THE MORTGAGE BILL

Southland Times, Issue 22999, 19 September 1936, Page 8

THE MORTGAGE BILL

A Lengthy List Of

Amendments

RESTRICTION ON SALE OF LAND

APPLICATION PERIOD EXTENDED

(From Our Parliamentary Reporter.)

Wellington. September 18.

Restrictions on the sale of mortgaged land and an extension of the period in which applications can be made for adjustment of mortgage liabilities are important features of a long list of amendments to the Mortgagors and Lessees Rehabilitation Bill, which were introduced as a Supplementary Order Paper by Governor-General’s Message in the House of Representatives to-day. Perhaps the most important of the new provisions restricts the sale of land for which an adjustment has been made, unless special leave has been obtained from the Court of Review. No sale may be made in these circumstances before January 1, 1941. In granting leave for the sale of a property, the Court may require a mortgagor to pay into the Court such portion of the sale price "as the Court thinks equitable, with special attention to any improvements made to the land since the date of adjustment. The money ordered to be paid into the Court is to go to the creditors.

Another amendment of note 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 Courts and the offices of solicitors and accountants are normally closed from Christmas Eve until some time in January, while Post Offices are also extremely busy at that time. The Court of Review will have power to extend the date for applications to February 28 next year in special cases.

Widening of Term. The term “applicant” has been widened to include a guarantor, as well as a mortgagor or lessee, and a guarantor may become an ordinary applicant entitled to adjustment to the same extent as a mortgagor or lessee. The alteration has been held to be advisable, because the definition of a mortgagor has been restricted to a person owning the property, as distinct from a person who signed a mortgage and then transferred a property. The latter is now included in the definition of a guarantor. It is made clear that a sub-lessee in occupation is also included. The definition of a lessee has been altered to include any person who has taken over a lease from an original lessee by way of assignment or sub-lease, or to whom a lease has been transferred by the operation of the law. The 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 as to fit in with a wider definition of property. A lessee under a lease containing an option to purchase can be dealt with as a mortgagor only when he has exercised his option, except in cases where the 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 their options and, for the purpose of the new legislation, are regarded accordingly as mortgagors. As the result of a new sub-clause, deferred payment licences are brought within the scope of the Bill as agreements for sale and purchase. Consequent on the new definition of a mortgagor, the owner of an equity of redemption in any property is deemed to be the owner of the property. Decisions Nullified. Another new clause will have the effect of nullifying several decisions by which it has been held that when judgment has been obtained for moneys owing under mortgage or lease, the liability of the debtor no longer arises out of the mortgage or the lease, but only out of the judgment. The effect of these decisions was to disentitle debtors to relief, but the position in this respect has now been reversed. Decisions of the Court have also declared that a mortgagor is not entitled to relief after a mortgagee has exercised his power to sell. That position is altered by an amendment which gives mortgagors a right to obtain relief in those circumstances. There is a further provision that a lessee may apply for relief in 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 appeals to the Court of Review against the decisions of the commissions. A sub-clause in the original Bill dealt with the requirements imposed on a mortgagor or a lessee on whom a copy of application had been served, and it was provided that a mortgage or lease would automatically cease to be subject to the legislation if the mortgagor or lessee failed to file the statements required by an adjustment commission within the specified period of 21 days. Commissions are now given discretion to order whether or not the mortgage or lease should cease to be covered by (he legislation. Other Creditors’ Position. Attention has been paid in the amendments to the possibility that although a 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 commission. Under a new sub-clause a commission may, in such cases, proceed with adjustment and the exercise of its powers, including its power to sell the property of the mortgagor to any of the mortgagees or creditors. _ Adjustment commissions are directed to ascertain how much is owing under any mortgage or charge after considering all the relevant factors. Recognition is given to the fact that with an instalment mortgage, or one under which a mortgagor made periodical payments on account of principal, there may be some dispute between the parties as to the amount actually owing. The Court of Review is authorized to make such adjustments as may be necessary on the present-day value of any property of an applicant, other than farm leases, the necessity being dictated by unusual or temporary circumstances affecting land values. Commission’s Power. Under another amendment all of the powers given to adjustment commissions as the result of the mortgage relief legislation of 1932 are included Jn the present Bill. Authority is given to remit interest, and it is pointed out, in an explanatory memorandum, that if this provision was not inserted, an applicant who would be entitled to remission of arrears of interest under the

