For years, pub landlords have financed pub refurbishments with loans from their brewery, typically secured against the property itself.
New Treasury definitions revealed last month and new FSA rules will consider these loans as mortgages if at least 40% of the floor-space has a residential use, thus covering the large number of UK pubs with an upstairs flat.
‘Non-compliance can result in criminal charges and may make loans unenforceable. My concern for brewers is that they may not be aware that these changes will affect them,? warned Mike Maloney, partner at KPMG.
‘Some people may feel that it is unfair that brewers will be treated in the same way as financially-orientated organisations. But the FSA’s primary concern is to protect the customer, not the lender. No-one should expect any sort of exemption or special treatment to be forthcoming from the FSA.’
From October 2004 breweries can only lend money to these pubs if they obtained authorisation from the FSA and only under approved mortgage contract terms. The new rules will not affect existing loans.
The FSA will begin its ‘lengthy’ application review mid 2003 and KPMG advises breweries to begin the process as soon as possible.
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