BUILDING SOCIETIES. (Hansard, 21 February 1939)

§ Miss Wilkinson

I beg to move, That leave be given to bring in a Bill to amend the law relating to building societies; and for other purposes in connection therewith. May I thank the Chancellor of the Exchequer for the statement that he has just made, and say that while we welcome the information that the Government are looking into this matter with a view to legislation, we think it is of extreme importance not only that the legislation shall be upon lines which will protect the building societies, but that consideration shall also be given to the case of tenants; and the Bill which I am asking leave to introduce, while it realises the case for the building societies, is designed to provide that protection for the tenants which may be lacking in the Bill to which the right hon. Gentleman has referred. We have been for some years now in a period of a building boom, and in connection with the building of cheap houses of a class which this House has on various occasions declared to be necessary, the problem is that of the deposit. As was the case with the hire-purchase system, it has been found that a device which was originally a useful one has been the subject of abuse. A building society can, as a matter of business, make advances upon a house up to only about 80 per cent. not of the price but of the value of the house, and that means that the pro- 212 spective purchaser is called upon to put down a deposit which is too high for a small man to pay, and this Bill deals only with the smaller houses—those under £1,000.

To meet the situation which I have described there has come into existence what is known as the builders' pool, that is, the builders put up a certain sum, say £50 a house, and on a large estate this provides a collateral security which, in fact, gives to a building society practically 100 per cent. protection for its advances. That device of itself may be, and has been, quite useful, and there are large numbers of people who have benefited by it; but like so many other devices, it can be abused. For one thing, a purchaser has not known of the existence of the pool, and if a building society has been prepared to lend £395 on a £400 house he has assumed that the house was, in fact, worth that money. Further, it has become no part whatever of the duty of a building society to see that the house was worth the money, because its loan was guaranteed.

What my Bill does is, first—as the Government themselves wish—to legalise the builders' pool retrospectively. That is obviously what the building societies want. But, in return, the Bill enacts, first, that the purchaser shall know the amount of collateral security taken up by the building society so that he will have some idea of the real value which the building society places upon the house. Secondly, and most important, it enacts that there shall be implied in every mortgage that the dwelling-house is of good, substantial material, that it complies with the local by-laws and that at the date of the mortgage it is, in all respects, reasonably fit for human habitation. In fact, the Bill gives the warranty implied in the Sales of Goods Act to the purchase of houses by instalments.

As things are, there is no warranty at all implied in most of these mortgages. That is to say, there is often a clause in them to the effect that the builder will put right any defects which appear within six months of the completion of sale, but six months is a very short time in the life of a house, and if a house built of very bad material has gone through a winter, very often the poor man who is paying up to the very limit of his income in instalments on the mortgage, may be faced with large 213 bills for repairs. I have found cases of bow windows of small houses coming away from the walls altogether. In other cases, where there should be a concrete foundation of seven inches, there is only a decorative fringe round the house and no concrete foundation at all. When the floor boards are taken up, the houses are found, actually, to be on the damp earth. The effect on little children who have to sleep in such houses is that their health may be impaired for all time.

The operative Clause in the Bill provides that if the purchaser finds that the house is not built in a workmanlike manner and of good material, he may apply to his local authority for a certificate to that effect. For the payment of a small fee he gets a survey of his house made, and if there is anything wrong he can take the certificate to the building society and ask them to put matters right. If they fail to do so, the Bill gives him the right to go to the county court, to present that certificate to the court and to get a judgment withholding the mortgage payments until the house has been put into the condition implied by the warranty. This is really a most reasonable Bill. It only gives the protection necessary to ensure that the man who is paying for his house shall get what he pays for, and not something run up quickly, and involving him in heavy bills for repairs. Therefore, I hope the House will give me leave to introduce it.