MORTGAGE BILL

Evening Post, Volume CXXII, Issue 69, 18 September 1936, Page 10

MORTGAGE BILL

IMPORTANT AMENDMENTS CLAUSES REDRAFTED THE PERSONAL COVENANT A long series of important amendments to the Mortgagors and Lessees Rehabilitation Bill was introduced into the House of Representatives today by Governor-General's Message. In many respects the Bill has been largely redrafted to make the provisions clearer and also to remove a number of anomalies which had become apparent as a result of the discussion on the second reading of the Bill and also as a result of representations made to the Minister of Finance (the Hon. W. Nash) since the introduction of the original measure. After the introduction of the amendments, the House proceeded to discuss the Bill in Committee.

CHANGES IN DETAIL TIME EXTENDED CLOSING OF APPLICATIONS The term applicant has been extended to include the guarantor as well as t£e mortgagor and lessee. This makes the guarantor an ordinary applicant who is entitled to adjustment to the same extent as a mortgagor or a lessee. This alteration is advisable because the definition of mortgagor has been restricted to the person who at present owns the property as distinct from the person who signed the mortgage and then transferred the property.. The latter is now included in the definition of a guarantor. . It is made clear that if a sub-lessee is in occupation he is also covered by the Bill. The definition of lessee'has been altered to make it clear that the term "lessee" includes any person who has taken the lease from the original lessee by way of assignment or sublease or to whom it has been transferred by operation of law. DEFINITION OF PROPERTY. A new definition of property is the same as that included in the Property Law Act and is all embracing. The term "mortgagor" has been newly defined to fit in with the wider definition of property. Another amendment makes it clear that a lessee under a lease containing an option to purchase can be dealt with as,a mortgagor only when he has exercised the option, except where a lessee was subject to the relevant section in the Mortgagors and Tenants Relief, Act, 1933. Lessees of the latter class are deemed to have notified their intention to exercise the option and are therefore mortgagors for the purpose of the Bill. A new sub-clause brings deferred payment licences within the scope of the Bill as agreements for sale and purchase. Consequent on the new definition of mortgagor tha owner of the equity of redemption in any property is deemed to be the owner of the property.

LIABILITY OF DEBTOR. A new clause has the effect of negativing several decisions by which it has been held that when, judgment has been obtained for moneys owing under a mortgage or lease the liability of the debtor no longer arises out of the mortgage,or lease but only out of the judgment. The effect of these decisions was.to disentitle debtors to relief and the position in this respect is now altered accordingly. Decisions of the Court have also declared that a mortgagor is not entitled to relief after the mortgagee has exercised his power to sell. That position is also altered by an amendment to the Bill which now gives mortgagors the right to obtain relief in the circumstances outlined. There is a further provision that a lessee may apply for relief.in respect of his lease notwithstanding 'the fact, that the lease, may have been determined or-may have expired. . '

In order to avoid the possibility of hardship to any party to proceedings before an Adjustment Commission, an additional seven days has been added to the time allowed for the lodging of an appeal to ..the Court of Review against the decisions of a Commission. Guarantors have been included in the definition of the term applicant in the Bill, which now enables a guarantor to make an application for the same adjustment that can be granted to mortgagors and lessees. TIME FOR APPLICATIONS.

One of the most important amendments is that extending the final date by which applications for adjustment must be lodged from December 31 this year to January 31 next year. This has been done owing to the fact that the Courts;and the offices of solicitors and accountants are normally closed from Christmas Eve until some time in January and that post offices are extremely busy at that time. A sub-clause in the , original Bill dealt with the requirements imposed on a mortgagor or lessee on whom a copy of an application had been served, and it was provided that the mortgage or lease would automatically cease to be subject to.the legislation if the mortgagor or lessee failed to file the statements required by the Adjustment Commission. within the specified period of 21 days. The Commissions are now given discretion to,order whether or not the mortgage or lease should cease to be covered by the legislation. Attention has been paid in the amendments. to the possibility that, although the mortgagor may take no interest whatever in the adjustment of his liabilities, some other creditor, such as a second mortgagee, may be vitally concerned to have the matter dealt with by an Adjustment Commis|sion. Under a new sub-clause the Commission may in such cases, proceed with the adjustment and in,the-exer-cise of its powers, including its power to sell the property of the mortgagor to any of the mortgagees or creditors. An Adjustment Commission is directed to ascertain how much is owing under any mortgage .or charge after considering all the relevant factors. For example, if the mortgage were an instalment, mortgage or one under which the mortgagor made periodical payments on account of principal there may be.' some dispute between' the parties as to the, • amounts actually owing. The Court of Review is authorised to make such. adjustment of the pre-sent-day value of any property of the applicant other ihan farm leases,which may be necessary owing to unusual and temporary circumstances affecting land value. REMISSION OF INTEREST. All the powers.given the Adjustment Commissions under the 1933 mortgage relief legislation are included in another amendment. Authority is given to remit interest.; , An explanatory