1933 Act, if he had not applied in time, would be prejudiced, as compared with a man who had applied. Power is also given to commissions to remit the 10 per cent, penalty on rates, and they are also authorized to disallow costs incurred by a mortgagee who has proceeded with the exercise of his rights since the introduction of the Bill.-" 7

It is made clear by another amendment that once an adjustment has been completed the Court will have no power to make any alteration in the basic value determined for the purposes of adjustment. There are a number of technical amendments making clearer a clause dealing with the method of determining whether or not an applicant is entitled to continue in occupation of his property. Another amendment stipulates that a mortgagee should not be excluded from the right to bid or tender for the sale of a property by order of the commission.

Rights Against Land.

It is also provided that although personal liability for moneys owing under a mortgage may be discharged, a mortgagee as a result is not to lose any of his rights against the land itself. When a property has been sold under power of sale in a mortgage or by a ruling authority, the balance not realized at the sale is to become an adjustable debt, whether the sale took place before or after the passing of the Bill.

Commissions are instructed not to give priority to a stock firm as a creditor, if during the last farming season the firm received on account of any debt owing by a mortgagor more than the amount advanced during that season. In effect, a creditor is to be prevented from applying moneys as they come in to back debts, and then, in addition, claiming to receive priority for goods supplied during the season.

Commissions are to be enabled to raise moneys for any purpose designed to increase the value of an applicant’s farm lands, such as the erection of buildings and cowsheds. A property mortgage is to be restricted to the land on which the money so raised is expended. The whole of the amount owing by a guarantor, a term including any mortgagor who is not now the owner of a property, is to become an adjustable debt and is to be dealt with under the relevant provisions of the Bill. The Personal Covenant. A provision of importance deals with the question of a personal covenant. If a mortgagee does not serve a guarantor before December 31 this year with notice that he holds him liable as a guarantor, and stating that the guarantor can make application for adjustment not later than January 31, 1937, the liability of the guarantor is to be entirely discharged. In this respect the term guarantor, is to include a mortgagor who is not now the owner of the property. If the mortgagee does serve this notice, the guarantor is liable under the guarantee, and unless he applies within the stipulated time for the 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 lands secured in the mortgage.

A new clause protects a mortgagee, lessee and guarantor from action by a rating authority to sell or lease the property for arrears of rates. A guarantor is primarily liable, but protection is extended to a mortgagee or lessor, who is secondarily liable, until January 31, 1937, or until the completion of the adjustment.

A provision dealing with the power of the Court to reopen transactions in certain cases where creditors have exercised their rights has been amended to make it mandatory, that such applications must be made within one month of the passing of the Act. Greater Powers. The powers of commissions are widened, and they will now have power to cancel or vary orders on milk cheques and similar assignments executed before or after the passing of the Act. Commissions may also direct how money paid to a mortgagee or any other person within the scope of the order is to be disbursed, but the creditors will still be protected in order of priority where money has been advanced to enable farming operations to be continued. In cases where a property, which has been subject to adjustment, is occupied by a tenant who is the lessee of the mortgagee in possession, the Coui-t is empowered to order possession to be given to the mortgagee. However, the tenant will retain any protection which he enjoys under the Fair Rents Act, which was passed earlier in the session. If the Court desires to enforce its order, it may register it either in the Supreme Court or the Magistrate’s Court. The Bill has been amended to provide that applications for the revaluation of rural Crown lands are to be deemed to be applications under the Bill. To avoid confusion in proceedings the work of the revaluation committees is to be suspended in the meantime. Family Protection Orders. The previous legislation omitted to embrace family protection orders and orders for alimony where the terms of deed or other similar documents were modified, on the grounds that there was hardship to the person seeking payment. The Bill extends the date under which this provision operates to March 31, 1937, and brings these orders into line with other similar orders. The Court is given power to vary pooling agreements and orders made under the legislation passed in 1933 and under a new provision a trustee or provisional trustee appointed under the former legislation is to be retained in office. He is to account to the commission concerned for all the moneys received by him and is to dispose of them as the commission directs.