Clause 39.—(MORTGAGES OF DWELLING-HOUSES TO WHICH RENT ACTS APPLY.) (Hansard, 1 November 1965)

§ The Solicitor-General
I beg to move, That this House doth agree with the Lords in the said Amendment.
The mortgagor has only a limited power, which is conferred upon him by Section 99 of the Law of Property Act, 1925, to grant tenancies of mortgaged properties which are bindig on the mortgagee. That power may be cut down, it may be extended, or it may be completely withdrawn by agreement between the parties. It would be most unjust to allow a mortgagor who has granted a regulated tenancy of mortgaged property in breach of the terms of his mortgage agreement, or, perhaps, in excess of his powers under Section 99 of the 1925 Act, to take advantage of his own wrong doing in order to claim relief under Clause 39.
The Amendment would preclude such a practice by providing that the relief shall be available only where the mortgaged property is subject to a regulated tenancy which is binding on the mortgagee. This is plainly fair and just, and I commend the Amendment to the House.

§ The Solicitor-General
I beg to move, That this House doth agree with the Lords in the said Amendment.
This Amendment raises a somewhat technical point. It is a point raised by the Building Societies Association, which, while the Bill was passing through this House, represented that the power given should not be extended to a case in which a mortgagor is in breach of his obligations under the mortgage. But it is customary to include in mortgage deeds a covenant 824 by the mortgagor to repay the principal money after a short period, usually six months. This is really a formality. The mortgagee does not expect the mortgagor to comply with the covenant to repay the money after six months. In most cases, indeed, he would be extremely disconcerted if the mortgagor were to do so, and the whole purpose contemplated by the parties at the time of the mortgage would be defeated.
The purpose of this provision made in the ordinary mortgage deed for repayment is purely technical. Once the mortgage money has become due, say, at the end of six months, the mortgagee has power to sell under the Law of Property Act, 1925, and also the right to sue on the personal covenant arises once the period has expired and repayment has become due. Therefore, the mortgagee is then in a position to exercise concurrent remedies.
Normally, the mortgagor will be in default under the covenant to repay the principal money, but at the time when the mortgage was entered into it was contemplated by both parties that he would be in default. I submit that the mortgagor ought not to be barred from relief simply on that account, just because of something which was in contemplation by both parties when the mortgage was entered into.
But the position is different in the building society type of mortgage which provides for repayment by instalments. This type of covenant for the repayment of the principal money is not put in for technical reasons but is one with which the mortgagor is actually expected to comply. It is to meet that state of affairs that this somewhat technical Amendment has been put forward in another place, and I ask the House to accept it.

§ Mr. Graham Page
I am sure that the House is very grateful to the Solicitor-General for his clear exposition of the Amendment. The Amendment, like the other Amendment and some which were moved in relation to the Clause in this House, shows clearly that the Clause was not thought out when it was first drafted. It came before us in the first stages in a rather peculiar state. I think that it is in its right form now.
I would merely stress that it applies only to mortgages created before the commencement of this Act. It deals 825 only with the effect of the Bill when it becomes an Act on existing mortgages so that unfairness shall not arise out of the effect of the Bill when it becomes an Act on existing deeds.
The mortgagor obviously should not have the benefit of the Clause if he is in breach of his covenants, whether it be a letting of the property as dealt with in the previous Amendment or whether it be a breach of any of the other covenants in the mortgage, but, as the Solicitor-General has rightly pointed out, there is a covenant which is frequently included in mortgages, that for repayment, which has to be in merely to give rise to certain legal rights at a certain date and it is not meant to be carried out as a covenant at all unless it is a covenant for repayment by instalments.
There is one form of mortgage for repayment by instalments which does not seem to be covered by this provision, and that is not the building society type but the copy of the building society type frequently used by private lenders. A covenant for the payment of the full principal is there, but if the mortgagor chooses to pay by instalments the mortgagee undertakes to accept by instalments. I suppose that in that case the mortgagor would not be in breach if he does not choose to pay by instalments. So the permissive instalment mortgage is not dealt with in this Clause, quite rightly, I think. It is the building society type of mortgage which should be dealt with as an exception in the Clause. I think it is adequately dealt with, and I am grateful to the Government for introducing the Amendment.

§ Dr. Dickson Mabon
I beg to move, That this House doth agree with the Lords in the said Amendment.
To validate the Amendment which we have just agreed to in Scottish terms, a term equivalent to the English legal term "covenant" would have to be used, and, accordingly, the Amendment seeks to apply an appropriate Scottish phrase, which is "an agreement or stipulation". I hope that hon. Members will concur in that.

§ Mr. Hendry
This is another illustration of the dreadful business of the Government failing to find a Scottish Law Officer to advise them on the terms which they use. Here we have a proposed Amendment to the Statute which is absolutely nonsense. To suggest that a reference to "an agreement or stipulation" is a translation of "a covenant" is absolutely meaningless and shows a complete ignorance of how these matters are dealt with in Scottish conveyancing.
1.0 a.m.
I do not blame the Under-Secretary of State. He is not a lawyer. Obviously, those who advise him have little experience of this sort of thing either. It is shameful that we have not a Scottish lawyer on the Treasury Bench to answer the point. My understanding is that a covenant involves some active step on the part of the person taking it. On the other hand, the two alleged Scottish words that it is proposed to substitute are completely different.
What happens is that the person binds and obliges himself. It is not a matter of agreement. It is a solemn undertaking. If the hon. Gentleman were to suggest that we substitute the words "obligation or undertaking" we would get something like precision. But to suggest that "agreement" is a proper translation is utter nonsense. Any stipulation would surely be made by the person who is being granted it and not by the person granting it.
I suggest that the hon. Gentleman withdraw this Amendment and seek proper legal advice, resting on the word "covenant", which, although is not a Scottish legal word, has a definite meaning which is clear and can be understood but cannot in any sense be translated as "agreement or stipulation."