ADJUSTMENT OF MORTGAGES

Southland Times, Issue 23308, 18 September 1937, Page 6

ADJUSTMENT OF MORTGAGES

Appeal For Private Settlements SERIOUS ANOMALY ALLEGED i (Special to The Times) AUCKLAND, September 17. The appeal made on Thursday by the Minister of Justice (the Hon. H. G. R. Mason) for more private settlements under the Mortgagors’ and Lessees’ Rehabilitation Act has brought to light what Auckland solicitors consider to be a serious anomaly between the practice of the Stamp Department and the principles underlying the whole body of mortgage adjustment legislation in assessing the estate duty payable on estates of deceased mortgagees.

It appears that the Commissioner of Stamps refuses to regard any mortgage adjustment made by private agreement within a period of three years before the/death of the mortgagee unless the latter’s executors are able to show that the mortgagor in question is insolvent. This means that for the purpose of assessing estate duty in such cases the whole former amount of the mortgage is included in the mortgagee’s estate together with the amount of any interest remitted by agreement within the three year period. A further possibility occurs. Experience in various Auckland estates shows that the commissioner claims the discretionary right to levy gift duty or reductions of principal and remissions of interest made by the mortgagee within three years before his death. Such assessments have, in fact, been made. Whether the commissioner takes a similar view of the mortgage written down by the Mortgage Adjustment Commissions before the death of mortgagees is not clear, but it is believed that he does not. However, the disadvantage undoubtedly applies to voluntary adjustments. 1116 commissioner holds in effect that although the property may not be worth the former amount of the mortgage, the mortgagor’s liability for the balance under his personal covenant remains an asset in the mortgagee’s estate, notwithstanding any voluntary adjustment that may have been made within a period of three years unless the mortgagor is insolvent. The requirement must have been rather a severe burden upon some estates in the depth of the depression when vendor mortgagees were known to write down mortgages voluntarily by thousands of pounds. Such cases, at that time, were comparatively isolated and apparently no public complaint was made. However, with thousands of mortgages awaiting adjustment under last year’s legislation the matter has become of general interest. Solicitors consider the Minister’s appeal for more voluntary settlements can only be regarded ironically while the anomaly remains.