On 3 December 2019, the Complaints Commissioner published its final report of 6 November 2019 concerning the FCA’s handling of an inquiry that had been made about the definition of a ‘legal mortgage’.

The final report explains that the Complaints Commissioner asked the FCA to clarify an earlier statement in which it stated that it does not have a definition of what a ‘legal mortgage’ is and that the use of the term, in PERG 4.4.16G, is a piece of legacy drafting and is included because it used to be relevant to how Parliament had defined what was a regulated mortgage contract.

In its further explanation to the Complaints Commissioner the FCA states:

All of the regulated mortgage activities (e.g. “entering into”, “administering”, “arranging” or “advising” etc) are framed in relation to the legal definition of a “regulated mortgage contract”. There are a number of ways in which this is narrower than “any loan secured by a mortgage on land”. This is discussed in our Perimeter Guidance at PERG 4.4 but as an example the borrower has to be an individual or trustee and at least 40% of the land has to be used (or intended to be used) as or in connection with a dwelling. So this tends to exclude, for example, commercial mortgages and buy-to-let.

[Our] intention in referring to “legal mortgage” in PERG 4.4.16G as a piece of ‘legacy drafting’ was to explain its presence by reference to the evolving nature of the legislative definition of a “regulated mortgage contract”. The drafting of PERG 4.4.16G is not now incorrect as a legal mortgage remains within the definition of a “regulated mortgage contract”. We think the current drafting of PERG 4.4.16G and the inclusion of “legal mortgage” within it remains useful. It provides an answer for firms who notice that the original legislative definition of a “regulated mortgage contract” was limited to a “legal mortgage” whereas the current legislative definition doesn’t mention them. This is because they are subsumed within the whole, which is the point that PERG 4.4.16G seeks to make.