HC Deb 20 June 1967 vol 748 cc1577-81
Mr. Rossi

I beg to move Amendment No. 38, in page 19, line 32, at the end to insert: (5) Upon receiving the amount which in accordance with this section discharges the house and premises from the charge, the person entitled to the benefit of the charge shall give an effective discharge (in writing) of the house and premises from the said charge. The Amendment concerns a conveyancing point, which I will take shortly as the arguments were fully adduced in Committee upstairs. The object of the Amendment is merely to give statutory effect to the requirement that a person receiving money from a tenant, being a mortgagee, shall enter into the convey- ance and give a discharge for the mortgage for which he has received the money.

In Committee, an undertaking was given by the Minister to consider this matter, and I hope that he will accede to the Amendment. It would be a great help to the legal profession in dealing with legal titles if there could be a statutory requirement compelling a person receiving these moneys to give a proper receipt and discharge.

Mr. Skeffington

As promised, we gave careful consideration to the point raised by the hon. Member on 27th April in Committee. Indeed, my right hon. Friend wrote to the hon. Gentleman and other hon. Members about it. The difficulty about this suggestion—a difficulty to which the Law Society attaches considerable importance—is that there would be no way in which such a provision could be enforced. I am sure we would all agree that we do not wish to have a criminal sanction here and the House is always reluctant to make a provision which cannot be enforced.

Mr. Graham Page

One does not pay the person the money unless he signs. That is the way to enforce it.

Mr. Skeffington

Perhaps I was trying to short circuit the argument. I had better read the full explanation.

The real difficulty we feel about putting the mortgagee under a specific duty to discharge a mortgage on enfranchisement is that there would be no effective sanction against the mortgagee who refused to comply with any such duty, unless we were to invoke some penal sanction as well.

Under Clause 12, as it stands, there is nothing to prevent an enfranchising leaseholder who wants documentary proof that the mortgage is discharged from applying to the court for an order requiring the mortgagee formally to acknowledge that the mortgage is discharged, so that the imposing of a duty on the mortgagee to do so will not improve the leaseholder's position. But in any case, all the enfranchising leaseholder need do, as far as any purchaser or subsequent mortgagee is concerned, is to show that he acquired the freehold under the Bill, so that the mortgage has in fact been discharged automatically. In practice, a special condition is likely to be imposed in the contract for sale preculding the purchaser from making requisitions of objections in respect of the mortgage.

A further point which I should put on the record is that a proposal on these lines could well work against the lease-holder's interests, because if he had it in his power to require the mortgagee to discharge the mortgage but did not do so, he might well have difficulty in persuading a purchaser to accept his title when he came to sell.

Amendment negatived.

Mr. Rossi

I beg to move Amendment No. 39, in page 19, line 33, to leave out subsection (5).

In order to consider this matter, one must first refer to subsection (2) of Clause 12, which requires a tenant paying the price for the freehold first of all to apply the money to discharging any mortgage there might be on the freehold interest. Then, when we come to subsection (5), which is the subsection we are concerned with, it states that this provision … shall not apply to debentures-holders' charge … In other words, where there is a debenture on the freehold, the tenant is not required to comply. This seems a little illogical and for this reason we ask that subsection (5), which excludes the requirement, where there is a debenture, of the tenant to pay money to the trustees for the debenture holder, be removed from the Bill.

Mr. Willey

The hon. Gentleman is pressing me to go too far by this Amendment, but we have received representations from the Law Debenture Corporation about this and it is possible that the subsection may operate unfairly where there is a fixed charge. I assure the hon. Gentleman therefore that this will be looked at in another place. I have already asked Parliamentary Counsel to look into it.

Mr. Rossi

I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

11.45 p.m.

Mr. Willey

I beg to move Amendment No. 40, in page 20, line 16, at the end to insert: Provided that, where the tenancy is granted after the commencement of this Part of this Act (whether or not it is, by virtue of section 3(3) above, to be treated for other purposes as forming a single tenancy with a previous tenancy) and the tenancy has not by the time of the conveyance of the house and premises to the tenant become binding on the persons interested in the charge, the conveyance shall not by virtue of this section discharge the house and premises from the charge except so far as it is satisfied by the application or payment into court of the price payable for the house and premises. This is to meet a point which has been raised by the Building Societies Association. The purpose is to avoid the possibility of fraud and collusion. It would be possible, but for this provision, for a freeholder whose house was subject to a mortgage to grant to, say, a member of his family, or, at any rate, collusively, a long lease at a low rent and to make that grant without the consent of the mortgagee. Then, after five years, there might be enfranchisement, which would mean that the property would be free of the mortgage under subsection (1), and the sole remedy would be on the personal covenant.

We are proposing this Amendment to avoid that possibility. It will apply only after commencement of the Act, and it will apply only if the tenancy has not become binding on the mortgagee by the time of the conveyance on enfranchisement. I think that this is a proper provision to make. We have carefully considered the drafting. It is difficult to tailor it to avoid only the possibility of the evasion to which I have referred, but I do not think that it will be unnecessarily to the disadvantage of the leaseholder. It will mean that he will have to inquire and make sure that the property is not subject to mortgage. In other words, there will be an obligation to investigate title.

Amendment agreed to.