Mortgaging charity land—mortgagee’s considerations
Mortgaging charity land—mortgagee’s considerations

The following Property practice note provides comprehensive and up to date legal information covering:

  • Mortgaging charity land—mortgagee’s considerations
  • Does the charity have power to borrow and power to mortgage?
  • Is consent required?
  • The s 124 procedure
  • ‘Comfort orders’ no longer available
  • Delegation
  • Prescribed certificate and mortgagee protection
  • Valid receipt
  • Registration
  • Further advances

If a charity is proposing to:

  1. mortgage property that it owns, or

  2. acquire property with mortgage finance

there are a number of issues that a prospective mortgagee needs to consider.

Does the charity have power to borrow and power to mortgage?

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:

  1. 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

  2. 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’

  3. by implication, where the borrowing is for the purposes of the charity’s trade: Re Badger, Mansell v Viscount Cobham [1905] 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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