual
circumstances. A number of factors need to be taken into account in
determining whether the test is met. These include:

•  the degree of continuity; 
•  the existence of a commercial element; 
•  the scale of the activity; 
•  the proportion which the activity bears to other activities carried on by the same person but which are not regulated; and
•  the nature of the particular regulated activity that is carried on.

Corporate plan providers and those who provide professional services to them or to home occupiers are likely to be carrying on their activities by way of business. Unpaid individuals who act as trustees for home occupiers are not likely to be.

With home reversion plans, it is quite possible that the reversion provider may be an individual who is acting purely in the capacity of investor. Such a person may not be acting by way of business when the criteria listed above are applied to his particular circumstances.

 Like I said, there is again massive scope for interpretation and shades of grey, so I'm looking into the case law with a view to publishing an article in the next few days to clarify the point.

 

Ollie

 

Further to this, someone has forwarded me advice that reads

"The Financial Services Authority have indicated in their near-final rules that individuals purchasing a sale & rent back on a non business basis will not require interim authorisation, see section 2.6 pages 8 and 55.
 Our understanding of this is that if an individual's main income is not from property they will not need interim authorisation. There are very few lenders who will allow funding for this type of transaction"

 This really is sailing too close to the wind.  There is nothing in PERG 14.5 that says the FSA will scrutinise a person's main income and decide that you're not doing things "by way of business".  You can still be interpretted as conducting transactions "by way of business" regardless of whether you are employed or not in another sector.  The FSA has been explicitly clear that anyone who earns their money "in property" will 

 need to be regulated.

 

I would advise extreme caution about following the statement above which i consider erroneous.