OG 22 Borrowing and Mortgages

Last reviewed:
Last updated:
14 March 2012

Policy Statement/Overview

IMPORTANT NOTE

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Summary of the guidance

This series of OGs contains guidance on borrowing by charities, the requirements of sections 124-126 of the Charities Act concerning mortgages of land by charities, the effects of Trusts of Land and Appointment of Trustees Act 1996 and the Trustee Act 2000 and the circumstances in which we need to be involved in such transactions.

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Casework Guidance

Please read the Important Note on the front page

OG 22 A1 - 14 March 2012 

OG 22 A1 Overview and summary

1. Summary

In order for trustees to borrow money, they:

  • must have an express power to do so (OG 22 B1 section 3); or
  • may rely on the statutory power contained in, or implied from, the Trusts of Land and Appointment of Trustees Act 1996 (TLAT 1996) (OG 22 B1 section 4) and the Trustee Act 2000 (TA 2000) (OG 86 B2 section 1) to raise money by mortgage for any of the purposes specified, ie in relation to land; (in the rest of this OG series, we refer to these sorts of powers and those derived from case law as 'implied powers'); or
  • may use the power of amendment in s.280 of the Charities Act or the relevant power in the Companies Act to confer on the charity a power to borrow. In the unlikely event that an unincorporated charity is unable to use the s.280 power of amendment (because, for example, the governing document specifically precludes borrowing) a Scheme would be needed to confer the power; or 
  • may apply to the Commission for an Order under s.105 of the Charities Act to authorise the borrowing (OG 22 B2 section 1).

There are no longer any statutory controls over the mortgaging or charging of charity property other than land.

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2. The provisions of s.124

Under s.124 of the Charities Act, any mortgage of land held by or in trust for a charity (other than an exempt charity) requires an Order of the Court or of the Commission unless:

  • the mortgage is by way of security for the repayment of a loan or grant or for the discharge of other proposed obligations; and
  • the trustees, before executing the mortgage, have obtained and considered proper written advice as set out in s.124(3)-(4) (OG 22 B3 section 2); or
  • the mortgage is excluded from the provisions of s.124 by s.124(9) (OG 22 B4).

In practice this means that in almost all cases trustees are able to proceed with these transactions without the need to come to us or the Court for authorisation as long as they comply with the requirements set out in s.124(3)-(4) – see (OG 22 B3) for further details of this.

Note: Our view is that s.124 applies not only to situations where land already held by a charity is charged to secure a borrowing, but also in cases where a charity is making a new purchase of land secured by a mortgage.

Under s.125 of the Charities Act every mortgage of charity land must include certain statements (this requirement applies to an exempt charity) and certificates.

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3. When an Order under s.124 must be obtained

Where charity land is mortgaged to secure the discharge of any liability other than the repayment of a loan or grant to a charity, such as:

  • a guarantee or indemnity given by the charity; or
  • the payment of deferred consideration by the charity for a purchase which it has made;

an Order will not be required if the trustees have obtained and considered proper advice given to them in writing, as to whether it is reasonable for the trustees to undertake to discharge the obligation having regard to the charity’s purposes.

A mortgage to secure the repayment of a loan will typically secure:

  • not only the repayment of the loan; but also
  • the payment of interest under the loan.

S.124(2) covers only the former, but the giving of security for the payment of interest should be regarded as incidental. We should not say that an Order under s.124(1) is necessary, and that s.124(3) procedure is inapplicable, simply because a mortgage extends to securing the payment of interest as well as repayment of the loan itself.

The controls in s.124 of the Charities Act apply equally to mortgages and charges (s.129(2)) but they do not apply to liens or charges which arise by operation of law; for example where the authority is contained in an Act of Parliament, a statutory instrument, or a Scheme of the Court or the Commission.

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4. Implied power

We take the view that trustees of unincorporated charities have an implied power to borrow in all cases except where there is an express or implied prohibition in the governing document. The wide powers of management contained in TLAT 1996 and the TA 2000 and case law effectively give trustees of unincorporated charities a power to:

  • borrow for any purpose which relates to the repair, maintenance, improvement etc, of the buildings and land which they own, or to the purchase of land; and
  • charge the land as security for that borrowing (subject to s.124 of the Charities Act).

This replaces the limited power in s.71 of the Settled Land Act 1925, and is applicable both to:

  • land already in the ownership of the charity trustees; and
  • land which is being bought with the assistance of a loan.

This applies only to land which is held on trust. It does not apply to land which is part of the corporate property of charitable companies, which will usually be able to rely on the powers in their memorandum and articles of association for the necessary power.

Our policy on when trustees may rely on an implied power to borrow is set out in OG 22 B1 section 2.

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5. The repeal and replacement of the 1960 Act

Before 1 January 1993, trustees who mortgaged or charged charity property by way of security for the repayment of money borrowed where the property was either:

  • land or other assets forming part of the permanent endowment of the charity; or
  • land occupied for the purposes of the charity (or had at any time been so occupied);

required the consent of the Court or Commission under s.29 of the Charities Act 1960.

S.29 (which also regulated disposals of land) was repealed with effect from 1 January 1993 and was replaced by ss.32 to 36 of the Charities Act 1992. Ss.32 to 35 were themselves repealed with effect from 1 August 1993 and were replaced by ss.36 to 39 of the Charities Act 1993. Although Part 1 of the 1992 Act has been repealed section 36 of that Act continues to have effect – see OG 22 B6.

Ss.38 and 39 of the 1993 Act regulated disposals of land by way of mortgage (sales, leases and other disposals of land were regulated by ss.36 and 37 of the 1993 Act. These sections are replaced by ss.124-126 that regulate mortgages of charity land (sales, leases and other disposals are regulated by ss.117-123 of the Charities Act – see OG548 Disposal of charity land.

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6. Exceptions no longer valid

S.29(4) of the Charities Act 1960 provided that s.29 should not apply to an exempt charity nor to any charity which was excepted by order or regulations. That subsection has not been re-enacted and therefore all excepting orders made by the Commission and all excepting regulations made by the Home Secretary ceased to have effect from 1 January 1993. These regulations are listed OG 22 D1. The exception contained in s.20 of the United Reformed Church Act 1981 from s.29 of the 1960 Act also ceased to have effect from that date.

Note: borrowings and mortgages entered into prior to 1 January 1993 remain valid.

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7. Excepted charities and Exempt charities

The provisions of s.124

  • do apply to excepted charities;
  • do not apply to exempt charities.

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8. When will we be involved?

