I beg to move, in page 9, line 44, to leave out from "thereof," to end of Sub-section (3), and to insert:
which suffer depreciation in value by reason of the war damage, in shares proportionate to the amount of the depreciation in value which they respectively suffer by reason thereof, that is to say, the amount by which the value of those interests respectively immediately after the occurrence of the damage is less than the value thereof respectively immediately before the occurrence of the damage.
(3) For the purposes of the last preceding subsection the value that a proprietary interest in a hereditament had immediately before the occurrence of war damage and the value (if any) that it had immediately thereafter shall be taken respectively to be the amount that the interest might have been expected to realise on a sale thereof in the open market on the thirty-first day of March, nineteen hundred and thirty-nine, if it had been subsisting on that day with the like incidents in all respects (other than its being subject to any charge or lien for securing money or money's worth) as it had, and the hereditament had been on that day in the state in which it was immediately before the occurrence of the damage, or immediately thereafter, as the case may be, so, however, that—
This Amendment alters and improves the principle of Clause 10. When the value payment is made, it is to he divided between the different persons interested. If one takes the ordinary case of a landlord and tenant, the Bill, as originally drafted, made the division according to their respective interests. The Amendment as will be seen—and I do not want to go into unnecessary detail on this complicated subject—does two things. It substitutes the principle that the proportions shall depend on the depreciation
which each interest suffers as a result of the war damage. I think the Committee will see that that is plainly right. You are deciding how to divide up the payment with respect to war damage between, say, two parties who are interested, and you want to see, therefore, in what proportion they have suffered by reason of that war damage. That is the principle which is substituted by this Amendment for the principle contained in the Bill as now drafted.
The other matter with which the Amendment deals is the case in which, under the Landlord and Tenant (War Damage) Act, a lease has been surrendered. In assessing the pre-damage value and the post-damage value one has to go back notionally to March, 1939, and if the lease has been surrendered by disclaimer under the Landlord and Tenant (War Damage) Act, the Committee will see that two things will have happened. The landlord will have lost his right to the rent but he will have gained the site and what remains of the building upon it. Therefore it is right in considering what depreciation has been suffered by him to take those facts into account. Paragraphs (a) and (b) of the Amendment will enable the principles which have already been described to he applied and make them fit the facts as they arise, where there has been a disclaimer under the Landlord and Tenant (War Damage) Act.
I do not rise for the purpose of opposing this Amendment but to ask the right hon. and learned Gentleman whether any consideration has been given, in the case of disclaimer by a tenant, of the advantages which may accrue to the landlord in respect of the damaged buildings. In certain cases, under whatever bargain is made, a valuable building structure may be involved and the tenant may have lost all his rights in the matter, whereas the landlord will stand to benefit as the result of what may have been a considerable venture on the part of the tenant. This matter has been brought to my notice in several cases and I should like to know whether attention has been given to It.
That is a rather special case, but I will certainly have it examined. The principle of the Amendment is that it does take account of what the landlord gets as the result of the dis- claimer. There may, of course, be fixtures which had a special value to the tenant because of the use to which he put his premises but which may not have any particular value in the market. That is a fact which the tenant would take into account in deciding whether to disclaim or not. However I will look into the matter.
Will my right hon. and learned Friend consider, in connection with the disclaiming of such leases, the fact that a tenant may have been under pressure and unable to maintain the lease owing to the exhaustion of other resources?
The following Amendment stood on the Order Paper in the name of Mr. Graham White: In page 10, line 34, leave out from "therefor," to "except," in line 38, and insert:
by apportioning the value payment between the mortgagee and the owner in the proportion which the amount of any such mortgage bears to the total value of the property, and failing agreement as to the apportionment the matter shall be determined by the Commission and.
On a point of Order. The Amendment in the name of the hon. Member for East Birkenhead (Mr. White) which he does not propose to move seems to be analogous in principle to the Amendment which stands next to it on the Paper, in my name: In page 10, line 40, at the end, to insert:
In all cases arising under this paragraph the shares of the payment shall be payable to the claimant and the mortgagee, respectively, in the same proportions as governed their respective liabilities for contributions on the last date, prior to the damage, when payment of interest was due.
I take it, Sir Dennis, that if you wish the principle to be discussed, it can be discussed on the Amendment in my name?
