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3. DIMINISHING MUSHARAKAH STRUCTURE AND ADVICE
3.1 How will the Bank's financing operate?
The Bank’s Home Purchase Plans and Buy-To-Let Purchase Plans use the Diminishing Musharakah financing structure.
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Under this structure, legal title to the property is transferred to the Bank (from either the seller or the Client). The Bank then becomes the registered proprietor of the Property.
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Beneficially, the Property will be held in shares by both the Bank and the Client. It is for this reason that the Bank cannot agree to any requests for the beneficial interest to be held on trust for the benefit of anyone other than the Bank and Client in accordance with the Diminishing Musharakah Agreement.
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The Bank's Initial Share (as at the completion date) will be equal to the Bank's Contribution on completion divided by the Purchase Price (multiplied by 100). This is set out in the Offer Letter.
The Bank will simultaneously grant a lease to the Client (for the finance term or 50 years depending on when your offer letter was issued). Under the lease, the Client pays Rent to the Bank each month.
Promises to sell and purchase are also contained within the Diminishing Musharakah Agreement which ensures that the Bank is obliged to sell the Property to the Client and the Client is obliged to buy the Property from the Bank by the end of the finance term or early settlement and payment of all sums due.
3.2 Acquisition Payment Profile
The Offer Letter notes the Acquisition Structure and Acquisition Payment Profile of each facility. This will be one of the following:
a) Acquisition over Finance Term (amortising)
The Client must pay Regular Acquisition Payments and Rent each month on the Payment Dates. The Regular Acquisition Payment is a payment towards the Purchase Cost (being the Bank's Contribution). The Rent is the amount calculated in accordance with the Lease (between the Bank and the Client). Each Regular Acquisition Payment causes the Client's Share of the Property to increase and the Bank's Share of the Property to decrease accordingly.
b) Acquisition at end of Finance Term (bullet payment)
The Client is only required to pay Rent on the Payment Dates. The Purchase Cost (being the Bank's Contribution) shall be payable in full on the Final Completion Date (as defined in the Diminishing Musharakah Agreement).
The Client may make Additional Acquisition Payments which are extra payments towards the Purchase Cost as per the Diminishing Musharakah Agreement. Please refer to the Diminishing Musharakah Agreement to determine the restrictions on making such payments.
3.3 Ability to advise the Client on the Finance Documents
You must be able to provide a legal advice letter in the form provided to you by the Bank's solicitors. If you are unable to do so, and you remain instructed to deal with the transaction, the Client is required to instruct separate solicitors to advise them on the finance documents and provide the legal advice letter to the Bank's solicitors.
You must check the identity of the Client (and anyone else required to sign any deed or other document connected with the mortgage) by reference to the document and notify our solicitors of any discrepancies.
3.4 Legal Advice to the Client
Advice to the Client does not need to be given in person however advice should at least be given over the phone. It is your responsibility to check the identity of the Client and ensure that you comply with the Money Laundering Regulations in force as at the date of instruction. You are required to provide the Bank's solicitors with Anti Money Laundering confirmations which are set out in initial correspondence to you.
3.5 Legal Advice to Interested Parties Other Than Guarantors (Donors, Occupiers or other.)
For all buy-to-let finances, please refer to the terms and conditions for details as to the types of occupational tenancy agreements acceptable to the Bank.
Occupiers (except non-named spouse or civil partner occupiers)
For all owner-occupied home purchase plan cases, you must ensure that:
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All occupiers above 17 years of age (other than the Clients) sign an occupier’s consent form. The occupier’s consent form can be downloaded from the online Solicitors’ Guide and the original signed document must be received by the Bank’s solicitors before funds are requested.
Donors (except non-named spouse or civil partner donors)
Where any party (other than a Client or Guarantor) is making a financial contribution towards the purchase plan, you must ensure that:
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Each donor signs a waiver form. The waiver form will be provided by the Bank to the Donor for signing before the Offer is issued.
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You must also send to the Bank’s solicitors before funds are requested a clear and in-date K17 bankruptcy search against each Donor. Where the search reveals entries, the donor must sign a statement appended to the K18 result confirming none of the entries relate to them.
Non-Named Spouse or Civil Partner Occupiers
Where the finance offer is not in the joint names of persons who are in a legally sanctioned relationship (i.e., married, in a civil partnership), and the non-named person is going to reside at the property, you must ensure that party:
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Is provided with independent legal advice by a separate firm (see below).
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Signs an occupier’s consent form. The occupier’s consent form can be downloaded from the online Solicitors’ Guide and the original signed document must be received by the Bank’s solicitors before funds are requested.
Non-Named Spouse or Civil Partner Donors
Where the finance offer is not in the joint names of persons who are in a legally sanctioned relationship (i.e., married, in a civil union), and the non-named person is making a financial contribution towards the purchase plan, you must ensure that party:
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Is provided with independent legal advice by a separate firm (see below).
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Signs a consent and waiver. You can download the consent and waiver from the online Solicitors’ Guide. Please note the original signed consent and waiver must be received by the Bank’s solicitors before funds are requested.
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Signs the waiver form provided to the donor by the Bank.
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You must also send to the Bank’s solicitors before funds are requested a clear and in-date K17 bankruptcy search against each Donor. Where the search reveals entries, the donor must sign a statement appended to the K18 result confirming none of the entries relate to them.
Independent Legal Advice for Spouses and Civil Partners
Advice should be given face-to-face to ensure that the interested party was advised separately. If, in exceptional circumstances, this is not practical (e.g., where, in the local jurisdiction, legal advisors are not available or willing to act) advice should at least be given over video call or, if a video call is not possible, over the phone. It is the independent adviser's responsibility to check the identity of the interested party and ensure that they comply with the Money Laundering Regulations in force as at the date of instruction. You can download the form of Independent Legal Advice letter from the online Solicitors’ Guide and you must ensure the Bank’s solicitors are in receipt of all required letters of ILA before funds are requested.
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3.6 Independent Legal Advice Letter for Guarantors
Guarantors must be provided with independent legal advice.
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If there is more than one Guarantor (or other interested party), advice to each of the Guarantors must be provided separately.
The Guarantors' independent adviser can issue one Independent Legal Advice letter covering the fact that they have separately advised each of the Guarantors on entry into both the consent and undertaking waiver letter and the guarantee.
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Another solicitor/licensed conveyancer in the same firm may be able to advise the Guarantor.
3.7 Subordination of Shareholder/Director Loans
There is no requirement for subordination of any shareholder/director or other loans or advances to corporate customers.
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The Bank does not accept cases where there is an intercompany loan being made to the Customer to fund the Client's Contribution.
3.8 Joint Applicants
Bare trust structure, joint borrower sole proprietor or similar arrangements are not acceptable for joint applicants.
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