The purpose of the provisions in the Charities Act is to foster among trustees a greater sense of their own responsibilities and to relieve us of supervising trustees in carrying out duties which trustees ought to be able to carry out unsupervised. For this reason, we will become involved in a particular mortgage only when the trustees cannot comply with the appropriate statutory conditions or they have no power to borrow or incur some other obligation for which a mortgage is required by way of security – see OG 22 B3.

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9. Application of s.124 to land only

S.124 applies only to land and not to mortgages over other assets (see section 1). For the purpose of s.124(2), a loan includes money borrowed on overdraft (see OG 22 B5).

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OG 22 B1 - 14 March 2012

OG 22 B1 Power to Borrow  

 

1. S.124 of the Charities Act

Before trustees can mortgage land as security for a loan, they must have power to borrow. Before trustees can mortgage land as security for a grant or other obligation, they must have power to accept a grant upon conditions or incur some other obligation and charge their property by way of security. In many cases these powers may be implicit in the governing document – for instance, where a power to incur an obligation is given, a power to charge property by way of security may be implied. S.124 does not confer on trustees the power to borrow or the power to charge property. S.124(2) merely removes the need to obtain an Order of the Court or of the Commission when mortgaging land in the circumstances set out in s.124(2).

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2. Our current policy

Power to permit trustees to borrow money and/or charge the charity’s property can be found:

  • in the governing document;
  • in the Trusts of Land and Appointment of Trustees Act 1996 (TLAT 1996);
  • in the Trustee Act 2000 (TA 2000); and
  • by implication - see OG 22 A1.

Where trustees do not have the power to borrow and/or charge property, they can confer a suitable power on the charity by using the power of amendment for unincorporated charities (s.280) or the power of amendment available to companies under the Companies Acts following our s.198 consent. In the unlikely event that the governing document specifically precludes borrowing, a Scheme will be required to authorise it. The exercise of any power of borrowing and/or charging property must be strictly in accordance with the terms of the power.

There may be cases where banks and other lenders will be unconvinced that the new statutory powers do in fact authorise borrowing and/or the giving of security because of the absence of any explicit reference to it. However, an absolute owner undoubtedly has power to borrow money on the security of their property and to charge property. We should refer doubters to paragraph 10.8 of the Law Commission Report on Transfer of Land and Trusts of Land (No 181), published in June 1989. This sets out the policy of the new land management powers.

 

lawyer_referIf lenders persist in the view that TLAT and TA 2000 do not give power to borrow and/or charge property, you should obtain legal advice.

 

The statutory trustee powers are not available to charitable companies, except in relation to funds of which the company is trustee. However, charitable companies are usually empowered by their governing documents to charge property for the purposes of borrowing money.

The power to borrow for any purpose relating to the repair, maintenance, improvement, etc of buildings and land which the charity trustees own also applies to unsecured loans. Our view is that this is within the land management powers. See section 6.

 

3. Governing document

The governing document of a charity may give trustees power to borrow. This is normally found in the powers recited in furtherance of the main object of the charity – eg “power subject to any consents required by law to borrow money and to charge all or part of the property of the charity with repayment of the money so borrowed”. The Commission’s model governing documents GD1, GD2 and GD3 contain power to borrow.

A charitable company will usually find suitable powers to borrow in the "powers" section of its memorandum, even if this is in the "sweeping up" power to do such other things as are expedient in the interests of the charity.

Where a charity has a power to accept grants on conditions or to give guarantees or enter into other types of obligation, a power to charge the charity’s property as security for such actions may be implicit.

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4. Statutory power

The statutory provisions conferring a power to borrow were, prior to 1 January 1997, found at s.29 Settled land Act 1925. Trustees were given the powers of a tenant for life by s.71 of that Act. This empowered a tenant for life to raise money by mortgage for the purposes set out in s.71(1). These purposes did not include the purchase of property.

From 1 January 1997, s.29 of The Settled Land Act 1925 was replaced by TLAT 1996. TLAT radically altered the statutory basis upon which charity land is acquired, managed and disposed. Almost all land which is held on charitable, ecclesiastical or public trusts is now subject to a "trust of land" as the result of TLAT. TA 2000 and other statutes which define the powers and duties in relation to a trust of land are relevant to most charities other than companies. See OG 86 B2.

The intention of TLAT 1996 is that charity trustees’ wide powers of management should give them a power to borrow for any purpose relating to:

  • the acquisition of land and buildings;
  • the repair, maintenance, and improvement of their land and buildings; and
  • to charge the land as security for the borrowing of funds for these purposes.

This replaces the more limited powers in s.71 of the 1925 Act.

TLAT 1996 does not expressly refer to this power but an absolute owner has power to borrow on the security of his property.

lawyer_referIf lenders remain unconvinced that TLAT 1996 gives charity trustees power to borrow and to charge property, advice should be sought from Legal Services.

 

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5. Borrowing for the purpose of a trade

A charity which carries out its charitable purposes by the exercise of a trade (eg a private hospital or independent school) will, if its governing document contains no express power to borrow, have an implied power for the purposes of its trade. Otherwise, power to borrow will only be implied if there is a need to incur emergency expenditure. It would need to be shown that the expenditure was both necessary and cannot reasonably be financed without recourse to borrowing. These principles emerge from the decision of the court in Mansell v Viscount Cobham (1905) 1 Ch 568.

lawyer_refer Legal advice should be taken whenever there is any uncertainty about an implied power to borrow.

 

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6. Unsecured borrowing

The power to borrow for any purpose relating to the repair, maintenance, improvement, etc of the buildings and land which the charity trustees own also arises in the case of unsecured loans. Our view is that this is within the land management powers.

This view is not accepted by all the corporate lenders which charity trustees may approach for finance. This difference arises from differing interpretation of the law rather than questioning the financial viability of lending to a charity. NatWest Bank, for example, has indicated that it does not accept that the statutory powers give trustees a power to borrow on an unsecured basis. It also takes this view if the loan is secured using property which does not belong to the charity, such as, for example, the trustees' personal property. However, it may be prepared to accept in the circumstances of the case that the trustees have an implied power to borrow money.

In fact, the lender may have legitimate concerns where any proposed loan is not secured on land belonging to the charity. These concerns arise from the supposition that trustees may not have power to borrow - whether with or without security - notwithstanding the new statutory provisions. If trustees do not have this power, then they may not be entitled to indemnify themselves out of trust property for the repayment of the loan and the payment of interest. In that case, the lender would also not have the right, which it normally would have if the trustees were borrowing within their powers, to recover the payment of the loan and the payment of interest out of the trust property. OG 22 B10 explains in more detail the circumstances in which trustees can properly repay unsecured loans from their charity's assets. NatWest Bank have indicated in discussions with us that where they are not prepared to rely on the existence of an implied power to borrow, in order to protect their interests, they will ensure that the charity trustees provide a reasoned argument to us, justifying why we should be prepared to grant an Order to authorise the borrowing. We should be prepared to consider such an approach whatever the identity of the lender. See also section 8 below.