I beg to move, in page 10, line 41, to leave out from the beginning to "one," in line 46, and to insert:
(5) The value which a proprietary interest in a hereditament is to be taken by virtue of subsection (3) of this section to have had immediately before the occurrence of war damage, or immediately thereafter, shall be such as may be determined by agreement between the owners of proprietary interests in the hereditament, together with any mortgagee of any such interest, or, in default, of agreement, by reference to.
The object of this Amendment is to make it plain that it is for the different parties concerned to decide among themselves as to the value of their respective interests and that it is not a matter for the Commission.
I beg to move, in page 11, line 10, to leave out from "right," to the end of the Clause.
I am moving this Amendment, although I recognise that since it was placed upon the Order Paper the Chancellor of the Exchequer has given some further information about the Commissioners and their duties, which previously were not clear. Sub-section (7) of Clause 10 applies restrictions to the transfer of rights to compensation, and this might affect the amount which, for example, a bank might be willing to advance for business purposes. The object, it is clear, is to prevent speculators from buying up rights to compensation, but, on the other hand, there is a danger that unless this power of restriction is wisely used by the Commissioners it may prevent certain people from being able to carry on their business by depriving them of the necessary capital. I should like to know whether it would not be possible to amend this proposal so as to allow an assignment where it is made with the object of continuing the same type of business and in the same locality. If some words on those lines could be inserted in the Clause as an instruction to the Commissioners it seems to me it would meet a difficulty. I may mention that there is another Amendment in my name to Clause 42 which will be disposed of at the same time so far as I am concerned—in page 32, line 40, to leave out sub-section (5). That Amendment raises the same point.
I hope that the Chancellor of the Exchequer will give us a good reason for resisting this Amendment, because it seems to have much to commend it. To bring in the word "speculator" is to try to throw discredit on a transaction. I see no reason why a man who has a legitimate claim and who wants ready money should not be free to sell that claim to anybody who is prepared, for a consideration, to advance the money. That seems to be a perfectly leg
If it is proposed to restrict these assignments, I fail to see why they should be permitted in the case of a person who has some rights in the property, such as a ground landlord or a mortgagee: If we think it wrong to allow assignments, why permit them in that restricted class of case? The effect of it will be to force people who wish to raise money lo go to the one or two persons upon whom there is no restriction, and in that way we shall give the ground landlord or the mortgagee—
We impose no restriction in the case of an assignment of a share or part of a share to a person entitled to another share of the same payment. In such a case it is not necessary to get the consent of the Commission to the assignment. The effect of that will be to force persons who wish to raise money to go to that restricted market, and those people will be in a position to take advantage of their privilege and to make a lower advance.
This Subsection (7) gives power to assign the right to receive payments subject to the approval in writing of the Commission, but does not give any indication of what considerations of principle or policy are to guide the Commission in coming to a decision. We have no idea whether their approval will be given only in extreme cases, or whether it will be general and the exceptions will be few. I am thinking of businesses which have been smashed up, where the capital of the concern existed largely in the premises. There may be an opportunity of taking vacant premises near-by and re-starting business if it is possible to get the necessary capital by an assignment of the right to payment under this Measure. There is also the case of elderly people who own a fairly large house and gain their income by letting part of it; or they may own two or three houses as their source of income. The houses may be destroyed, but the owners will want their immediate income to continue, and it is not good enough for us to say to those old folk, who are perhaps in the last years of their life, "We will not allow you to assign your right to payment in return for an advance of money. You must wait for the money until after the war." Those are typical of the considerations which will arise, and we should be given some guidance by the Chancellor of the Exchequer on the line which will be taken, or, if possible, instructions should be incorporated in the Clause to guide the Commission in deciding whether they should give or withhold their approval.
I gladly say a few words on this matter. The general principle of the Clause was clearly indicated on the Second Reading of the Bill, and it was approved in all quarters of the House. I think the object of the Clause is plain. The first reason for inserting it was to ensure that the provisions of the Bill regarding the payment of money should not be circumvented by claimants assigning their claims with the object of getting loans on them. The other reason which appealed to me and my advisers when we framed the Clause was that we were afraid—there is no offensive use of the words "speculator" in this connection—that there was a danger of the exploitation of claimants by persons offering to advance the money at a discount. It might have led to a number of people going round trying to do that sort of thing. Those were the main reasons for inserting the Clause. I would refer my hon. Friend to a part of the Bill which, I think, will meet some of the cases which it was quite right to mention to the Committee, and that is the part which empowers advances to be made by the Commission. I have already undertaken to reconsider the amount, which is at present limited to £500. As a matter of fact, I was looking into the matter again yesterday. I hope that provision will meet the demand that a larger sum should be made available.
