MORTGAGE LEGISLATION

New Zealand Herald, Volume LXX, Issue 21426, 25 February 1933, Page 10

MORTGAGE LEGISLATION

Further amendments of the Mortgagors and Tenants Relief Act have been introduced, with the object of preventing hardship. At least two of the new provisions appear to have been inspired by sentimental considerations, without duo regard for their practical consequences. The bill proposes that when a mortgagee has failed to exercise powers of sale for at least three months after he has obtained authority from the Court, the mortgagor may make further application for relief. The Minister explained the effect of the clause, but he did not give, any illustration of the circumstances in which such action would be justified. Why should a mortgagee delay the exercise of powers sanctioned by the Court? Obviously not merely through lethargy or carelessness, as the Minister's use of the figurative term sleeping suggests, but because he has concluded that it would be wiser to allow the mortgagor to remain in possession, and probably because they have entered into a new agreement. The inevitable effect of the interference now contemplated will be to immediately they obtain authority from the Court, to foreclose, and thus to prevent any adjustment between mortgagee and mortgagor. The fact that the legislation deliberately sets aside judgments of the Court cannot be lightly disregarded. It proceeds to forbid mortgagors and lessees to contract out of the benefits of the Act and invalidates covenants having that effect. This is not only unnecessary, but it is positively detrimental to the interests of those whom it pretends to assist.

The original legislation was justified by the argument that mortgagors needed relief from the consequences of a in economic conditions "which neither party to tho contract had foreseen. This reasoning cannot be applied to contracts made since the relief legislation was enacted, since the only rational assumption is that the parties to them had their eyes fully open and understood the responsibilities they were undertaking. The effect of interference in these circumstances will be not only to discourage lending on mortgage security but also to prevent private revision of existing contracts, since the consequence of the proposed clause is to make any mortgage contract open for review at the will of the mortgagor. Since these results cannot have been intended by the Government, the two clauses should be withdrawn from the bill.