For guidance on trustees' indemnity when dealing with unsecured loans, see OG 22 B10.

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7. Pressure from trustees' lenders

Lenders tend to be concerned that, even though the trustees have complied with the requirement to obtain proper advice, and certify this on the deed of charge, their security will be invalid if the trustees did not have the necessary power to enter into the mortgage in the first place. Despite the provisions of s.125(3), the lender may attempt to influence the trustees to apply for an Order to safeguard its position. Our position is set out in section 4 above, and we should in these cases follow the approach set out in section 8 below.

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8. “Comfort” Orders

lawyer_refer 

Section 6(1) of TLAT 1996 states that:

  • for the purposes of exercising their functions as trustees, the trustees of land have, in relation to the land subject to the trust, all the powers of an absolute owner.

The expression “in relation to land” has, in the similar context of section 28 of the Law of Property Act 1925, been the subject of judicial comment on a number of occasions.

These comments make it clear that the words “in relation to land” are not confined to powers of disposal. They extend to all actions which trustees may take in the management of land, including the raising and expenditure of money.

In our view the powers of an absolute owner clearly include a power to borrow money and/or to charge the land, and if the power is exercisable in relation to land comprised in the trust then the power to borrow and/or charge the land falls within the ambit of section 6(1) of TLAT 1996.

In practice, borrowing by charity trustees will almost invariably be for a purpose connected with the use of the land for the purposes of the charity. Borrowing for the purposes of acquisition, improvement, repair and maintenance and equipment of land and buildings are all within the scope of section 6(1) of TLAT 1996.

Consequently, we will no longer make 'comfort' Orders in these cases. This means that we decline any request for a legal permission where there are no serious issues that would justify the exercise of our power and it is being sought simply to provide reassurance.

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OG 22 B2 - 14 March 2012

OG 22 B2 How we confer authority

 

1. Trustees' ability to confer power

Our policy is that trustees should use the power of amendment (which may be in their governing document but which is otherwise available for unincorporated charities at s.280 of the Charities Act and in the Companies Acts for charitable companies) to confer on the charity a power to borrow and/or any other appropriate power. If that is not suitable (because, exceptionally, the governing document of an unincorporated charity precludes borrowing or the particular power required), or the trustees are unable to make the amendment themselves, we should, where it is expedient to do so, grant a specific or general power by Scheme (to overturn a prohibition) or s.105 Order.

If the trustees use the power of amendment to give themselves an express power to borrow, the power which they adopt might be on the following lines:

  • the trustees may borrow money upon such terms as they think fit and may mortgage the whole or any part of the property of the charity as security for the money borrowed subject nevertheless to complying with the restrictions on mortgaging imposed by s.124 of the Charities Act.

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2. Authorising particular borrowing

An Order under s.105 of the Charities Act can be used to provide general powers as well as authority for specific transactions. A specific authority sanctions the use of a particular power in a more closely defined set of circumstances.

If we are asked to make an Order to authorise a particular borrowing, in the absence of a power to borrow, it will be made under s.105 of the Act. Where security is to be given for a borrowing, this should be reflected in the Order. In the case of a borrowing which is to be secured wholly or partly on land belonging to the charity, directions in the Order should make it clear that the authority which the Order confers is valid, subject to the condition that the trustees comply with the restrictions on mortgaging imposed by s.124. This means that the trustees should take due care to ensure that the conditions set out in s.124(2)-(4) (where appropriate) are complied with, unless the circumstances of the case make it necessary that a further Order under s.124(1) should be obtained.

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3. Order conferring general power to borrow

A general authority provides the trustees with powers on a long term basis without the need to seek a fresh authority from us each time they wish to exercise the power.

Where it is desired to confer a general power to borrow, this should be done by Order. It should be expressed in such a way as to make it clear that the borrowing may be secured by the charity. However, if the security is to consist wholly or partly of land belonging to the charity, then the exercise of the power is subject to the condition that the s.124(3)-(4) (where appropriate) procedure is followed, or another Order of the Commission is obtained under s.124(1).

Whenever an Order gives a general authority, we must give suitable directions including, at the very least, a suitable duty of care. This is because s.105(2) of the Charities Act provides that anything done under the authority of an Order is to be treated as if it was properly done under the powers of the trustees. Where we provide a specific authority (as in section 2 above), we will have assessed the circumstances of the particular case and will be satisfied that the trustees can properly proceed. In cases where we are providing a general authority we cannot know that in the future the trustees will always exercise the power properly. The inclusion of a duty of care (which mirrors the duty in the Trustee Act 2000 (see OG 86 B6) provides us with greater certainty on this point.

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4. Removing prohibition on borrowing by Scheme

Where the existing trusts of a charity expressly prohibit borrowing, and:

  • there is no suitable power of amendment; and
  • the trustees can show that the lack of a power to borrow is adversely affecting the administration of the charity,

we should be prepared to make a Scheme to confer on the trustees a suitable power to borrow.

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5. Borrowing for investment purposes

In certain exceptional circumstances, we will be prepared to authorise trustees:

  • to borrow for the purposes of investment; and
  • to charge trust property by way of security for such borrowing (if land is to be included in the charge the Order should contain directions requiring compliance with the restrictions on mortgaging imposed by s.124).

Normally we would not confer a power which would allow trustees to put at risk any part of the charity’s funds by borrowing against them for the purposes of acquiring further investments. However, where trustees can demonstrate that such a practice would enable them to administer the charity more effectively and to make better use of its funds, we may agree to extend a charity’s investment powers for that purpose. (For example, borrowing may be appropriate where there is a short gap between a purchase of property and the maturing of a deposit, and borrowing would remove the need to realise other investments).

Each case must be treated on its merits, but by way of illustration, we have in the past conferred power on a charity with assets of £7m to borrow for a period not exceeding three months, where the scale of the borrowing was limited to a maximum of 3% of the value of the trust fund. The purpose for which the trustees may borrow needs to be strictly and precisely defined.

