CLT Jargon Buster (pdf) - Community Land Trusts

Mortgagee in PossessionClauseNot for ProfitObjectsPre-emption clause/pre-emption rightThese are clauses that allow a (commercial or retail) lender who hasrepossessed the property to operate free of the restrictions which areplaced upon individual properties. These restrictions would includeaffordability and allocations restrictions.This means that an organisation’s primary purpose is the provisionof specific services/activities to a defined community for thecommunity’s benefit and not for the distribution of monetary profitto shareholders. It is therefore not a commercial trading entity.This is the expression used within all constitutions to set out thepurposes/aims of the legal entity being created (incorporated). TheObjects direct and guide the CLTs activities and how its assets may beused to achieve those objects. Using assets for purposes not statedis not allowed. The powers granted to the CLT need to be sufficient toenable the Objects to be pursued.Where a CLT wants to become a charity, its Objects must:• fall within at least one of the 13 purposes listed in Charities Act2006; and• be for the public benefit. This means (very broadly) that theObjects must have an identifiable benefit(s) and the benefitmust be to the public or a section of the public rather than forprivate benefit.Not all objects that aim to benefit individuals or communitiesare necessarily charitable – for example, an object which aims to“provide housing” won’t be charitable because this isn’t one of thepurposes listed in the Charities Act 2006. But if providing housing isa means of achieving an object (for example, relieving or preventingpoverty), this is more likely to be charitable. This is becausepreventing or relieving poverty is listed as a purpose in the CharitiesAct 2006 and providing housing can be a legitimate way of achievingthis. Whether it is in fact charitable or not will depend on whether theaim is going to be for the public benefit. See the separate definitionof charitable purposes.Information on charitable purposes and public benefit can be foundat www.charity-commission.gov.uk . Applying for charitable statusshould be considered carefully as it might not be appropriate and it isimportant to remember that becoming a charity is an irreversible step.A CLTs right of pre-emption gives the CLT the right to buy back a homeor nominate a new occupant where the home is repossessed by amortgage lender or vacated by the current occupant. This should beincluded in a shared ownership lease or shared equity arrangementand in a Section 106 agreement.JARGON BUSTER