§ Read 3a (according to order), with the Amendments.
§ THE MARQUESS OF SALISBURYThere is one amendment I wish to move. I think it is to meet a casus omissus in the Bill. The effect of the Bill as it now stands 666 would be that if a bit of land which had been held with another farm was taken separately, and the new tenant proceeded to drain it and to build farm buildings upon it, he might entirely oust a mortgagee who had executed the mortgage without any idea of the danger he ran. For instance: £10 per acre would be spent upon farm buildings; £7 per acre would be spent on drainage; I take it that £17 per acre is more than, or quite as much as, any mortgagee would now lend upon land—ordinary land. The result would be that the mortgagee would be put to considerable danger. What I propose is that these charges shall not operate against a mortgagee unless they have been registered before the mortgage is executed. When they are registered, of course, the mortgagee is taken to have obtained all necessary information, and it is his own fault if his charge is ousted. As the matter now stands, I think it would be a serious injustice to the mortgagee, and would throw a considerable amount of discredit upon land as a mortgageable security.
LORD STANLEY OF ALDERLEYThis Bill only comes into effect in case of a mortgagee having foreclosed; and, when a mortgagee forecloses, if he does so according to legal forms, after he has foreclosed, he ceases to be a mortgagee and becomes owner absolutely. All this Bill does is to confer upon this new owner the full rights and duties of an owner. The noble Marquess has always said that Parliament will not do anything to injure the rights of the mortgagee; therefore, I expected some opposition from him to this Bill, just as, in any case where the remainderman is touched, Lord Bath always came forward to the rescue. One is tempted to believe that the noble Marquess is bidding for Membership of the Liberty and Property Defence League, in order that he may rebut the insinuations of the noble Lord on the Cross Benches as to Socialism. I wish to ask the noble Marquess whether he has consulted with his Minister of Agriculture on this point, because Mr. Chaplin was very strong some time ago upon the subject—that if this Bill does not pass as it is, all the tenants will be requiring from the landlords, before taking land, inquiry into their title, and putting questions 667 which will be very troublesome. In the part of the country with which I am connected, I do not think there is likely to be any difficulty of this sort; but it appears that in the Eastern Counties that would be the case. The noble Marquess, no doubt, has seen what has passed at the Central Chamber of Agriculture. There the opinion of a conveyancing barrister was read. He said that there might be some difficulty in passing a Bill in the case of old mortgages, but he did not think that as to future mortgagees there would be any trouble. That is exactly the reverse of the noble Marquess's proposal. He proposes to safeguard the future mortgagees.
§ THE MARQUESS OF SALISBURYNo—the old mortgagees also.
LORD STANLEY OF ALDERLEYI mean, those improvements registered previously to the execution of the mortgage. I am not quite sure how that is. In many cases tenants may have to do, as the noble Marquess has just stated, trifling improvements, such as drainage; and he would have to lose those because of the necessity of safeguarding the mortgagees, or what were mortgagees. Can the noble Marquess say that his Minister of Agriculture approves of this Amendment?
§ LORD HERSCHELLI think that the effect of the proposal of the noble Marquess would go beyond what he intends, because it would destroy the effect of this part of the clause altogether. The evil that the Bill is intended to meet is this:—It very frequently happens that a mortgagor in possession lets his land. I suppose a great number—the majority, probably, one may say—of the estates in this country have some mortgages upon them, and at present the mortgagor is generally treated as the owner. He makes his leases, and there is no inquiry as to whether there are mortgages existing or not. Under the existing law, if the mortgagee comes in and takes possession, the rights of those persons who took from the mortgagor are ousted. Now, if you exclude from the operation of this clause all those cases in which improvements are not registered before the mortgage, you will exclude nearly all the cases with which the Bill intends to deal. Because the evil to be met is this: The 668 tenant who takes knows nothing about a mortgage; he supposes he is dealing with the mortgagor, and he takes the land of him, and makes improvements on the faith that they are improvements made in respect of which he will get the ordinary compensation at the end of his tenancy. Then a mortgagee comes forward and takes possession, and he is deprived of all these improvements, and of all the payment in respect of them which he would have had if the mortgage had not existed, and if the mortgagor in possession had been absolute owner of the property. Now, you do not get rid of the evil at all by simply providing that if, before he takes, the mortgage is registered, he shall be protected. He knows nothing about the mortgage, and had never heard of it, and, therefore, he is not in a position to protect himself, except, of course, by making inquiry; lessees might all make inquiry whether their lessor was a mortgagor, and if so insist on the concurrence of the mortgagee in the lease; but I am quite sure the noble Marquess and noble Lords opposite would say that that would not be likely to facilitate lettings, and that there would be considerable objection to the necessity in every case of the concurrence of a mortgagee in the lease wherever there is any mortgage on the property. It is certainly desirable to avoid that necessity. But after the recent decision, tenants will be likely to insist, unless they are afforded the protection of this Act, upon knowing whether their lessor has mortgaged his property or not, because without knowing it they will not have the slightest security when they become tenants. Now, an objection—and I admit it has some force—has been taken to the wording of this clause as it stands. I think the objection has been a little exaggerated, because fears were expressed lest, if the mortgagor had let upon a fine, the mortgagee might not be made to pay back to the tenant the fine which he paid to the mortgagor, as being expenditure which he has made in expectation of holding the land for the term of his contract of tenancy. I do not think myself that such a construction would be probable, but, at the same time, I think there is reasonable ground for suggesting that an Amendment be made; and that is, that after "expenditure " 669 the words "upon the land" should be inserted. Then there is another point to which objection has been taken, and I think also with some reason. Allowance is made to the tenant for expenditure made in expectation of holding the land for the full term of his contract of tenancy, and for which he has not been recouped. A man may not have been recouped for a very inexpedient expenditure, which really does not improve the land at all. The reason why he has not been recouped may be because it is expenditure that ought never to have been made. I think there is some reason in that objection, and that that might be met by substituting for the words "for which he has been recouped" the words "in so far as the improvement resulting therefrom is not exhausted at the time of his being so deprived." It would then rest in this way: that if the mortgagee came in and deprived him otherwise than in accordance with his contract of tenancy—of course if the contract of tenancy covered it, it would be dealt with in the ordinary way—but if the mortgagee came in and deprived him on the notice that this Bill permits, then he should pay compensation for any expenditure upon the land which the tenant has made in expectation of holding the land for the full term of his contract of tenancy, in so far as the improvement is not exhausted at the time of his being so deprived. In other words, if there remain an additional value given to the land, by reason of his expenditure, at the time he is deprived, to that extent he should get compensation. I was myself about to suggest those two Amendments, which I think do hit a little blot in the Bill.
