Guidance

Charity land: mortgaging your charity’s land in England and Wales

Updated 7 March 2024

Applies to England and Wales

• Publication for Northern Ireland
• Publication for Scotland

In most cases you can take out a mortgage or charge on your charity’s land in England or Wales without asking for authority from the Charity Commission.

You must:

• have a power to borrow or mortgage. This can come from the law (a statutory power) or your charity’s governing document. Most charities have one or other of these powers, but if you are unsure you should take professional advice
• follow the relevant requirements below

In this guidance ‘land’ means any:

• land owned by, or held in trust for, your charity
• buildings on the land
• rights over land such as easements or restrictive covenants

Section 124 of the Charities Act 2011 (as amended) sets out certain requirements which charities must meet when mortgaging their land. These requirements are explained in this guidance.

If you cannot meet these requirements, or you have not met these requirements, you must apply for Commission authority before mortgaging your charity’s land. In your application, you will need to explain why you have not, or cannot, meet the legal requirements, and provide evidence that:

• your charity needs the loan or grant to achieve what it plans to do
• the loan or grant terms are reasonable for your charity
• your charity has the ability to repay the mortgage under the proposed terms

Requirements that apply to all mortgages and charges

You must obtain and consider proper advice, in writing, on a proposed mortgage. The requirements on what the advice must cover vary depending on the reason for the mortgage. These are explained in sections 2 and 3 of this guidance.

However, all advice must be from a person:

• you reasonably consider to have the necessary ability in and experience of financial matters
• with no financial interest in the transaction

We recommend that your adviser is professionally qualified, such as your charity’s accountant or financial adviser.

The adviser can be a trustee, officer or employee of your charity if they have the right ability or experience. If they are then you:

• must manage any conflicts of interest
• must make sure, if a trustee or officer is to be paid for giving advice, that your charity’s governing document doesn’t prevent payment of trustees and follow the legal requirements for paying trustees. Read our guidance about trustee expenses and payments
• should check your charity’s insurance cover. Not all insurance will cover negligent advice given by an adviser who is also a trustee, officer or employee of your charity

If you re-mortgage any land or the terms of a mortgage change and increase your charity’s liability then you must take proper advice again.

Requirements for mortgages or charges to secure repayment of a grant or loan

Before you mortgage your land to secure repayment of a grant or loan you must obtain and consider proper advice, in writing, which states:

• whether your charity needs the loan or grant to achieve what it plans to do
• whether the loan or grant terms are reasonable for your charity
• whether your charity is able to repay the mortgage under the proposed terms

Requirements for mortgages or charges to secure other obligations

You may need a mortgage to secure a different type of obligation. This could include guaranteeing a loan for another charity, which means your charity would agree to repay the loan if the other charity was not able to.

You can only do this when the obligation is compatible with your charity’s purposes.

For example:

A charity with a purpose of providing housing for older people could guarantee a loan for another charity to refurbish its housing for older people.

However, a charity with a purpose of providing housing for older people could not guarantee a loan to build a children’s playground because this would not be compatible with its purposes.

In these cases, you must obtain and consider proper advice, in writing, on whether it is reasonable for you to secure the obligation and whether it is compatible with the purposes of your charity.

Exemptions to the requirements

These requirements do not apply if:

• your charity is set up by an Act of Parliament and the mortgage or charge is authorised by the Act
• the mortgage or charge is authorised by a Commission or court scheme or other statutory provision
• your charity is an exempt charity (although your principal regulator may set other requirements)
• you are acting in your role as a liquidator, provisional liquidator, receiver or administrator

Always take professional advice if you are unsure about which requirements to follow.

Read the section on Exemptions to following the legal requirements in our guidance about the disposal of land.

Keeping mortgage records

For all types of mortgages, you should keep:

• all the documents connected to the transaction
• a copy of the legal opinion from your charity’s adviser to your lender which says that your charity can enter into the mortgage
• documents that show any other finance for the project
• any documentation from your charity’s accountant, financial adviser or other appropriate person that shows you have received and considered proper advice

Keeping these records will help you to show that you have acted properly.

Statements in the mortgage documents

The mortgage documents must include specific statements that confirm:

• whether the land is held by, or in trust for, a charity
• whether the charity is an exempt charity or whether it is excluded from complying with the requirements as explained in section 4 above; the statement must also state why it is exempt
• where the charity is not exempt or excluded from following the requirements, that the charity is subject to these requirements

If the mortgage is subject to these requirements, you must also certify that either:

• you have the power in your governing document to grant the mortgage and that you have complied with the relevant requirements or
• the Commission or Court has sanctioned the mortgage by an order

You should seek legal advice on this. Your solicitor or other professional adviser will draft the documents for the mortgage.

The statements and certificate must include certain information which is certified by the trustees of the charity. The Land Registry Practice Guide gives further details on this.