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OG 22 B3 - 14 March 2012

OG 22 B3 Mortgages and S.124 of the Charities Act

 

1. Do the trustees need to ask for an Order?

S.124(1) of the Charities Act provides that subject to s.124(2) no mortgage of land held by or in trust for a charity shall be granted without an Order of the court or of the Commission. However, in many cases the trustees will not need to come to us for an Order, as long as they comply with the provisions set out in s.124(2). This subsection provides that s.124(1) shall not apply to a mortgage of any such land where the trustees have, before executing the mortgage, obtained and considered proper advice, given to them in writing, on the matters mentioned in s.124(3) in the case of a loan or grant, or s.124(4) in the case of any other obligation – see section 2 below.

If the trustees do not or cannot comply with these requirements then an Order will be needed. For us to be able to make such an Order we would need to consider the same sorts of information that the trustees would take into consideration when undertaking the transaction without our authority – see section 8 below.

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2. Matters on which advice is needed

The matters mentioned in s.124(3), for when the mortgage is to secure repayment of a proposed loan or a grant, are whether:

  • the loan or grant is necessary (ie to enable the trustees to pursue the course of action for which they are seeking the loan or grant) (s.124(3)(a));
  • the terms of the proposed loan or grant are reasonable, having regard to the charity’s status as the prospective recipient of the loan or grant (s.124(3)(b)); and
  • the charity can repay the loan or grant on the proposed terms (s.124(3)(c) (ie without prejudicing its other charitable activities).

The reference to the “status of the charity as the prospective recipient of the loan or grant” in bullet point 2 above refers to the charity’s creditworthiness, and the risk which the charity presents to the lender or grantor. In other words, the charity may represent a low risk to a lender or grantor and may therefore be able to negotiate terms which are more favourable than those generally available to other recipients of loans or grants. The opposite, can of course, be true, hence the need for proper advice.

If the trustees consider that they are unable to comply with these requirements, they should apply to us for an Order.

Where the mortgage is to secure the discharge of any other proposed obligation, the relevant matter mentioned in s.124(4) is whether:

  • it is reasonable for the charity trustees to undertake to discharge the obligation having regard to the charity's purposes.

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3. Meaning of “proper advice”

“Proper advice” is defined in s124(8) of the Charities Act as the advice of a person:

  • whom the trustees reasonably believe to be qualified by his or her ability in, and practical experience of financial matters; and
  • who has no financial interest in relation to the loan, grant or other transaction in connection with which his or her advice is given.

The subsection specifically permits a suitably qualified employee of the charity to give proper advice.

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4. Credentials of adviser

In deciding whether a particular person has the ability and experience to advise them under s.124(8)(a), the trustees must consider the nature and complexity of the transaction upon which advice is being sought. We cannot consider the credentials of individual advisers on behalf of charity trustees. This is a matter within the trustees’ discretion. They must be satisfied that they can demonstrate that if called upon to justify their choice of adviser they have considered the matter fully.

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5. Having a financial interest in the loan

For the purposes of s.124(8)(b), a person may be said to have a financial interest in relation to the loan, grant or other transaction in connection with which his or her advice is given if there is a possibility that he or she will enjoy a material financial gain as a direct consequence of the charity taking or incurring (or not taking or incurring) the loan, grant or other obligation. Similarly, there may be a financial interest if, as a direct consequence of the charity taking or incurring (or not taking or incurring) the loan, grant or other obligation, he or she avoids making a material financial loss.

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6. Acting on advice

Trustees will not have fulfilled the requirements of s.124(8) if they decide to accept the terms of a proposed mortgage without having considered proper advice. Trustees would be unlikely to be regarded as having acted properly if they act against or ignore the advice of someone more experienced than themselves, without good reasons. (The standard generally required of a trustee is to take the precautions which a prudent man of business would take in managing his own affairs).

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7. Trustees’ decisions on the mortgage

7.1 Taking decisions

The trustees’ consideration of the written advice which they have obtained under s.124(3)-(4), and their decisions based on that advice, should, where practicable, be made and minuted at a properly constituted trustees’ meeting. Alternatively, the trustees may consider the advice between themselves in correspondence, or orally. If oral approval is given, a written record should be made as soon as possible. We would expect all trustees to be party to the decision (they are jointly and severally responsible) but provided the meeting is quorate, a binding decision can be made.

 

7.2 Delegating decisions

The Trustee Act 2000 provides wide powers of delegation - see OG 86 B3 - to charities other than charitable companies. If trustees wish to delegate decisions in relation to mortgage transactions, they must ensure that the following conditions are met:

  • in delegating the matter, the trustees must comply with the duty of care at s. 1 of the Act;
  • the terms of the delegation must be agreed by the trustees at a meeting and set out clearly in writing; and
  • the terms of the borrowing, grant or other obligation must be reported back to the trustees as soon as possible. It is particularly important to draw this requirement to the trustees’ attention if the charity’s governing document does not provide for it. Trustees may wish to consider using the power of amendment in the governing document (if one exists) to include a requirement for sub-committees to ‘report back’.

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8. Our considerations when an Order is required

If trustees consider that they are unable to fulfil the requirements of s.124(3)-(4) and s.124(8), they will need to approach us for an Order. 

We should make an Order under s.124(1) only if we are:

  • satisfied that the proposed transaction is reasonable and in the interests of the charity;
  • clear exactly what the transaction involves (this will need to be described in the Order) – for example how much money is being lent or granted, or what undertaking is being given – and that the trustees understand this;
  • sure about the purpose of the transaction and how this advances the charity's objects; and
  • satisfied that the trustees have identified any risks to the charity if they proceed and how these risks have been managed or minimised;
  • satisfied about the reasons why the trustees cannot comply with the statutory requirements and that they were not simply applying for the sake of convenience rather than going through the s.124(3)-(4) procedures.

In all cases we should ask the trustees to provide us with:

  • a copy of their charity's accountant or financial adviser’s advice – this would include information showing:
    • that it is reasonable for the charity to enter the agreement on the proposed terms;
    • the ability of the charity to discharge any obligation which may be imposed as a result of entry into those terms;
    • possibly, reference to any existing borrowing or other liabilities of the charity,
  • copies of all the documents and paperwork relating to the loan or grant;
  • a copy of the advice the trustees have received from their legal adviser confirming the ability of the charity to enter in to the arrangements;
  • information about any source of finance for the project not provided by the loan or grant;
  • the reasons why the trustees consider they cannot comply with the statutory requirements.

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9. Pressure from trustees’ lenders, grantors or other chargee

Lenders, grantors or chargees may be concerned that, even though the trustees have complied with the requirement to obtain proper advice, and certify this on the deed of charge, their security will be invalid if the trustees did not have the necessary power to enter into the mortgage in the first place. Our position is set out in section 4 of OG 22 B1, and we should in these cases follow the approach set out in section 8 of that OG.

lawyer_refer If the chargees remain unconvinced that TLAT 1996 gives charity trustees power to charge property, advice should be sought from Legal Services.

