Charities Bill [HL]

moved Amendment No. 44:"Page 27, line 19, at end insert—" ““(   )   In section 38 of the 1993 Act— (a)   in subsection (2) after ““loan”” insert ““or a grant””; (b)   in subsection (3)(b) after the second ““loan”” insert ““or grant””; (c)   in subsection (3)(b) after ““loan”” insert ““or grant””; (d)   in subsection (3)(b) after ““borrower”” insert ““or recipient of a grant””; (e)   in subsection (3)(c) at the beginning insert ““in respect of a loan””; and (f)   in subsection (4)(b) after ““loan”” insert ““or grant””.”” The noble Lord said: Amendment No. 44 makes changes to Section 38 of the Charities Act 1993. Section 38 is entitled ““Restrictions on Mortgaging”” and specifies that no mortgage of land held by or in trust for a charity shall be granted without an order of the court or of the commissioners. Section 38(2) says that that general requirement shall not apply to a mortgage by way of security for the repayment of a loan where the charity trustees have obtained proper advice. That is very sensible. That covers typical banking arrangements. ““Proper advice”” is defined in Section 38(4) as the advice of someone,"““who is reasonably believed by the charity trustees to be qualified””" to give that advice, and"““someone who has no financial interest in the making of the loan””." Those are standard arrangements which are very important for the working of charities. Since 1993 some of the great grant-making agencies—I think, for example, of the Millennium Commission—rather surprisingly, your Lordships may think, require a formal charge on land of a charity to which they are making a grant, not a loan, just in case some of the conditions attaching to the loan are breached, so that in extremis, if there is a breach of a condition attached to a loan, they then have the right to recoup the loan. Then, belt and braces, they take out a charge so that if at the time concerned the charity is not ““flush””, they can realise land to meet the recoupment. Some may think that that is all somewhat bizarre. The problem is, first, that this is a fairly general provision. Secondly, it is not confined to the Millennium Commission. Thirdly, if you have to go through this rigmarole—that is to say, you cannot rely on the exemption given in Section 38 of getting advice from someone qualified to give it—you are then involved in the huge expense of taking a formal legal charge and instructing lawyers on both sides of the transaction. The recipient charity will probably have to pay the costs of the charity making the grant. I give an example, which was dealt with in my office not so long ago, concerning the Eden Project down in the West Country, which received a grant from the Millennium Commission. The legal costs regarding the   charge that is being insisted upon is likely to be of the order of £2,000 to £3,000 on both sides. That is a nonsense. I believe that the making of a grant ought to come within the provisions of Section 38; that is, where you can act upon proper advice. I am sorry to have explained that at some length but otherwise it would be completely incomprehensible. I leave it at that. I beg to move.