§ THE MARQUESS OF SALISBURYI was only going to ask this. If an improvement confers no value on the land, can you talk of its being capable of being exhausted? Would it not remain unexhausted to the end of time?
§ LORD HERSCHELLThat might be met by changing the word "the" into "any." My suggested Amendment would then read, "in so far as any improvement resulting therefrom is not exhausted at the time of his being so deprived."
§ THE LORD CHANCELLORThis seems to me to be a question rather of political economy. There is ro doubt as 670 to what the law is. A mortgagee might be ousted of the full security of his mortgage by reason of the expenditure; when he forecloses he finds that a great deal has been done which he has got to pay for practically, and in some way or other that ought to be met. If there are any better words than those suggested, of course one would gladly adopt them, but that it ought to be met in some manner seems to be quite manifest. Otherwise, no mortgagee would be likely to advance his money on land unless he has security against the mortgagor and the tenant between them practically building him out of his mortgage. There are a great many farm buildings and so forth, technically called improvements, which the experience of many noble Lords will show have not very much added to the value of the estate, but, in point of justice, because they ought to be paid for, the man himself and his mortgagor have agreed to be erected at his own expense. But there is a third person to be consulted—a mortgagee who has had no notice. He finds that his security has been diminished by an expenditure which, upon the hypothesis, gives additional value to the land. That is the sort of thing that ought to be provided for, otherwise it would be unjust; and, because it is unjust, it would have this effect upon the letting value of the land as a security upon which money could be advanced, that it would discourage people from advancing money on mortgage to the extent to which it is found that mortgagees are injured by that sort of process. Therefore, that in some way or other that difficulty ought to be met is quite manifest. I am not at all prepared to adopt the particular words of the noble Marquess, but it is quite clear that some words which shall provide against that contingency are necessary for the working of the Bill, and for the keeping of land as a good security for money.
§ THE MARQUESS OF SALISBURYI do not wish to press my Amendment after what has been said by the noble Lord, whose views on a legal matter are, of course, much more likely to be correct. I should rather be inclined to urge him to put off the Bill till Thursday, in order that the words may be given notice of and carefully considered. But that is a 671 matter for his consideration. My only fear is that the first part of the Agricultural Improvements Act of 1883 gives liberty for a series of improvements which may or may not confer value upon the land. There is the limitation introduced into, the Act that they must not be adopted without the assent of the landowner; but under the present theory the landowner is really impecunious, and to him it matters very little. The mortgagee, who is really the person interested, has not got to give his consent under the Act. Therefore I think you are running the risk of a very serious injustice unless you adopt some such measure as I have proposed, or has been proposed by the noble and learned Lord opposite.
§ LORD HERSCHELLI have had a good deal of conversation on this matter with those who have had very great experience in dealing with the lending of money upon mortgage, as well as with these estates; and they are perfectly agreed upon the Amendment, which I proposed, together with another to which personally I do not see any objection, because I think these are the cases intended to be dealt with. They said they should have no apprehension at all if these Amendments were adopted. The one is that to which I have just called attention. The other is, to provide that the sub-section should only apply where the contract was for a tenancy from year to year, or for a term of years not exceeding 21, at a rack-rent. Of course, if the tenant paid his rent, the mortgagee would have no desire to dispossess him, and therefore he would not need to come in and put an end to the tenancy. On the other hand he has the power, if circumstances should require it, but only in that case, which would be an exceptional case. I think that with those two provisions, there would be a complete safeguard. I understand that the promoters of the Bill do not object to those provisions, which are really only carrying out their purpose and object.
THE MARQUESS OF SALISBURYMI will accept the Amendments of the noble and learned Lord, but it will be better to take the final stage on Thursday.
§ Bill to be further proceeded with on Thursday next,