Evening Post. THURSDAY, SEPTEMBER 3, 1936. UNSETTLING ADJUSTMENT

Evening Post, Volume CXXII, Issue 56, 3 September 1936, Page 8

Evening Post. THURSDAY, SEPTEMBER 3, 1936. UNSETTLING ADJUSTMENT

' The Mortgagors and Lessees Rehabilitation Bill contradicts its own title. "Rehabilitate" is to restore to privileges or a previous condition. Under this measure an attempt is made to restore mortgagors lo their previous condition, but they will certainly not have the former privileges. Formerly there was a two-sided contract. The mortgagor borrowed and the mortgagee lent. To each party there were certain, rights. By legislation those rights have already been disturbed. This Bill disturbs them further. The effect upon the mortgagee must be that he, seeing that the contract is no longer fixed and firm, will rid himself of it so soon as he can conveniently do so. The mortgagor may still have- the right to pledge his land as security for a loan, but that privilege will be impaired because the security has been injured by legislative interference. The Government may say: It was necessary that we should interfere and we have done so to re-establish reasonable conditions. But nothing is established. As the Chambers of Commerce statement points out, mortgages executed subsequent to the introduction of relief legislation and not formerly open to review, are now to be subject to adjustment.

For this extension of the adjustment there is no sound reason, and there are many sound reasons against it. It cannot fail to be most unsettling. Lenders previously felt secure that, new mortgages executed after the relief legislation became operative would not be subject to reyiew. ' Now they are made subject. What guarantee have they that contracts made in the future will stand? The Chambers of Commerce ask for an assurance tliat at least this will be the final measure. But such an assurance will not be binding on a future Government. A better reassurance would be if the present Government, though not bound to do so, respected the implied promise of its predecessor and refused to bring under the Adjustment Bill mortgages to which it cannot equitably be applied. The Government would be wise to do this. It has before its eyes the effect of constant intervention in renting contracts. No one now will build houses to let—-not. because such an investment does not offer an attractive return, but because the owner never knows what his position will be when next Parliament chooses to interfere. It will be the same with lending on lands. The lender will know his contract, but not from year to year whether it will be enforceable.

A further important point made by the Chambers of Commerce and to which we have already made reference, is the mortgagee's claim to a refund if the mortgaged property is sold within a limited period. The chambers suggest that the mortgagor's title should be 'caveated. Even from the Government's point of view there.. are the strongest arguments for this. The Government wishes to give relief, not. in order that the farmer or householder may profit by a sale, but so that he may continue in the use and occupation of the property. If it is made clear that part of a selling-profit will be applied in recompensing a mortgagee, a revival of speculation will be discouraged. It is only equitable that the mortgagee should have this prospect of recovering something of that which he is to be asked to sacrifice. Indeed, we think that it would be equitable to go further and to provide for revaluation in about five years of all properties which have been subject to adjustment. This would not disturb the owners in their occupation. It would be equivalent only to the revaluation made on a renewable lease. Certainly it would mitigate one of the major evils of the adjustment legislation, the danger of giving a new impetus to speculation. This is the more important because, at the present time, there is no stable basis for valuation. We have previously pointed out that the guaranteed price (which is subject to change) does not provide a fixed basis for farm values. For town values there is no definite basis whatever. How are the commissions to arrive at valuations •of house property? By pitting the opinion of one valuer against another, when none can say what building costs will be in Ihe future. There appears to be an upward trend in urban property values. If this should prove to be so the mortgagees five years hence may find that they have been compelled to give mortgagors , substantial equities which were never earned. Under the law as it once stood the mortgagor had the right to this equity. He stood to lose or gain and shared neither loss nor gain with the lender. Now the lender is asked to share a loss, and he has a strong claim to any prosIpective gain.