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10. “Comfort” Orders

Some chargees take the view that charity trustees cannot rely on the Trusts of Land and Appointment of Trustees Act 1996 (TLAT 1996), or the Trustee Act 2000 (TA 2000), to borrow or mortgage without an express power in the charity’s governing document or an Order under s.105 of the Charities Act.

Consequently we will no longer make 'comfort' Orders in these cases. This means that we decline any request for a legal permission where there are no serious issues that would justify the exercise of our power and it is being sought simply to provide reassurance.

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11. Borrowing not covered by TLAT 1996

A borrowing to finance the purchase of a non-land investment by the charity would be an example of a borrowing which would not be authorised by TLAT 1996; see OG 22 B2 section 5.

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12. Further advances

Trustees may enter into a mortgage which permits them to take out further advances without the need to come to us for an Order and without the need to undertake an entirely separate transaction. This is detailed in s.124(6)-(7).

Where the trustees have executed such a mortgage they may "tack on" further lending if, before entering into the further transaction, they obtain and consider proper advice, given to them in writing, on the matters mentioned in s.124(3)-(4) as appropriate – see section 2 above.

This regime puts the onus back on the trustees to work through the same considerative process as they did for the first loan or grant but without the need for an Order from us.

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OG 22 B4 - 14 March 2012

OG 22 B4 Mortgages to which S.124 does not apply

 

1. Summary

Certain mortgages are excluded from the provisions of s.124 by s.124(9) which provides that nothing in that section applies to mortgages of land for which general or special authority is given as mentioned in s.117(3)(a). In executing such mortgages trustees will not need to follow any of the requirements of s.124, but the duty imposed by trust law to secure the best terms reasonably obtainable for the charity still applies. S.117(3)(a) (which also applies to sales, leases and other disposals of land) provides in effect that:

  • any mortgage for which general or special authority is expressly given:
  • in an Act of Parliament; or
  • in a statutory instrument; or
  • in a legally established Scheme;

is not subject to the requirements of s.124 unless the authority is subject to the making of an Order of the Court. OG 22 B6 provides guidance on s.36 of the Charities Act 1992.

For example, an RSL does not need our consent to a charge over their property as a security for a grant. The charge over the property would fall within s.124(9) of the Charities Act (effectively incorporating s.117(3)(a) into s.124), because the Housing Corporation General Consent 2003, by Order under s.9 of the Housing Act 1996, provides general authority for the disposition. As it has effect under an Act of Parliament, this charge does not require our consent as well.

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2. Circumstances in which s.124 does apply

Where trustees rely on an authority which is within the terms of s.117(3)(a), but is subject to the sanction of an order of the Court, s.124 does apply to the grant of the charge.

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3. When the sanction of the Court is required

If the sanction of the Court is required to the grant of a charge, and that sanction is required by something which is in the trusts of the charity, then we can authorise the grant of the charge (s.105(7)). We would normally include in our s.105 authority directions which would require compliance with s.124(1)-(2).

If the sanction of the Court is required to the grant of a charge, and that sanction is required by general legislation, then the sanction of the Court is necessary, because it is not then required by “the trusts of the charity” and s.105 cannot apply.

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4. The Trusts of Land and Appointment of Trustees Act 1996

In our view, neither s.6(6) nor 6(8) of TLAT 1996 provide authority to mortgage land within the meaning of s.117(3)(a).

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OG 22 B5 - 14 March 2012

OG 22 B5 Overdrafts

 

1. Consent not required

S.124(2) of the Charities Act extends to securing land for borrowing by way of an overdraft, and therefore it is not necessary for trustees to seek our consent under s.124(1). An overdraft is a loan within the meaning of s.124(2) (see section 2 below). Provided that lending institutions lend money for particular purposes, which are covered by s.124(2), the trustees may mortgage land as security for the repayment of a loan for that purpose, whether by way of overdraft or not. A “particular purpose” would include circumstances where the trustees have clearly identified a need for expenditure and taken proper advice on this point.

To illustrate this point, for example, the trustees of a school could borrow money by way an overdraft secured against the charity's land without our consent under s.124(1) where:

  • there was a clear purpose for the borrowing – for example, to refurbish a science block or pay salaries; and
  • the trustees had taken proper advice covering the issues in s.124(3).

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2. No statutory definition of loan

In the Charities Act, the word “loan” is not defined. Where a statute does not distinguish between loans and overdrafts in the manner by which borrowing is taken, it is reasonable to conclude that the statute does not require any distinction to be made to effect its purpose. Certain statutes separately refer to loans, or define them in terms which differentiate between different types of borrowing or the taking of credit. It is necessary to construe the word “loan” in its context within the statute in which it is being used, and the other statutes have no effect on the construction of the term as used in the Charities Act. It is immaterial whether the overdraft is a single advance or a series of advances. Neither does it matter whether the advance is for a specified amount or a fluctuating amount.

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3. Ensuring that a charge given under s.124(2) is effective

For a charge to be effectively given under the s.124(2) procedure, it must be granted after that procedure has been completed. The substantial terms of the loan to be secured must be decided upon before the charge is granted. For example the terms agreed may need to include fluctuations in the amount of the loan or the period for repayment.

However, if:

  • the terms are changed after the charge has been given; or
  • a new loan contract is substituted for the former after the charge has been granted; or
  • if it is desired to add the new loan to the existing security,

then:

  • the trustees do not need to come to us for an Order if they comply with s.124(7) and obtain and consider proper advice given in writing on the matters mentioned in s.124(3)-(4) – see section 12 of OG22 B3.
  • If they do not or cannot comply with these requirements, then an Order must be obtained.

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OG 22 B6 - 14 March 2012

OG 22 B6 S.36 of the Charities Act 1992: Removing the need for our consent to certain transactions

 

1. Trusts requiring consent to mortgages

The governing document of a charity may require our consent to be given to disposals of land (which term includes the granting of a mortgage). However, s.36(1) of the Charities Act 1992 stipulates that any provision:

  • establishing or regulating a charity contained in, or having effect under, any Act of Parliament; or
  • contained in the trusts of a charity;

shall cease to have effect insofar as it provides for dispositions of, or other dealing with the charity’s land to require our consent. But where the power is exercisable subject to:

  • our or the court’s consent; or
  • the court’s consent alone;

the requirement for the court’s consent continues to apply. This is the result of an oversight during the preparation of the Bill. In practice, it should not be suggested to a charity that application is made to the court because the mortgage can be authorised by us by an Order made under s.105(7) (“An order under this section may authorise any act even though…the trusts of the charity provide for the act to be done by or under the authority of the court”).