Finally, I think we may trust the Commission, in a reasonable case, not vexatiously or too strictly to use this Clause. The Amendment I am proposing to make will meet a number of cases. It is desirable that we should in no way encourage anything which will get round the Clause by way of advance payment. From the national point of view, we have to consider the expenditure of money, and at the same time we do not want exploitation by people who induce claimants to sell.
Has the right hon. Gentleman considered the point mentioned by one of my hon. Friends, as to whether there is any justification for giving a holder of a mortgage or a ground landlord a special interest in this matter? Obviously they will be provided with a means of using a certain amount of pressure to get more favourable terms, in a case where a man may be, for personal reasons, in desperate need of getting money. Just as happens in the insurance world, some of these claimants will wish to compromise, and may be defrauded out of their legal rights because they will have no other place to which to go except this limited market.
There is a clear case in which, I submit, it should be permissible to pay this compensation to another person, and that is where a contract for the sale of a hereditament has been entered into before the war damage was caused. If I agree to buy a property and sign a contract for its
purchase, and the property is afterwards damaged, obviously, in law, the property, although not actually conveyed, is my responsibility and belongs to me. Therefore, I respectfully suggest that the right hon. Gentleman might put an Amendment into the Bill somewhat to this effect: "After 'shall,' in line 14, to insert:—
'except in a case where a contract for the sale of a hereditament has been enterd into before the war damage has been suffered and in which case payments shall be made to the purchaser'.
The Law Society has, I believe, raised this point with the right hon. Gentleman. It would appear one which would not infringe any of the principles which the right hon. Gentleman has in mind.
I will certainly look into that matter, which seems to be a proper one for consideration. Another reason for putting the Clause in its present form was to assist arrangements which might be desired for the development of the property between landlord and tenant, and to facilitate them. I will have regard to what has been said. On the whole, I think it wise to retain this condition, but I will consider the matter.
I beg to move, in page 11, line 13, after the first "a," to insert "payment or."
I think it desirable that, as far as possible, the right to receive the payment should run with the assignment of the property. In order to prevent them from going in different directions it seems desirable that the person who is going to receive the property should have the right to receive the payment in respect of it. Those two things become dissociated sometimes but it is desirable to keep them together. I hope the point will be considered whether, after the death of the claimant, the right to receive payment of money should be separated from the right to receive the property.
My learned Friend is quite right. We are looking into the point that under a will the right to the compensation should go with the property. On the main point of the Amendment, a provision to give a right of assignment in all cases where the property is transferred might go a long way to defeat the object of the Clause. If there is a bona fide sale by a man requiring money in order, for example, to get alternative accommodation, that is a case in which one anticipates consent would be given by the Commission to the assignment. The purchaser ought to be able to get not only the site but the right to the payment. As at present advised we think that the Amendment would open a door which it is the purpose of the Clause to provide should be opened only by the Commission. We therefore recommend the Committee not to accept the Amendment and I hope that my hon. and learned Friend will not press it.
I beg to move, in page if, line 15, at the end, to add:
(8) In any case where the Commission are not prepared to make an immediate payment. the Commission may, in their discretion, lend sums up to fifty per cent. of the value destroyed, and charge interest at the rate of two-and-a-half per cent. per annum, provided the Commission are satisfied that there is urgent need for temporary relief of the difficulties of the contributor, arising from the damage concerned.
This Amendment would cover the difficulty raised by the previous Clause. There is a case, of course, where the Commission are prepared to make a payment in advance. That means that the Commission make the payment, and that costs the person who receives it 2½ per cent. But there may be cases where the Commission are not prepared to make a payment—cases where they do not think it is justifiable—but where the man who has had his property destroyed may be in desperate need of receiving assistance for other
purposes. This Clause would enable the Commission to advance him the money, instead of the man having to go to moneylenders or other people and borrow money at an additional 2½ per cent. This would avoid the complication of one man dealing with the value of the property, another man dealing with the question whether it is worth lending money upon it, and bringing in outsiders to go into the question and make arrangements which would be more complicated, less simple and less immediate in their action.
