The following Property practice note provides comprehensive and up to date legal information covering:
If a charity is proposing to:
mortgage property that it owns, or
acquire property with mortgage finance
there are a number of issues that a prospective mortgagee needs to consider.
The charity must have power to borrow and to mortgage its property as security for that borrowing. Such a power may be expressly set out in the charity’s governing document. If not, a sufficient power may arise:
under Trusts of Land and Appointment of Trustees Act 1996, s 6(8), which gives trustees of land ‘all the powers of an absolute owner’—this includes the power to borrow money and to secure repayment of it on the trust property
under Trustee Act 2000, s 8, which gives trustees the power to acquire land and invests them with ‘all the powers of an absolute owner’
by implication, where the borrowing is for the purposes of the charity’s trade: Re Badger, Mansell v Viscount Cobham  1 Ch 568
However, a charitable company which owns the charity’s land beneficially, rather than holding it on special trusts or as custodian trustee for another charity, cannot rely on these trustees’ powers—the company’s articles of association must contain an express power to borrow and mortgage. A lender is on enquiry as to the capacity of a charitable company to borrow money and mortgage its
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