REHABILITATION ACT

Te Awamutu Courier, Volume 53, Issue 3812, 23 September 1936, Page 5

REHABILITATION ACT

MORTGAGORS AND LESSEES. FARMERS’ POSITION. The statement that the Mortgagors and Lessees Rehabilitation Act would be definitely the final opportunity to mortgagors for the adjustment of their mortgages and other debts, and when it became law it would be necessary for everybody who might need the protection of such legislation to file their application before December 31 next, was made by Mr W. W. Mulholland, Dominion president of the New Zealand Farmers’ Union, in a statement on Wednesday. That fact, he said, also made it particularly necessary that the basis of the adjustment should be such as would enable a capable farmer to have a reasonable chance of carrying or. under the conditions that would obtain in the future, as there would be no further opportunity for the review of his debts as under the present Act. Of very great importance in that respect was the method adopted in the valuation of land and of the stock and chattels. The Act instructed the commission to value the stock and chattels on the basis of values ruling on the date of the passing of the Act. As the price of most farm stock was high at the present time—partly due to a buoyant market, and partly due to the time of the season —sheep approaching fullwool—there was the prospect that average prices over the next few years might be considerably lower than that, and while under the system of determining basic values in the Bill that might not seem directly to affect the farmer, it did in fact mean that he would have a greater amount of working capital to find, and he would have no security to offer for it. The mortgagee would have a consequential reduction in the amount of his adjusted mortgage. “There does not seem to be any reason,” Mr Mulholland said, “why a different method of valuation should be adopted for the land and for the stock. It will have the effect of placing people who have advanced money on the stock and chattels in a more favourable position than those who have advanced money on the land. “An important point in the determining of the basic value is the allowance that is made to the farmer himself by way of wages, or living expenses, or whatever it may be called. It will be wrong, and given an entirely false value if this is calculated on the basis of ordinary farm wages. It should certainly be a management wage—a salary that would be paid to a working manager—and should be sufficient to enable him, not only to keep his family in the same standard of comfort as an artisan in town, but should also enable him to pay off his mortgage year by year, and so rebuild out of his hard labour the equity in his farm. If all he is to be allowed is enough to cover costs of living and maintaining himself and his family, he will certainly not be encouraged to stay on his farm. “The interest rate which can be arbitrarily fixed by the Government is another important matter. If the rate is fixed at a low level, the effect will be to make the basic value higher—consequently also the capital value of the mortgage. While at first glance a low interest rate may seem to be advantageous, the increase of the capital debt must also be considered, and the point can easily be reached where the cost of amortisation on a table mortgage plan of large capital indebtedness would increase the annual repayment instalments to a burdensome level. It is, herefore, desirable that the interest rate on which the basic value is computed should be moderate —neither high nor low.”