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2. Mortgages still subject to s.124

A copy of the Decisions of the Commissioners Volume 5 pages 21-24, in relation to powers of sale conferred by Scheme, is given in OG548, but Counsel's Opinion, upon which this decision is based, applies equally to mortgages. The end result is that where trustees propose to exercise a power of borrowing/mortgaging conferred by Scheme, which includes either the words “Subject to the authority of a further Order or Orders of the Commissioners” or the words “subject to such consents as are required by law”, the mortgage is, in our view, subject to the provisions of s.124 of the 2011 Act.

lawyer_refer If trustees do not accept the position even after our views have been explained to them, the case should be referred to Legal Services for further advice.

Where, in the future, a Scheme or Order is needed to confer a power of borrowing/mortgaging on trustees, the procedure to be followed is that described in OG 500 Schemes and OG 501 Orders.

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OG 22 B9 - 14 March 2012

OG 22 B9 Interest rate swaps and other similar instruments

 

1. What is a swap?

“Swap” transactions are arrangements or agreements entered into by the trustees, by which they acquire the right to move from one type of interest rate for their borrowing to another. For example, a charity might take out a loan at a variable rate of interest and then swap the basis on which it pays interest to a fixed rate of interest. A glossary of terms is set out in OG 22 G1 defining the most common types of interest rates which staff will come across in dealing with transactions of this type. A “swap” in this context is not a re-mortgage.

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2. Reasons for swaps

Swaps may be proposed:

  • at the time the borrowing is first taken out; or
  • in connection with an existing borrowing.

In either case, there may be a variety of reasons why such a transaction is proposed. The trustees may, for example, wish to have the certainty of a fixed rate of interest which will enable them to budget with some degree of certainty during the period of the loan. Alternatively, if interest rates are falling, trustees might wish to move from a fixed rate to a variable rate because the latter would be cheaper. In all cases it will be necessary for staff to explore in some detail why the swap is proposed and why the trustees consider it advantageous. It is important to bear in mind that the success of these transactions depends on interest rates falling or rising in conformity with the expectation of the borrower at the date of the swap.

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3. Power to enter into a swap

The ability of trustees to enter into this type of transaction depends on:

  • whether trustees have the power to enter into the transaction; and if they do:
    • whether its exercise would be consistent with their duties to exercise all trust powers in a trustee-like manner; and
    • whether they have sought and considered appropriate advice.

 

The power to enter into the transaction will depend on what powers are conferred by the charity’s governing document (see OG 22 B1 section 3). It will only be in rare cases that an express power to enter into a swap transaction will exist. Normally, staff will have to determine whether the swap transaction can be seen as falling within the trustees’ powers as an incidental aspect to the exercise of a borrowing power. In the case of an existing borrowing, it may be more difficult to argue that the swap was incidental to the exercise of a borrowing power, although it may be easier to see the justification where a swap is in connection with a proposed new borrowing. The issue in each case must be carefully examined to decide whether the swap is:

  • merely an integral part of managing the charity’s debt; or
  • a speculative venture.

For example, a swap in relation to an existing borrowing might be justifiable where a charity enters into a borrowing in a period where borrowing rates are relatively stable, but subsequently, borrowing rates become unstable with wide fluctuations. In such a case, a charity may seek to stabilise its borrowing rate by taking out a swap. Clearly this would fall in the category of managing the charity’s debt and not a speculative venture.

If the charity has no power to enter into the swap, our consent by Order under s.105 will be required.

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4. Trustees’ exercise of power

If the charity has a power to enter into a transaction, or we are considering empowerment by Order under s.105, it will be necessary to determine whether the exercise of the power is consistent with trustee duties. In Hazell v Hammersmith and Fulham London Borough Council (1991) 2 WLR 372 the court considered the powers of local authorities to enter into swap transactions. Although the borrowing and investment powers of charity trustees are not the same as local authorities, the court made general observations which are relevant to any analysis of the duty of charity trustees in entering into transactions of this type. In his speech, Lord Templeman described swap transactions as those which “may involve speculation or may eliminate speculation” but speculation was “inherent in any transaction which was undertaken solely for the purpose of obtaining a profit by forecasting future interest rate trends”. Lord Templeman also said “Individual trading corporations and others may speculate as they please or consider prudent, but a local authority is not a trading currency or commercial operator with no limit on the extent of its borrowing or with powers to speculate”.

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5. Swap transactions not akin to insurance

In the same case, Lord Templeman also dismissed the argument that swap transactions can be regarded as a form of insurance. He expressed the view that they were more akin to gambling than insurance, and stated that “a local authority which borrowed in reliance on future successful operations would be failing in its duty to act prudently in the interests of the ratepayers". Lord Ackner gave a similar analysis of such transactions in his judgement on pages 398 and 399 of the law report.

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6. Deciding if a transaction is appropriate

It follows from the remarks made by Lord Templeman that swap transactions which are entered into solely on the basis of forecasting future interest trends would not be consistent with the duties of trustees. Generally, where staff are dealing with an existing loan, and a swap transaction is proposed, the transaction will normally be one involving speculation on future interest rate movements, and therefore in conflict with the duties of trustees. On the other hand, a charity may be proposing to take up a new borrowing and the trustees may see a swap as a means of enabling the charity to obtain a loan on terms which are in the charity’s best interests. This may well be an appropriate exercise of the trustees’ discretion. The following checklist of points may help staff in deciding the matter:

  • What fee would be paid for the swap?
  • Why is it proposed?
  • What are the advantages to the charity?
  • What risks are there and do the advantages outweigh any risks?
  • What is the opinion of the trustees’ financial adviser?

lawyer_referaccountant_referThis type of transaction can be very complex, and the issue of speculation or its elimination can be very finely balanced. Staff should seek the guidance of the accountants in any case of doubt. If an existing charity seeks to argue that its powers of investment permit it to indulge in swap transactions, the case must also be referred to Legal Services.

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7. Proposed charities

Staff in Registration must bear in mind that the decision in Hazell (see section 4 above) means that the inclusion of a power to enter into swap transactions in the governing documents of new charities must be questioned, as it is not appropriate that trustees should be given the power to speculate.

lawyer_refer If it is argued that the powers of investment of any proposed charity should specifically include such a power, the case must be referred to Legal Services.

 

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OG 22 B10 - 14 March 2012

OG 22 B10 Unsecured loans involving trustees' indemnity

 

Note: the guidance in this OG relates to unincorporated charities only. Charitable companies borrow money in their own name, which does not involve, in theory, trustees borrowing in their own names and relying on being indemnified from the charity.

