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Charities Act 2006

Commentary on Sections

Section 27: Restrictions on mortgaging

108.Section 27 makes a number of amendments to section 38 of the 1993 Act. At present, the grant of any mortgage over charity land requires the authority of the court or the Charity Commission, unless it is being granted by way of security for the repayment of a specific loan. Where the mortgage is granted for such a purpose, that authority is not necessary so long as the trustees obtain and consider proper advice, before executing the mortgage, on certain matters concerned with whether the loan is expedient in the interests of the charity. This section extends the circumstances in which a charity does not require the formal authority of the court or the Commission to allow land belonging to a charity to be used as security.

109.The substitution made by subsection (2) provides for the extension of the circumstances in which consent is not required, and prescribes the matters on which the trustees must obtain written advice in the case of a mortgage to secure the repayment of a proposed loan or grant (new subsection (3)), and in the case of a mortgage to secure the discharge of any other proposed obligation (new subsection (3A)).

110.New subsections (3B) to (3D) make provision for the régime for which consent is not required to be extended to mortgages which are intended to secure not only the loan which is under immediate consideration, but also any future loan which the lender might make to the borrower. This is subject to the requirement in new subsection (3D) that such a future transaction must not be entered into unless proper advice (as prescribed by new subsection (3) or (3A))has been taken in respect of that transaction.

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