My hon. Friend mentioned that the person he had in mind would, for various reasons, require to borrow money. He had in mind the case of a man with personal difficulties, who might be owing money, and matters of that kind. That suggestion, of course, is totally opposed to the principle of the Bill, as my hon. Friend appreciates. The State is making a considerable contribution in this matter because it is in the national interest so to do, and the main national interest which the State is seeking to preserve is the restoration of property, because, obviously, in our national economy, property plays such an important part. Therefore, we have in the Bill conditions such as would necessitate the Commission satisfying themselves that payments should be made—I have in mind at the moment value payments—and that they should be devoted to specific objects. Thus, speaking broadly, it would not be in the national interest that money should be obtained and devoted to some personal necessity or desire, and therefore one could not assent to my hon. Friend's proposal. That is why we have incorporated in the Bill the other Clause which enables advances to be made, not for personal necessities of an individual, but to enable him to rent another house, or perhaps even to purchase one again, so far as the national interest allows. That is the main principle of the Bill, and that is why I am unable to accept the Amendment on the Paper.
May I draw the attention of the Chancellor to the fact that the first Amendment on the Paper standing in my name was not
called? Clause 10 has no provision as to when payment is to be made for cost of works, and there is no part of the Bill which justifies the statement in the Memorandum as to the cost of works payment. In paragraph 4 of the Memorandum it says:
'Cost of works' payments will be made as and when the repairs are carried out,
but there is nothing in the Bill to make it obligatory that payment will be made as set out in the Memorandum.
I would like to ask the Chancellor of the Exchequer whether there is provision for guaranteeing that the owner of a house gets anything at all out of the value payment. I recognise the difficulty which exists in understanding the complications of a Bill of this kind, but I am not quite satisfied, where owners have mortgages of a considerable amount on a house, that, when a value payment is made and the arrangement completed, it will not be possible for the owner of the house to receive nothing for his house and that the money will all go to the mortgagee and the other people who are claimants. There should be some assurance in the case of a person who owns a house, where the mortgage has been contracted at a time when the house had a different value on the market, and the owner finds himself liable for the mortgage, that the whole of the amount will not be claimed.
The problem of the relationship of mortgagee to mortgagor is one of the very gravest problems in this Bill. As a mortgagor who has been "blitzed," I am personally interested. This question raises very grave problems, particularly as the basis of valuation, being the 1939 value, is very likely to be altered after the war, with the result that the value payment received will be an entirely fictitious sum, bearing no real relationship to the loss sustained by the property owner. May I give two instances? The part of the value left in the hands of the property owner is his site, which had a certain value in 1939. The value of that site after the war may be vastly different: it may be very much smaller, although that diminution, caused by the increased number of sites on the market owing to war damage, is not taken into account. There is also the case of the single houses that have been knocked down. We know perfectly well that those sites are never going to be rebuilt on until the whole block of property is dealt with. Nobody will put up a modern house on one of those congested sites in a narrow mid-Victorian street. The owner, therefore, is left after the war with a site which has a value in theory but none in practice.
Again, let us consider, not London, but a provincial town where a big central area has been damaged. The value of that land may theoretically be very high, but an enormous number of sites are thrown on to the market, more than can be absorbed for a very long time, with the result that the owner is left with land which has a merely theoretical value but no practical value. The land is derelict and will remain so for years. On the other hand, the mortgagee is absolutely protected and will take the whole of, and possibly a great deal more than, the value payment. The probable position of the mortgagor under this Bill will be very serious. I admit that it cannot be dealt with under this Bill, and I have kept that admission to the last lest I should be ruled out of order, but I do feel that this Bill will have to be supplemented by some form of protection for the mortgagor, otherwise you will have one set of interests bankrupting another set of private individuals, owing to war damage.
Perhaps I ought to say a few words on this matter, which is very important. As my hon. Friend who last spoke has indicated, it is really a matter for consideration, not under this Bill, but under such other proposals as may be put forward by the Government to deal with difficulties arising out of the war generally. So far as this Bill is concerned, I think the matter is quite plain, and I do not think anybody has any quarrel with it. You are bound to take the facts of the position as they are and the legal position as it now is, namely, that if in relation to payments under this Bill a mortgage debt is owing, the mortgagee is entitled to receive that amount. It is not simply a question of the mortgage on the property itself; in a vast number of cases very great value is attached to the personal covenant. You cannot lay down a rule in all these cases to say that the mortgagee shall not be satisfied and that his debt shall not be met. Neither can you say what an unfortunate position the mortgagor is in until you know something about the mortgagor himself, because you may very well have cases where the mortgagor is in a better position in fact to bear the blow than the mortgagee himself. This is a matter of the adjustment of debts, and the question of what shall happen and how the fair thing shall be clone is obviously not a matter for the War Damage Bill, but for more general consideration.