Where trustees have a power to borrow money, and repayment of the money is not secured by a formal charge against any property of the charity, the lender will be limited to relying on the personal covenant of the trustees to repay the loan. But trustees who borrow funds to apply for the purposes of the charity will expect to be indemnified out of the charity’s assets rather than having to pay back the money personally. Such a right of indemnity will be secured by an equitable charge over the property of the charity. This charge arises by operation of statute law (s.30(2) of the Trustee Act 1925). It does not depend for its validity upon compliance with s.124 of the Charities Act.  However, the trustees’ right to an indemnity only exists if the trustees have, in incurring the loan, and when using the monies borrowed, been acting properly in the administration of the charity.

If the loan is called in early by the lender and the trustees approach us for advice on alternatives to the sale of land for the purpose of repaying the loan, we should encourage them to examine other options. Where it seems likely that the issue is a symptom of wider financial difficulties, we should refer trustees to our publication Managing Financial Difficulties and Insolvency in Charities (CC12).  Caseworkers may also find it useful to refer to OG 30 on the same subject.

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OG 22 C1 - 14 March 2012

OG 22 C1 Statements and certifications in mortgages required by SS.125-126

 

1. Extent of requirements

Ss.125-126 of the Charities Act require certain statements and certificates to be included in mortgages. S.125(1) and s126(1) apply to all charities, including exempt charities, but s.125(2) applies only to charities which either obtain consent under s.124(1), or meet the requirements of s.124(2).

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2. Content of statements

S.125(1) requires that any mortgage of land held by or in trust for a charity shall state that:

(a) the land is held by, or in trust for a charity; and either:

(b) the charity is an exempt charity; or

(c) the mortgage falls within s.124(9) (ie that the mortgage is one for which general or special authority is given by s.117(3)(a)); or

(d) the mortgage is one to which the restrictions in s.124 apply.

Each mortgage must, therefore, contain two statements: that at (a) above and one of either (b), (c), or (d) (the latter three are mutually exclusive).

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3. Prescribed forms of statement

Where the land to be mortgaged is registered land, or is required to be registered under s.123(1) of the Land Registration Act 1925, the statement must be in a prescribed form (s.126(1)). “Prescribed” means prescribed by rule 180 of the Land Registration Rules 2003 (SI 2003/1417). It is the responsibility of the trustees or their solicitor to ensure that any statement required under s.125/126 is correctly produced in the prescribed form, and included in the mortgage deed. The text of the SI can be found on the Legislation.gov.uk website. A full description of the requirements of the SI can be found in section 6.2.2 of the Land Registry Practice Guide 14, which is available on the Land Registry website.

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4. Content of certificates

S.125(2) requires that:

  • where a mortgage of land held by, or in trust for a charity falls to be authorised by Order under s.124(1), the trustees must certify in the mortgage that it has been sanctioned by an Order of the court or of the Commission as the case may be;

and

where, instead, s.124(2) applies to the mortgage the trustees must certify in it:

  • that they have power under the charity’s trusts to grant the mortgage; and
  • that they have obtained and considered advice in accordance with the requirements of that subsection.

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5. Certificates and non-prescribed forms of statement

Where there is no prescribed form of statement, or where a certificate by the trustees is required, it is for the trustees or their solicitor to devise a form of wording which will satisfy the statutory requirement. We do not offer any model forms, nor will we comment on the sufficiency of forms put forward by other people.

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6. Who should certify

The trustees are required to give the certificate in the mortgage deed, but in the case of a charitable company, the mortgage will be executed by the company itself, and not by the directors, who are the trustees. Although the matter is not free from doubt, it should be approached on the basis that the persons executing the mortgage on behalf of the charity, company or not, can give the certificate as agents for the trustees.

The Charities Act states that “charity trustees” shall give the s.125(2) certificate in the mortgage, but it is considered that they can delegate this function to the (usually two) people who will execute the mortgage on behalf of the charity or its trustees as a whole (under s.333 of the Charities Act, or, in the case of a company, under s.44 of the Companies Act 2006).

Where the charity trustees have had direct responsibility for the conduct of the mortgage transaction, and two of their number will actually execute the mortgage, responsibility for giving the certificate can simply be delegated to those two, under s.333.

If a non-trustee executes the mortgage on behalf of the charity or its trustees, the delegation would have to be effected by power of attorney, as s.333 does not permit delegation to non-trustees. The non-trustee would also need a compliance report from the trustees, as he or she personally would not have been involved in the consideration of the mortgage transaction.

The position is more complicated if trustees have delegated responsibility for the conduct of the mortgage transaction to a committee (see OG 22 B3 section 7.2).

The committee can give the s.125(2) certificate on behalf of the trustees, but they, too, may wish to sub-delegate to two people who actually execute the mortgage on behalf of the charity or its trustees. this would have to be done by power of attorney as s.333 can only be used by trustees; as mentioned above, if those executing the mortgage were not themselves involved in the conduct of the mortgage transaction, they would need to be provided with a compliance report.

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7. Protection of mortgagee’s and later interest in land

In cases where trustees have given the required certificate, s.125(3) protects the title of anyone who acquires an interest in the land for money or money’s worth either directly from the charity, or afterwards. In these cases, it is conclusively presumed in favour of such a person that the facts were as stated in the certificate. This means that, even if the trustees are found later on to have given a false certificate, the mortgage in which the false certificate was contained will be valid in favour of such a person, unless that person was aware:

  • that the certificate was false; and
  • that the transaction was not in the interests of the charity (equity would then prevent the exploitation of the false certificate).

The phrase “money’s worth” would include other forms of valuable consideration such as the provision of land or the erection of buildings for the charity.

S.125(4)-(5) applies in cases where one or other of the certificates mentioned in section 4 above ought to have been given by the trustees, but was not given. In such cases, the mortgage remains valid in favour of the person who, in good faith, (whether under the mortgage or afterwards) acquires an interest in the land for money or money’s worth, in any of the following circumstances:

  • where s.124(1) applied to the mortgage, and an Order of the court or the Commission was obtained to sanction it;
  • where s.124(1) applied to the mortgage, but no order of the court or the Commission was obtained to sanction it;
  • where s.124(2) applied to the mortgage, but the trustees did not have power under the charity’s trusts to grant it (regardless of whether or not the trustees obtained and considered the advice required under that subsection);
  • where s.124(2) applied to the mortgage, but the trustees did not obtain and consider the advice required under that subsection (regardless of whether or not the trustees had power under the charity’s trusts to grant the mortgage); or

Where s.124(2) applied to the mortgage and the trustees had power under the charity’s trusts to grant the mortgage, and obtained and considered the advice required by that subsection.