memorandum points out chat if this provision were not inserted in the Bill an applicant who would, be entitled to remission of arrears of interest if he had applied in time under the 1933 Act would be prejudiced as compared with the man who had applied. Power is also given for, the Commission to remit the 10 per cent, penalty on rates which is also in the nature of arrears of interest. The Commission is also authorised to disallow,.costs incurred by a mortgagee who has proceeded with the exercise of his rights after the introduction;of the Bill. It is made clear by. another amendment that once an adjustment has been completed there is no power for the Court to make. any. alteration in the basic value. There are 'a number of technical 'amendments making clearer the. clause dealing with the method of determining whether an applicant is entitled to continue in occupation of a property. Another amendment makes it clear that the mortgagee should not be.excluded from the right,to,bid or tender on the sale of a property by order of the Commission. Another amendment makes it quite clear that although the personal liability for the moneys owing under a mortgage is discharged the mortgagee does not thereby lose any of the rights against the land itself. Where a property has been sold under a power of sale in a mortgage or by a ruling authority the balance not realised at the sale becomes the adjustable debt whether the sale took place before or after the passing of the Act. . ' ' A guarantor has now been included in the list of those eligible to make application for relief, and is therefore entitled to the ordinary adjustment which a mortgagor,or lessee can obtain.

PRIORITY TO CREDITORS. A new sub-clause is Included directing the Commission not to give priority to the creditor—a stock firm—if during the last farming season he has received on account of any debt owing to him by the mortgagor more than the amount advanced by him during that season. In effect, the creditor is prevented from applying moneys, as they come.in, to bdck debts and then, in addition, claiming to receive priority for goods supplied during the season. ,

The. Commission is now, enabled to raise moneys for any purpose that would increase the value of the applicant's farm lands, ■ such as buildings and cow sheds. The property mortgage is restricted to the land. on which the money so.raised is expended. The whole of the amount owing by a guarantor (and, this includes any mortgagor who is not now. the owner of the property) becomes an adjusted debt and is dealt with under the provisions of-the Bill relating to adjusted debts.

PERSONAL COVENANT. • An important provision is made regarding the personal covenant. If the mortgagee does not serve a guarantor (who includes the mortgagor who is not now the owner of the property) before December 31, 1936, with a notice thai he holds him liable as a guarantor and stating . that the guarantor can make application for adjustment riot later than January 31, 1937, the liabilr ity of the guarantor is entirely discharged; If the mortgagee does serve this notice the guarantor is liable under the guarantee and unless he applies before January 31, 1937, for an adjustment of his liabilities;he will lose the protection of any relief legislation. The discharge of a guarantor does not affect the mortgagee's rights against any land secured in his mortgage. A new clause protects the mortgagor lessee and guarantor (being the person primarily liable) from action by a rating authority to sell or lease property for arrears of rates, and the protection is extended to the mortgagee or lessor (who is, secondarily, liable), for the period until. January 31, 1937, or the finish of the adjustment. The provision dealing with the power of the Court to reopen transactions in certain cases where creditors have exercised their rights haslbeen amended to make it mandatory that such applications must :be made within . 'one month of the passing- of the Act. An applicant to the Court is still restrained from disposing of property or of obtaining credit without disclosing the fact that he is an applicant, but an additional offence is provided if he does not fulfil this obligation, and he will be liable to the penalties to which he would be liable under the Chattels Transfer Act, 1924. VARIATION OF ORDERS.

The powers of the. Commission are widened, and it will now have power to cancel or vary orders on milk cheques and similar assignments executed before or after the passing of the Act. The -Commission may also direct how money paid to a-mortgagee or any person within the scope of the order is to be disbursed. Creditors are still protected in order of priority where money has been advanced to enable farming operations, to be carried on.'

Where a property, which has been subject to adjustment; is occupied by a tenant who is a : lessee of the rnortgagee in possession, the Court is empowered, to order possession to be given to the mortgagee. ■ The-tenant will retain any protection he has under the Fair Rents Act, 1936. . - • . ■ • • Where the Court desires to enforce its order, such order may be registered in either the Supreme Court or the Magistrate's Court REVALUATIONS. Many applications have already been made for the. revaluation of rural Crown lands, and the Bill has been amended to provide that such applica tions for revaluation shall, be deemed to be applications under the Bill. To avoid confusion in proceedings, the work of revaluation committees . is stopped in the. meantime. ,

A provision has been embodied restricting the sale of land in respect of which an adjustment has been made, and except without special leave of the Court, no sale may be made before January 1, 1941.

In granting leavt to sell the property, the Court may require the mortgagor to pay into Court such portion of the sale price as the Court thinks

equitable, having specially in view improvements made to the land since the date of the adjustment, and this money is to go to the creditors.

• Previous legislation omitted to embrace Family Protection orders and orders for alimony where .the terms ot a deed, etc., were modified on the ground that there was hardship.to the person making payment. The Bill extends the date under which this provision Operates to March 31, 1937, and brings these orders into line with similar orders.

The provision relating to the making of orders by- agreement under the Mortgagors and Tenants Relief Act. 1933, has been deleted, as no agreements were made under section 11 of that Act. Provision .is made enabling the.Court to,exercise all powers conferred by the 1933 Act in respect to orders that were. made. The Court iis given power to vary pooling agreements made ■ before the 1933 Act still in existence.in the same way as it can vary orders. The Court is also empowered to vary orders made under the 1933 Act.

A new provision is included by which the . trusty or provisional trustee appointed under the 1933-35 Act is retained in office. He is to account to the Commission for all moneys received by him, and is to dispose of them as the Commission. directSi