It is not entirely a question of the personal obligation. When the Government were building houses they found it impossible to build houses for all the people of this country, and they encouraged people to build their own. Builders said to people that if they would put down £50, they would build a house, and I know working people who with a great struggle succeeded in putting down £50 and who now theoretically own the house, but most of it is actually subject to a mortgage which they are paying off gradually by means of their savings. There can be no justification for saying that that was ever a personal obligation. Both the Government and this Parliament will be seriously neglecting their duty if they do not protect people who built houses, not only for their own sake but to relieve the Government of the necessity to build homes for the people. I beg the Chancellor not to allow a position to remain in which these people, if the "Blitz" does damage their houses, will be left without a penny after the sacrifices they have made to provide themselves with homes.
I should like to reinforce what my hon. Friend has said, and while I do not ask the Chancellor to give any pledge at this moment, I would ask him to use all his influence with his colleagues in the War Cabinet to get a Bill brought in by the Ministry of Health to deal with this complicated question. My constituency has a strong interest in this matter. I have something like 90,000 constituents, of whom a very large proportion are nominally in the position of owning their houses while in fact they owe a very large amount of money to the insurance companies. I would go even further than my hon. Friend and say that it was the encouragement which the State gave which led to the enormous extension since the last war of this method of financing housing. Unless there is a special Act on the subject we shall get a most appalling position. A great deal of damage has been done in constituencies like mine to that class of property. I should also like to urge very strongly that consideration should also be given to the fact that in some respects this Clause puts the mortgagee in a more favourable position than that in which he would be otherwise, because under the Rent Restriction Act the mortgagee is very strictly curtailed as to the manner in which he can exercise his rights.
I do not think we can accept what was said by the Chancellor. It does not seem to me that the question of the personal covenant of the borrower really affects the matter. It is not a question of what the security was; it is a question of sharing the burden of damage, which has no relation whatever to the question of the security raised in the first instance. All of us, and not least those of us who are lawyers, have, of course, an interest in this matter, which is a very difficult one from every point of view. No one desires to do an injustice either to the mortgagor or to the mortgagee, but unless some provision is made—and I do not see why it should not be made under this Bill, and indeed under this Clause—a very serious injustice will be done to many mortgagors.
Take the case of a man who has mortgaged a house which he has purchased, and which was valued at £1,000. Suppose that it is re-mortgaged at £750—a very common case. It may be that the value on 31st March, 1939, was only £750. That, presumably, will be the sum paid by the War Damage Commission. The whole of that sum would go to the mortgagee, whether an individual, a building society, an insurance company, or anybody else. If that sort of case is multiplied, as it may be, by hundreds or thousands, there will be an outcry. The way to deal with the position seems to me to be very clear. I admit that it is one which may inflict hardship on mort- gagees, but, in the great majority of cases, especially where they are owner-occupiers, they are in a much better position to bear the burden than the mortgagor. Take the case which I have given. Assuming that the value of the house on 31st March, 1939, is £750, the matter might be adjusted by giving the mortgagor and the mortgagee each a part of the £750. The sum paid is three-quarters of the original purchase price of the house. Three-quarters of the sum which, on a logical basis, would be paid to the mortgagee, would be £560; and the balance of the £750 would amount to £190. So the mortgagee would get £560 of the £750 originally advanced, and the mortgagor would get £190 out of the £250 which he originally put in. That would, I think, do substantial justice as between the two parties.
I agree with a good deal of what was said by my Noble Friend the Member for Horsham (Earl Winterton), but I would point out that what I have suggested would not require a special Act of Parliament. Clause 10 of this Bill deals with the question of the persons to whom payments may be made, and—as I understand—the apportionment of those payments. Therefore, it would be quite competent for such a scheme as I have outlined to be laid down. That would avoid a difficulty which, if not tackled, will become very serious, and which might take away a great deal of the value of this Bill.
