(1) In paragraph 5 of Schedule 2 to the 1986 Act (membership), for sub-paragraphs (1) and (2) there shall be substituted the following sub-paragraphs -

"(1) The rules of a building society shall provide that no person shall be a member of the society unless he is a shareholding member or a borrowing member or both.

(2) In this Act, in relation to a building society -

"borrowing member" means, subject to sub-paragraphs (2A) and (2B) and paragraph 29(2) below, an individual who is indebted to the society -

(a) in respect of a loan which is fully secured on land; or

(b) if the rules of the society so provide, in respect of a loan which is (within the meaning of the rules) substantially secured on land;

"shareholding member" means a person who holds a share in the society.

(2A) If the rules of a building society so provide, an individual shall cease to be a borrowing member at any time if at that time the society -

(a) takes possession of, or exercises its power of sale in relation to, the whole or any part of the land on which the loan is secured; or

(b) obtains an order for foreclosure absolute or, in Scotland, foreclosure in respect of the whole or any part of that land.