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OG 22 C2 - 14 March 2012

OG 22 C2 Deposit of title deeds as security

 

1. Deposit of title deeds alone do not create an equitable mortgage

Before 1989, it was considered that the deposit of title deeds created an equitable mortgage over a charity’s land (ie no written charge is entered into as security; the lender merely holds the deeds). However, since the Law of Property (Miscellaneous Provisions) Act 1989 came into effect, it is no longer possible to create an equitable mortgage of land by deposit of title deeds alone. (See United Bank of Kuwait Plc v Sahib (1994) 2 WLR 94). The deposit of deeds must now be accompanied by a written memorandum of the agreement between borrower and lender, as otherwise, no mortgage or charge will be created. S.124 applies to the creation of a mortgage or charge in this way.

If there is no written memorandum accompanying the deposit of title deeds, the mortgage or charge will be invalid, and the borrowing will simply be unsecured.

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2. Where the charity is a company

If the charity is a company, then the unsecured loan will be repayable under the corporate covenant. In an insolvency situation, the loan will have its appropriate priority, in accordance with the usual insolvency rules. 

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3. Where the charity is not a company

 

3.1 Where the borrowing is within the trustees’ powers

If the borrowing is within the trustees’ powers, they will have their usual equitable charge over the property under their administration to secure their liability under the contract with the lender. This charge is created by statute (s.39(2) of the Trustee Act 1925) and is not subject to s124. In any case, a charge which arises by operation of law is not “granted” within the meaning of s124(1). Nor is it affected by the Law of Property (Miscellaneous Provisions) Act 1989; this only applies to contractually created interests, as in the United Bank of Kuwait case. It accordingly extends to land belonging to the charity. Nothing is achieved by action under s124(1). The lender stands in the shoes of the trustees (subrogation). He has the same charge over the trust property, including the land, as they do.

If money is properly borrowed, say for investment, and authorised investments are purchased as a result, then the trustee may have the right to repay the loan out of the trust fund in full, even though the investments have declined in value.

Enquiries from trustees on this point may require referral to Legal Services.

 

3.2 Where the borrowing is outside the trustees’ powers

If the borrowing is outside the trustees’ powers, then, of course, there is no question that either the trustees or the lender will have any charge over the trust property for securing the borrower’s liability.

If monies are borrowed by a charity trustee, and are then used for a purpose other than the purposes of the trust, then repayment is a personal, contractual obligation of the person who borrowed the money. Neither the trustee not the lender will have any right to have the loan repaid out of the trust property.

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OG 22 C3 - 14 March 2012

OG 22 C3 Land vested in the Official Custodian for Charities

 

1. Power of trustees under s.91(3) of the Charities Act

Where trustees are mortgaging land vested in the name of the Official Custodian, s.91(3) gives them power in his name and on his behalf to execute the mortgage. This applies (subject to the exception mentioned in section 2 below) whether or not we have authorised the mortgage.

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2. Limits to trustees' power

We have a range of powers under ss.76-87 of the Charities Act which we may exercise to protect charity property that is at risk as a result of maladministration. These powers may be exercised at any time after we have instituted a statutory inquiry under s.46. One such power, at s.76(3)(c), is to make an Order vesting property at risk in the name of the Official Custodian. To prevent trustees mortgaging, without reference to the Commission, any land which has been so vested, s.91(4) provides that trustees may not exercise the power at section 1 above unless the mortgage has been authorised by an Order of the Court or the Commission.

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OG 22 C4 - 14 March 2012

OG 22 C4 Levels of authority

 

Orders authorising or refusing borrowing/mortgages will be dealt with in accordance with our Authorised Officer policy.  See OG 702.

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OG 22 C5 - 14 March 2012

OG 22 C5 Guidance relating to Orders

 

1. Type of Order

Orders are made by sheet Order, using standard forms, drafted in accordance with divisional working instructions. Model Orders can be found in the Procedures and Practice Manual. The endorsed Order procedure is not normally used, as mortgage deeds are unlikely to be too complex or too involved to be set out in a Sheet Order.

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2. Recitals

Unless an Order is authorising a second mortgage on charity property to a different lender, it is unnecessary for the Order to recite the particulars of previously authorised borrowings by the charity which are not fully repaid. However, the charity should be keeping such records as a matter of best practice.

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3. Repayment period

The period within which the trustees are authorised to repay the sum borrowed should normally run from the date of the Order and not from the date of the borrowing. However, the date of the Order may not always be appropriate in the case of fixed-term borrowing. For example, where trustees are borrowing a substantial sum for the purpose of providing or improving charity buildings, the work may take some time to complete. The sum concerned will be advanced by instalments, and the Order will direct payment within x years of the date of the final advance.

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4. Metrification of land measurement

From 1 January 1995 the measurements of land described in the body of a Scheme or Order or in a schedule must be in metric by virtue of the European Community Units of Measurement Directive 1989.

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OG 22 D1 - 14 March 2012

OG 22 D1 Regulations made under S.29(4) of the Charities Act 1960 which have ceased to have effect

 

TITLE OF REGULATIONS SI NUMBER

The Charities (Baptist, Congregational and Unitarian Churches and Presbyterian Church of England) Regulations 1961

1961/1282
The Charities (Society of Friends, Fellowship of Independent Evangelical Churches and Presbyterian Church of Wales) Regulations 1962 1962/1815
The Charities (Church of England) Regulations 1963 1963/1062
The Charities (Methodist Church) Regulations 1978 1978/1836
The Charities (Methodist Church) Regulations 1961 1961/225
The Charities (Religious Premises) Regulations 1962 1962/1421

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OG 22 G1 - 10 March 1999

OG 22 G1 Glossary 

 

This glossary provides definitions of terms used in the guidance relating to SWAPS - OG 22 B9.

   

BASE RATE

The percentage rate of interest on a borrowing which is set from time to time by the Bank of England.

CAP/CAPPED A variable interest rate, but one which cannot exceed a pre-set or "capped" figure.
COLLAR A variable interest rate, but one which can only fluctuate between pre-set minimum and maximum figures. The rate is "collared" between the two extremes.
FIXED RATE A rate of interest which is fixed throughout the period of the loan.
INTEREST RATE The rate, normally expressed as a percentage of the amount borrowed, at which interest is paid on a loan.
VARIABLE RATE A percentage rate of interest which may vary during the period of the loan. It is normally expressed as a certain percentage above the base rate.

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