There are some general considerations which must necessarily influence one when trying to work out whether one should lean on the side of the mortgagee or the side of the mortgagor. Those general considerations apply equally whether we are considering the question of compensation or that of contributions. I have some observations which I was going to make when we come to the question of the contribution, but I could equally well make them now. So far as compensation is concerned, I do not see any other practical way than that of putting down a particular date. After arguing the question, we have decided on 31st March, 1939, although it may well be that somebody who bought a house through a building society will find that the market value on that date is below the unliquidated amount of the mortgage. That is bad luck, I admit; but I do not see how it can be helped. On the broader question of which way we shall move when it comes to considering the interest of the mortgagee or that of the mortgagor, we have to draw the line somewhere. I suggest, and I think hon. Members opposite are themselves inclined to this view, that we should place the line just above the point where the lender is in some sense the partner of the borrower for the purpose of building the house. We can hope to achieve only a sort of rough justice. If we try to go further we come up against what we are always coming up against in Parliament, a position where the best becomes the enemy of the good. If we go above that line, we get into that field where the borrower may, in borrowing the money, have had other motives than home building.
In the main, in that higher field, the borrower stands to gain all there is to gain, while the lender's interest is, by the very terms of the contract, limited. It is true that an uncovenanted risk has descended on both borrower and lender from above, on account of the war. I do not think that that affects the major question of equity involved. But when we consider the practical issues which arise in the higher field, both on the side of paying out compensation and that of collecting contributions, the difficulties are almost insuperable, for instance in a case where a mortgage constitutes only part of the security for a debenture or a loan, and the trustee or the lender is looking for his security more to other assets, on, which he has a general charge.
I have not actually considered the implications of that aspect, but I am in sympathy with the view that leads to that suggestion.
How are we to deal with the question of temporary advances or fluctuating credits secured by mortgage or mortgages deposited as collateral by third parties? But there is another major consideration involved. Mortgages are widely regarded as a very safe and well-tried form of in- vestment, and their security is held to be inviolable. Is it wise to pass legislation which might threaten this inviolability and make the class of persons who invest in mortgages—a class which includes insurance companies, banks, trustees and friendly and charitable societies of all kinds—fight shy of this form of investment?
The hon. Member has succeeded in demonstrating that this question is not free from difficulties. There are many complications. But this Bill does settle a principle—the principle that where the amount of compensation is limited, all of it, if necessary, is to go to the mortgagee. This is a principle which we ought not to accept at this stage, except with very great reservation. This is, as the hon. Gentleman said, an uncovenanted risk. Neither the mortgagee nor the mortgagor contemplated that property would be destroyed by enemy action, and, therefore, in my view, it would be equitable that the risk should be shared by both. It is inequitable that the whole of the burden should be placed on the mortgagor, with the mortgagee left in the same position as if this were an ordinary transaction. I can realise the position where money was advanced on a commercial basis and not for the purpose of providing the whole, but this Bill goes far beyond that and settles the principle where money is advanced. There is no Amendment on the Paper to deal with the point, and nothing can be done at this stage, except make our position plain. I believe I shall obtain the sympathy of everybody in the Committee when I say that, as the thing stands now, it is inequitable that the mortgagee should recover the whole of his money and the mortgagor nothing at all in cases where the amount provided is not sufficient.
I hope, as the right hon. Gentleman said, that the Chancellor of the Exchequer will give very serious consideration to this matter and not allow it to remain where it is, but will, at the earliest possible moment, introduce legislation to deal with what might become a very serious national grievance throughout the country. The right hon. Gentleman's constituency is not the only one by any means, and all over the country this is a burning question. I might go further and say that perhaps the matter which is receiving the greatest amount of thought on the War Damage Bill is the position of the owner-occupier, together with the question of what is to be the position of the man who is a lessee, whose premises have been destroyed and who is still liable for the reckoning. These two questions are burning questions in everybody's mind, and I hope that serious consideration will be given to them, so as to ensure that equality is provided for both the mortgagee and the mortgagor. The Chancellor of the Exchequer made what he does not usually make, namely, a debating point, when he spoke about the personal covenant, because he knows perfectly well, in view of his profession, as I know, that the personal covenant in 99 out of 100 cases is not worth twopence. People do not grant money on personal covenant but on the actual property itself. Therefore, it cannot be said that there is additional security of the property.
I intended to get up to ask a very limited question, but this discussion is ranging rather wider than I thought was likely, and I would like to ask you, Colonel Clifton Brown, whether this is to be taken as a general discussion on the relations between mortgagor and mortgagee, or will it be possible to enter into this argument again on Clause 19?
