Joint ownership with a charity?

GentleGin

I'm new so please be gentle! I've been sent here by one of my friends as I have a very complex situation!

My sister in law is the founder of a charity, I volunteer for this charity and have done for many years.

Very recently the charity was left a large amount of money. My sister in law offered to buy a property (that her friend has offered to sell to the charity cheaply) and let my partner and I rent it out. I graciously declined as I am currently in social housing and I am on the verge of being able to afford to do shared ownership.

The next day she called me back and said "well why can't WE do shared ownership?" She really wants to invest the funds in property but does not want to rent out the property to a random person because she needs to protect the charities interests. Her idea is that the charity put down half the capital for the house and I mortgage the other half, then pay her interest on the charities capital within the house, giving the charity a passive income. The board of trustees have met and have agreed to this.

The question is, is this even feasible? Surely there is no mortgage company in their right mind that would agree to a third party e.g. Charity having an interest in the property?

I am not sure how I feel about it from a moral perspective either, but don't really want to go there in this thread, & just want to address the practicalities.

tlc678910

Sounds inappropriate to me, would sound to an outsider like the charity misusing it's funds to help out friends. If the charity wants to buy a house and rent it out it should do it in a transparent way either on the open market or from a pool of people relevant to the charity e.g. disabled people or whatever the aims of the charity.
Tlc

davidmcn

GentleGin wrote: »

Surely there is no mortgage company in their right mind that would agree to a third party e.g. Charity having an interest in the property?

Correct. "Normal" shared ownership properties only work because there's an agreement between the social landlord and the lender about what happens if either of them wants to repossess. While in theory you could set up similar arrangements on an ad hoc basis with anyone else, lenders aren't going to do it.

Mojisola

tlc678910 wrote: »

Sounds inappropriate to me, would sound to an outsider like the charity misusing it's funds to help out friends.

This ^

Your SIL stands a good chance of being reported. How well will the charity do after people get to know that their donations are being used to help her family members?

AnotherJoe

Why does your sister think that investing in property is the best thing for the charity? Does that sit well with the aims of the charity , to become property speculators or let to family on the cheap? Why isn't it being spent on the charities aims?

Sounds close to fraud, I think the charity comission would have something to say about this.

GentleGin

Thanks for your responses. I'm going to suggest she contacts the charity commission to sound them out about this. Investing in property for capital returns is not uncommon for charities, but as I explained I'm not sure where it sits from a moral stance and I want to make sure it is within charitable activities before I agree to something - and it may not be possible from a mortgage point of view, which would make life easier if that is the case!

AnotherJoe

Massive conflict of interest here, so many aspects of that I'm shocked someone running a charity would even suggest this. Amateur hour in spades.

campbeji

Hi,

I see three issues with this;

1/ Is it OK for a charity to invest in property - assuming it doesn't conflict with the objectives of the charity and the rules of the charity, then I don't see why not
2/ Is it OK for the charity to rent out to a family member of a person with control - There was no mention of it being done 'cheap' or with any other benefit being derived. The OP is being considered as a trusted person who will fulfill their obligations and responsibilities (I assume you are). If this is done in a legal way, with proper payments etc then I don't see a problem with it. However, as you have seen from some of the other responses, people will quite often jump to conclusions and read the worst into a situation.
3/ Will a Mortgage company give you a mortgage. - this is where the main problem would be. It depends on how it is set up, you'll have problems having two mortgages on the property, but I don't think, from reading your post that this is what is being proposed, it sounds to me like you are being offered a loan of half the capital that will be used to pay a 50% deposit, with the remainder being paid via a mortgage. The mortgage provider would have first rights to the property if their were problems and the loan from the charity would be guaranteed against the property. This seems straightforward to me assuming you can pass the affordability criteria's etc for the mortgage company.

Just make sure that everything is checked by your solicitor and is above board and that you know what you are agreeing too.

I don't see anything immoral about it, the charity is investing its money, you are (hopefully) going to be a good custodian of their investment.

Of course I might be talking rubbish, as I often do :-) I have no background or legal knowledge of this sort of thing.

Jim

AnotherJoe

Re "there was no mention of it being done cheap" - if it's not on the open market, how do they know they couldn't rent for more ? And with a relative of the founder staying there it certainly looks dodgy as hell to anyone checking.

Then, suppose later the OP can't afford the rent, will the "charity" evict with the same speed as someone they don't know ? Far too many vested interests.

If this was public I can't imagine many people being incented to give money to a charity whose aims appear to be morphing into property speculation and cheap lets to relatives, from the original aim of housing maltreated goats or whatever.

GentleGin

Nothing would be done "on the cheap", I'm proposing to pay the charity 5% interest on the capital they invest per year, which is double the rate of shared ownership schemes. This figure would rise with inflation. The return on their investment would actually be very good! And the reason why I am willing to pay such high interest is because it is a charity. I have also made it clear to the board of trustees that I would fully maintain the property, pay all of the legal fees, for the survey AND the stamp duty so they do not need to waste any charitible funds doing this.

My sister in law asked my partner and I because the house they wish to buy happens to be in an area I want to move to. There are other people interested, however the home I currently live in is condemned by environmental health and I have a desperate need to move which she is aware of.

Anyway, still waiting on the result of the conversation with the charity commission so will feed back what they say.

Thrugelmir

campbeji wrote: »

The mortgage provider would have first rights to the property if their were problems and the loan from the charity would be guaranteed against the property. This seems straightforward to me assuming you can pass the affordability criteria's etc for the mortgage company.

What if the property value were to fall. The Charity would then become liable for the mortgage debt.