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Diminishing shared ownership arrangement: conditions

CTA09/S504 describes a diminishing shared ownership arrangement. A diminishing shared ownership arrangement is a partnership-style arrangement whereby the ‘first owner� (for example, a bank) acquires a beneficial interest in an asset together with a customer (the ‘eventual owner�) and the arrangement satisfies the following further conditions (which ensure that arrangements identical to a normal partnership are excluded):

• »Ê¹ÚÌåÓýapp first owner and the eventual owner both acquire a beneficial interest in the asset.
• »Ê¹ÚÌåÓýapp eventual owner makes a number of payments to the first owner equal in total to the amount paid by the first owner for its beneficial interest in the asset. For example, where the first owner bought its beneficial interest in the asset for £1,000, the eventual owner may make 10 monthly payments of £100 to the first owner. »Ê¹ÚÌåÓýapp eventual owner acquires the first owner’s interest in the asset through the series of payments.
• »Ê¹ÚÌåÓýapp eventual owner makes ‘other paymentsâ€� to the first owner, over and above the payments made to acquire the first owner’s beneficial interest. For example, where the first owner purchased its beneficial interest for £1,000, the eventual owner not only makes ten monthly payments of £100 to acquire the beneficial interest of first owner, but makes an additional monthly payment of £10 to first owner.
• »Ê¹ÚÌåÓýapp eventual owner has exclusive rights to the benefit of the asset to which the arrangement applies.
• »Ê¹ÚÌåÓýapp eventual owner is exclusively entitled to any income, profit or gain that arises from the asset or is attributable to the asset. »Ê¹ÚÌåÓýapprefore, where over the period of the arrangement the asset increases in value, the eventual owner is entitled to the whole of that increase.

»Ê¹ÚÌåÓýapp arrangement must be with a financial institution (CFM44030) or a regulated home purchase plan provider. Alternatively, the arrangement can be a regulated electronic system facilitated arrangement (CFM44035).

»Ê¹ÚÌåÓýapp first owner will always be the party receiving the alternative finance return.