The specific point that I wanted to raise first arises in my mind on something which the Chancellor of the Exchequer said in replying to the last Amendment that was moved. He made the point, which has been made very often in the course of the Debate on the Clauses of this Bill, that public interest is the paramount consideration in relation to the working of this Measure. That of course is right and is very present in all our minds. But the argument,
Sub-section (4) of this Clause provides that, if a value payment is made, it goes to the mortgagee, and so much as is necessary to satisfy his debt, and if his debt is larger than the whole, it would depend upon him. It is, among other things, to that position that certain objection has been made, namely, that it goes to the mortgagee.
The principle is the same. The principle on which the Chancellor of the Exchequer was arguing would apply to final payment. But I wanted to raise that question in regard to early settlements and because doubt had been raised in my own mind by what has been said.
Apart from that, I do not want to speak at any great length, and would only like to put a point of view following on the lines of what was said by my hon. Friend behind. I am not speaking at all of the very difficult case of the owner-occupier—I realise that there are some tremendously important issues arising out of that class of case—but on the general relationship between mortgagors and mortgagees, I would ask hon. Gentlemen opposite who press the contrary point of view to realise the nature of the contract that is very often entered into. The man who borrows money chooses to enter into a speculative investment very often with the borrowed money. He stands to gain if his property investment increases in value. I have never yet known of a case of a mortgagor coming to the mortgagee and saying, "The luck has been my way. Some chance—perhaps even the war—has come along and put up the value of real property enormously. In these circumstances, I think I ought to pay you 6 per cent. interest instead of the 3 per cent. we arranged, and I would like to give you a handsome capital premium on your advance when I repay it." That case never happens, although very often a man who has entered into a speculative investment which may have done very well with somebody else's money receives a very substantial profit. The lender, on the other hand, took a limited risk, with a very limited rate of interest, and we must remember, when we are discussing this general issue, that those difficult positions were deliberately chosen by the two individuals who entered into this particular form of contract.
I do not think that I need go back to the experiences of the last war. Naturally a mortgage is generally arranged on a six months' notice basis, and if rates of interest go in a certain direction, the position is provided for in the contract. It is a limited period which can be used both ways. But, here again speaking from my own experience, having looked art this matter from the point of view of big insurance companies which invest money in mortgages, I have never come across any case where rates of interest have been deliberately raised.
I am also connected with very large insurance companies, and although nobody is making any charge against the big tariff companies, there have been cases where small insurance companies have shown very bad treatment to small occupiers, who are the people I seek to protect under this Bill.
I hope my right hon Friend will not think that anything I have said is in defence of instances of that kind, but I am talking about the very important kind of business which is carried on on clearly accepted principles, where a contract is entered into and is perfectly well understood by both sides. Any suggestion that that line of business should be interfered with should be viewed with great caution. There is doubtless a wide range of cases which need special treatment, but that special need should be treated as a separate matter and not made the excuse for altering well-established contractual relations which the parties have entered into with their eyes completely open.
This Clause is one of very great importance, because it is not only necessary that the amount of compensation should be the correct figure but that it should go to the parties who have really suffered damage. The Amendments moved by the Chancellor to-day to Sub-sections (2) and (3) have gone a considerable distance towards remedying one of the most serious defects in the Bill, but there are still some defects in regard to the allocation of the payment. It is the fundamental principle of this Bill that no compensation is payable in respect of loss of income. It is only compensation in respect of loss of capital that is provided for under the Bill. Unfortunately, there is no provision whatsoever by which the rights in respect of income of one party, who is interested in the property as against another, shall cease, and, clearly, if the principle is that no compensation is given for loss of income, then, when the income from the property ceases completely owing to war damage. the right of one party against another, ground landlord against lessee or lessee against sub-lessee, should cease also, in order that the position of everybody might be precisely the same.
This point is of particular difficulty in the case where the payment to be made is a cost-of-works payment, because in that case the person who is entitled to that payment is the person who actually carries out the work. If the lessee is to receive any compensation whatever, it follows that he must retain his position as lessee. He cannot disclaim his lease; he must continue paying rent, and it might conceivably happen that by the time compensation is paid to him he may have paid away to his landlord or superior lessor more money than he will actually receive in compensation. I know of cases where the rent is perhaps half the value of the damage that has been sustained, and, therefore, in the course of two years the whole compensation will ipso facto be taken away from the person entitled to it and handed over to his lessor. I beg the Chancellor and his colleague the Attorney-General to consider this matter and devise means by which it may be remedied.
