MacRoberts Real Estate e-update 01/09/08

DISCLOSURE OF INCENTIVES - NEW CML REQUIREMENTS

The Council of Mortgage Lenders (CML) has announced a new requirement in
respect of disclosure of incentives for purchases of new, renovated and converted
houses/flats.

In essence, from today, 1 September 2008, in respect of relevant properties the
seller must complete a Disclosure Incentives Form (DIF) disclosing any incentives
which are being given to purchasers to induce them to buy the property: for example
discounts, part exchanges, cashback, contributions to legal fees, etc. The reason for
the new requirement is to provide transparency for the purchaser's lender in respect
of incentives, allowing the lender to base its decision to lend on full and accurate
information about loan to value ratios.

What purchases are affected?
First sales of new-build houses/flats, and first sales of existing property which has not
been occupied in its present form, e.g. after renovation or conversion.

Who completes the DIF?
The seller completes the DIF. The seller, usually a housebuilder/developer, will have
all the relevant information.

Who gets the DIF?
The DIF is for the use of the lender and the valuer. The sooner in the process the DIF
is completed and sent to the lender's solicitor the better for the speed of the
transaction.

What is the seller's solicitor's role?
It is likely that the seller will make its solicitor responsible for sending the DIF to the
lender's solicitor.

What happens if the DIF is changed/updated with new information?
The obligation if the information on the DIF is amended is for a revised form to be
sent to the lender's solicitor, again via the seller's solicitor. This should be done as
soon as possible.

What effect does this have on the purchaser/borrower?
The purchaser's/borrower's solicitor will confirm with them that the information on the
form is correct. Although, the DIF is not intended for the purchaser it is likely that the
purchaser's solicitor will also be the lender's solicitor. The lender's solicitor requires
assurance that the Form DIF complies with the loan instructions and the purchaser
should ensure that the DIF is acceptable to the lender as it will be a precondition of
release of the loan funds.

What should you be doing?
If you are a housebuilder or developer who will be selling relevant property, you
should familiarise yourself with the CMLs requirements in respect of DIFs and update
you internal procedures accordingly.

For more information see the FAQs at http://www.cml.org.uk/cml/filegrab/?ref=5977.
A copy of the form can be found at http://www.cml.org.uk/cml/filegrab/?ref=5978 .

If you require any further information please contact Kelsey Gibson on 0141
303 1149

© MacRoberts LLP 2008