THE EMERGENCY LAWS

New Zealand Herald, Volume LXIX, Issue 21277, 2 September 1932, Page 15

THE EMERGENCY LAWS

RENT AND INTEREST CASES LEGAL ADVICE TO READERS MANY INQUIRIES ANSWERED Many inquiries, arc still being received fiom town and country readers of the Herald as to difficult points arising out of. the application to particular cases of the provisions of the emergency legislation affecting mortgages and tenancies. Tho ■ Auckland' barrister who considers all such letters of inquiry on behalf of Iho Herald writes a number of answers to-> day as follows: — "J.K.H." (Devonport).—Yes; a regulation gazetted on Juno 7, 1932, excluded from the operation of Part 111. of the National Expenditure Adjustment Act leases of land administered by secondary school boards. "A.G.C." —If you have a hire-purchase agreement or bill of sale, the principal sum not being payable "on demand" your interest will reduce by 20 per cent. The part of each instalment which consists of principal will be payable each month just as before, and any other fixed charge such as insurance will also bp, payable. The interest, however, will reduce by 20 percent. Tho exact arithmetical application 1 leave to you. Mortgagor and Mortgagee

"Farmer" writes:—"Last March 1 renewed a mortgage of £2OO at 6 per cent with a proviso that 9 per cent should be payable in case my quarterly payments were overdue. Am 1 to deduct 20 per cent from the 6 per cent'!" Answer.—As your latest contract (the renewal) was entered into only in March last, you are not absolutely entitled to a reduction by 20 per cent. The answer to ycur question depends on a detail which you have not given—viz.: "What rate of interest would have been specified in your renewal if that document had'been signed on January 1, 1930, instead of in March last ?" This rate may be determined by agreement between you and your mortgagee; I should say that the rate in tho old mortgage beforo the' renewal woald be a very relevant consideration. Reduce this hypothetical rate by 20 per cent, and pay at the reduced rate. Note, also, that the "penalty rate" will also reduco by 20 per cent. See also remarks addressed to "Scotch" (below). "Scotch" writes as follows: —"Can you tell me what reduction of interest I am entitled to ? 1 purchased a farm on January 1, 1931, for £—, paying interest on the unpaid balance at 6 per cent."

Answer.—Sinco your contract was entered into after January 1, 1930, tho answer to the question is similar to that of "Farmer" above. It depends on the answer to tho question "what rate of interest would have been provided by your contract if it had been entered into on January 1, 1930 ?" This must be determined by agreement between you and your- mortgagee. If you cannot agree, the Court will determine it for you, but in your case, I should think it would be easy to agree. This "hypothetical rate," when agreed upon, is reduced by 20 per cent, and you now pay at the reduced rate. If you and your mortgagee .agree that the rate as at January 1, 1930, would have been 6 per cent, your rate will now reduce to 5 per cent; if it would have been per cent, your rate will now reduce to £5 4s per cent. "Puzzled" (Morningside).—lf your mortgage does not expressly provide for a penalty 4'ato, your mortgagor is entitled to tho statutory reduction to 5 per cent even if his payments are late. Ho* was within his rights in deducting 20 per cent for the period April 1-30.

Signing New Agreements "D.D.W." writes: "In Juno, 1930. I purchased a farm, taking over an existing five years' mortgage, which fell due iri 1931. -When this mortgage fell due I paid a part of the principal sum and the balance was extended at 6 per cent (the same rate as in the original mortgage). I have now received a communication from the mortgagees that, as per cent was the ruling rate in Auckland as at January 1, 1930, they will give a 20 per cent reduction only on 6£ per cent, and I have been asked to sign a new memorandum of agreement, confirming the mortgagees' contentions. Will you please inform me what is the position and whether I should sign the agreement?" Answer.—There is no need to sign any agreement at all. You are protected by the Act and there is no need under it for you to sign anything. As to the rate, it appears obvious that, the rate formerly actually specified on your security being 6 per cent, your interest must now reduce to 5 per cent. Pay at 5 per cent and let the mortgagee do what he. likes. It will be unwise to sign any agreement which may possibly, later, bo held, under some future Act, to debar you from some measure of protection. "Mortgage."—You are protected by two Acts. In the first place, the National Expenditure Adjustment Act protects you bv reducing your interest to 5 per cent. Then the Mortgagors' Relief Acts protect you if the mortgagee attempts to call up her mortgage. Simply continue to pay at 5 per cent and let the mortgagee take whatever action she likes. She will very possibly attempt to call up the mortgage: but to do so she must first give you notice under the Mortgagors' Relief Act. As soon as you receive any such notice yoti should see your solicitor and -instruct him to apply to the Court for relief against payment of the principal sum. Of course, the question whether relief will or will not be granted in any particular case is one for the Commission or Court, to dpcido on the facts; but I should imagine from the few facts you supply that you would have a case for relief. Landlord and Tenant

"Taupo."—l received your further particulars. The contract having been entered into after January 1, 1930, your lessee is not entitled to an absolute reduction of 20 per cent, but only to a reduction to four-fifths of the rent that would have been payable under a similar contract entered into on January 1, 1930. This "hypothetical rent" must be decided upon by agreement between you and your lessee: and if you cannot agree it must be decided by 1 lie Court. Jf you can show that the rent that would have been provided for by this contract, if it had been signed oti January 1, 1930, would have been £2 10s per week or more (the lessor paying, as now, all rates, etc.), then you will not have to reduce below £2 now. In any case, it seems to me that under section 38 of the Act you would be entitled to apply to the Court to be exempted from the reduction, on the ground that the present rent is fair. If your lessee will not pay at the proscribed rate, unreduced, see your solicitor. "Butter-fat."—You do not actually say when your lease was entered into: you say that you "took it over" in October, 1931, and I am assuming that the lease was actually signed on or about that date. I assume from your letter that if the prieo keeps at Is or less you are content. If it rises, on the other hand, you will legally have a right to a reduction to "four-fifths of the rent which would have been payable under your contract if it had been entered into on January 1, 1930." The assessment of this amount may in your case be difficult; and if you cannot agree upon it it would have to bo decided by the Court. If it went to Court the lessor would probably invoke section 38, by which ho can ask the Court not to grant any reduction in ' this particular case on the ground "that the rate of rent, payable under the contract is fair," It would be argued that you have the benefit under your contract of a scale of rent, rising and falling with the market, anil 1 think that this argument would be upheld. My advice to you is to pay meanwhile at 45s and if the market rises, to come to .a verbal agreement with the lessor as to what rent he will accept.-