I raised this matter to try and bring the points that have emerged into a more concrete form. A great deal has been said about sympathy for the mortgagee: I think the Committee will feel sorry both for the mortgagee and the mortgagor, and everybody who suffers as the result of war damage, but the essential point to remember is that nobody contemplated this kind of damage in any contract, and if this damage takes place, neither the mortgagee nor the mortgagor will get one penny. Parliament by this Bill is to take them from that position and make payments to compensate them for damage, and I say that our sympathy should be on some ground of equity and not only be extended to the mortgagee. At the moment the Bill gives an enormous advantage to the mortgagee, and there is no guarantee at all to the mortgagor in the case of an owner-occupier.
I quite agree that from the point of view of speculation, where mortgages are for speculative purposes, there might be justification for saying, "That is a risk which these people took, and they must bear it," but there is no justification for saying that with respect to the great field of owner-occupiers where people have taken upon themselves the liability of ownership without the effect of ownership. In other words, they have become agents of insurance companies or others who have arranged with them for the mutual building of the property, and I suggest that the Government must do something to ensure that benefits shall be mutual and not one-sided. I am quite sure that there will be great bitterness in the country if this preference is given to one section instead of treating people on the basis of justice.
I have not been in the position to follow this Bill and pay attention to all its details, because of other matters with which I am concerned, but I have heard this discussion with some surprise. I do not mind telling the Committee that I am in the position of being an owner-occupier with a mortgage on my house. This position, I understand, is the same as that of 4,000,000 other people in this country. Is it the intention of the Government that where a workman has paid 25 or 50 per cent. down on the cost of a house, has obtained a mortgage for the rest, has paid his interest for some years and then has his house destroyed, the actual payment is to be made to the mortgagee? If so, the Government will have to take some steps to meet it. If I am right, that is a very great wrong and will need most serious consideration. I do not know whether it is the intention of the Government to make a statement of general policy on this matter or to bring in another Bill to deal with it. This is a very serious matter for the bulk of our people who, in fact, will get very little relief. They have regularly paid their interest, they have not defaulted in any way, but if they lose their house they will get no payment. If this Bill is not for those people, who is it for?
Various matters have been discussed since two of my hon. Friends raised the very important question of the distinction drawn in Clause 19 with regard to contributory mortgagees. I think the distinction we have drawn in the Bill to some extent reflects the view which has been put forward from the benches opposite, namely, that the owner-occupier mortgagor is really in a sense sui genesis. The only point with regard to the mortgagor and the mortgagee which arises on this Clause is with regard to the value payment. I think that perhaps the hon. Member for Chester-le-Street (Mr. Lawson) did not realise that the bulk of the owner-occupier cases, like the bulk of other cases, will be cost-of-works cases. What the man who wants to live in the house will get will be that his house will be repaired at the cost of the State.
That is not what I said. I was pointing out that the bulk of the cases would be cost-of-works cases, in view of the principles laid down in the Bill. If anyone goes to a damaged area, he will see that the vast bulk of the damage is not total damage, but damage which can be repaired economically and in the national interest. That is what the owner-occupiers and other people will get out of the Bill in the great majority of cases. Therefore, as far as this Clause and mortgages are concerned, we are dealing only with cases in which the destruction is so great that it is uneconomic to rebuild the house or is contrary to the national interest to do so. In that case, the position under the Bill, and the position in fact, is that the mortgagor has a certain amount of debt outstanding to the mortgagee. What the Bill says is that if it is not a cost-of-works case but a value payment case, the value payment is to be used in the first instance to pay off the debt. If it is not used for that purpose, the debt will remain to the extent that it is not paid off. I think most hon. Members have realised that the sort of matters we have been discussing go beyond matters which could be dealt with in this Bill, as is pretty well evidenced by the fact that there is no Amendment on the Paper dealing with these matters. What is said is that this Bill may require reconsideration concerning the relationship between the mortgagor and the mortgagee in the building society class of cases.
The owner-occupier will have paid a certain amount. If the amount he has paid has brought the mortgage debt to a figure at which it is below the March, 1939, value of the house, then of course the debt is paid off and he gets the difference. What is the position if they are equal? If a house is totally destroyed, if it is presumably uneconomic to rebuild on the site, then if the value payment is included within the mortgage debt, it goes to the mortgagee. The debt is completely wiped out.
Yes. I do not want to be controversial, because this matter is really outside the Bill, but I wanted to state the position as it appeared to me and to draw limits within which our consideration can proceed after we have passed from this Bill.
Question, "That the Clause, as amended, stand part of the Bill," put, and agreed to.
Clauses 11 to 13 ordered to stand part of the Bill.