SLUM CLEARANCE (COMPENSATION) BILL (Hansard, 7 June 1956)

§ THE EARL OF MUNSTER
My Lords, the noble Lord, Lord Silkin, who rose to make some observations on this small Bill which I presented to the House to-day, said that the measure was of limited purpose and will have limited results. He also said that its main purpose is to benefit the owner-occupier who purchased his house after the outbreak of the war and before December 13 last year. That is correct. The Bill has a limited purpose and, of course, can have only limited results. The introduction of the measure in another place was not intended to be in any way a world-shattering political event. What it was intended to do was to mitigate acute hardship which is suffered when a property is compulsorily acquired. The noble Lord went on to ask whether widows and elderly persons are covered by this Bill. They are covered.

§ LORD SILKIN
As a matter of fact, I did not ask that: it is self-evident. I said that those who had invested their savings and were not covered by this Bill were equally deserving, if not more so.

§ THE EARL OE MUNSTER
I am sorry if I mistook what the noble Lord said, but I was coming to exactly that point. In point of fact, widows and elderly persons, and anyone who comes in the definition in Clause 1 (1), are covered by the Bill. The measure is not intended to go any further. This deals with the purposes outlined in the first clause, and we do not intend to proceed any further.
The noble Lord went on to ask me what sums these people will receive. He knows, having read the Bill, that the first two clauses provide that the owner-occupiers and business occupiers shall receive payment equal to the full compulsory purchase value of their interest. If the noble Lord turns to Clause 4 of the Bill he will see that "full compulsory purchase value" is the compensation payable under subsections (1) and (4) of Section 40 of the Housing Act, 1936, and as if paragraph 2 of the Fourth Schedule to that Act (this is vital in this case) had not been passed. The Government's intention has always been to provide that owner-occupiers and business occupiers 790 who qualify under these two clauses shall receive what is called "grey value", rather than "pink value". I understand that unfit houses are shown on statutory maps as pink, and that fit houses bought and demolished solely on account of their awkward situation are shown in grey. They attract compensation roughly equivalent to current market value.
Paragraph 2 of the Fourth Schedule to the 1936 Act prescribes that where a local authority are buying fit houses, and those houses are defective and not in good repair, the compensation shall be the estimated value of the premises if put into a proper condition or reasonably good repair, less the estimated expense of putting them into such condition or repair. During the passage of the Bill in another place, it was pointed out that this paragraph 2 had rarely been invoked in recent years, but that it would have to come up for review at this time. Accordingly a Government Amendment was moved on Report stage to repeal the second paragraph of the Fourth Schedule for assessing compensation payable under Clauses 1 and 2 of the Bill. As I have said, with that paragraph out of the way, there is no doubt that the owner-occupier and business occupier will receive the full compulsory purchase value of their interests.
The noble Lord touched on two other points. One, which dealt with the position of houses sub-let to a tenant, I think the noble Lord will agree, would be better discussed at a future stage of the Bill. The other question, which is of some importance, is the question of mortgages. Where a party to a mortgage or a contract goes to the county court, the provisions of Clause (1) subsections (4) and (5) enable the court to modify or discharge that liability still outstanding after the full compensation has been paid. This provision was put in during the passage of the Bill through another place. The procedure is almost a novel one, and I was not surprised that the noble Lord made some reference to it to-day. This is a legal question, but I will do my best to explain to the noble Lord how it will work.
The Lands Clauses Acts provide that in the normal way a mortgagee has prior claim to compensation which has been paid to a mortgagor in respect of property. Thus under the provisions of 791 those Acts the owner-occupier may be the holder of a mortgage of, say, £700 but may have paid only £100 when slum clearance takes place. The district valuer might come along and assess the value of the property to-day at, say, £400 only, the price originally paid having probably been inflated by scarcity conditions. The mortgagor would have to surrender his £400 compensation to help clear off the mortgage and there would then be left outstanding a personal debt of £200 which he might be quite unable to meet. In the absence of any special provision to renew this outstanding debt, Clause 1 would fail in its object. During the passage of the Bill through another place, the Party of noble Lords opposite proposed to deal with this matter by remitting to the mortgagee all payment due to the mortgagor on sale and to wipe out the balance of the debt which might remain due from the latter if Clause 1 payment did not satisfy the whole debt. The noble Lord will remember that my right honourable friend the Minister of Housing and Local Government, thought that that went too far, and that in his view the only way in which hard cases could be dealt with satisfactorily was by giving the county court jurisdiction to inquire into them and to make such orders as might seem just in each case. As a result, a Government Amendment was made to subsection (4) on Third Reading of the Bill, and provides, in the circumstances envisaged, that either party to the mortgage or purchase agreement shall he able to apply to the county court for an order adjusting the respective rights and liabilities of the parties under the mortgage deed or purchase agreement. The court is given power to discharge or modify any liabilities outstanding in respect of the debt due under the mortgage. The court has been given wide discretion and may make an order in any particular case with or without such terms and conditions as it may see fit to impose.
Subsections (4) and (5) apply not only in cases of mortgage but also in cases of "equitable interest"—the point raised by the noble Lord. For the purposes of the Bill, the holder of an equitable 792 interest is someone who is in process of buying his house by instalments, under a rental-purchase agreement. The difference between a mortgagor and an equitable interest holder is that the mortgagor possesses in toto the interest he has bought by entering into the mortgage, whereas the equitable interest holder owns only as much as he has bought at any particular time. Perhaps I might give the noble Lord an example. A freeholder-mortgagor who qualifies under the Bill and whose house is valued at £400 will receive £400 in compensation, but an equitable interest holder whose house is valued at £400 and who has paid £200 in rent in pursuance of an agreement to pay his landlord £400 by way of purchase, will receive compensation based on the value of the interest he holds—that is to say, the £200 he has paid, also taking into consideration his liability to pay a further £200, if slum clearance action had not intervened.
I hope that I have answered that case satisfactorily, but as the noble Lord, Lord Silkin, knows, matters of mortgage and equitable interest are of great technical and legal difficulty. And if I have not given him a sufficient answer, I can promise that he will have an even fuller answer at another stage of the Bill. I was interested to hear the observations of the noble Lord, Lord Meston. I hope that, after the passing of this Bill, he will find that the cases which have occurred in one county council area will not occur in future. I was intrigued to hear the views on this small Bill of the noble Lord who spoke for the Opposition. I take it that it is the poverty of the housing policy which his own Party seems to show at the present time which makes him feel that it is vital to criticise a Government measure with some degree of sternness, without, of course, being able in any way to make any constructive suggestions for the future. I shall watch with great interest the statement on housing which, I understand, is to be approved by the noble Lord's colleagues on Monday morning. I hope that the noble Lord will have some say in the matter.