Mortgage for a not for profit organisation?

thursdaynext

Hello - not strictly either small business or charity, but this seems to be the most appropriate board!

I am a member of a not-for-profit, membership organisation. We own outright a large building where we run classes for our members; we rented it for a number of years, while we saved from our surplus income, and then bought with a mix of savings and a loan from one of our founding members. This loan was paid off a couple of years ago. Because of the nature of our organisation, the building is owned by our members (c. 500 people) - that is, if the organisation were to close tomorrow (which it won't!) then the building/other assets would be sold and profit distributed among the membership.

Attached to the building is a small (2 up, 2 down) house. This is owned by someone else, who lives there - but now wants to sell. For a number of reasons, we are keen to buy this house although we haven't yet decided what we'd do with it - but we know we wouldn't be renting it out i.e. it wouldn't be a residential property any longer.

We've started looking for a mortgage but are coming up blank - no-one seems to want to lend to us. We have a good amount of savings, so the mortgage would be relatively small; the cottage needs a lot of work so we'd want to keep some of our savings liquid, to pay for that.

The alternative is to take out an unsecured loan (which at least one lender has said they will do), but I think this would be a relatively expensive way to do it, considering we have this very substantial asset we could use as security. Our accounts are healthy and we would have a high deposit against a relatively low loan amount - which we'd be looking to pay off as soon as possible. (That is to say - we are safe to lend to, but probably not very profitable for the lender!)

Has anyone any experience of a similar situation? Does anyone know of a mortgage lender who would lend to us? Or should we forget the mortgage and go for the loan? Any ideas welcome!

Haarlem

Does the organisation's constitution specifically say it can take out a mortgage?

Is the organisation incorporated? If not all members are liable for any default.

It is important you take legal advice.

thursdaynext

Don't know about the constitution, but to be honest I think it needs updating anyway. I assume that, as we've had a formal loan previously, the constitution includes something about borrowing in general; I will dig it out to see. And I don't think we're incorporated so will investigate that.

Legal advice will definitely come, but we need to establish what our options are! A mortgage is our preference, but if that's not possible then we'll need to decide on plan B and whether we take an unsecured loan or look to do fund raising among our membership.

Savvy_Sue

Another thing to think about is whether you'd be able to get planning permission for change of use if you don't intend to use the property as living accommodation any more. Depending on where you live this might be easy, or not so easy. What you don't want to do is buy it, then find you can't do what you want with it ...

Could be worth a chat with a planning officer, they won't give detailed advice but should be able to tell you what planning documents you need to look at for your area!