HOUSE PURCHASE DEPARTMENT:
ADMINISTRATION & POLICY
(continued)
Bank Committee: December 21st 1925
2210 The following report of the Finance and House Purchase Sub-Committee was presented:
A Bottomore - Receivership.
On the 18th February, 1924, Mr Frank Wilde was appointed Receiver on behalf of the Bank in respect of property No 163, Yardley Fields Road as a consequence of non-payment of arrears by the mortgagor (Mr A Bottomore).
Your Sub-Committee are now informed that the mortgagor has not complied with the requirements of the Receiver, and cheques which he has sent have not been honoured by his Bank.
In view of the circumstances, and as authorised by the Committee at their last meeting, the Town Clerk has given formal notice to Mr Bottomore demanding vacant possession of the property preparatory to sale, and your Sub-Committee have now authorised the Town Clerk, if this request should not be complied with, to take proceedings in the County Court for obtaining possession of the property.
House Purchase - Proposed conversion of house into flats
An application has been sent on behalf of Miss J P Bates, who desires to purchase the house in which she is now residing and to convert the property into three flats, in one of which she proposes to continue to live. The Bank Valuer states that such a conversion would not affect his valuation, and that subject to the Bank's consent being obtained to any letting arrangements, he did not see any objections to the advance being granted.
Your Sub-Committee have directed the General Manager to consult the Town Clerk as to the legal aspect of the matter, and to report to the meeting of your Committee.
House Purchase - Proposed purchase of house for employee.
An application has been received on behalf of Mrs A G Hussey, who desires an advance on a new house in Brandwood Road, King's Heath, which she proposed to purchase in order to find a home for an employee of her husband.
In connection with this application your Sub-Committee have discussed the policy already laid down by your Committee of confining advances to prospective residents and in respect of a limited number of houses, and they have directed the General Manager to consult the Town Clerk as to the legal aspect, and to present a report on the subject to a subsequent meeting of your Sub-Committee.
With reference to the application of Miss J P Bates to purchase the house in which she is at present residing and to convert the same into 3 flats, the Town Clerk expressed the opinion that this proposal was permissible under the Bank regulations, but advised that the consent of the Committee should be obtained to the sub-letting, and that the alterations to the premises should be carried out to the satisfaction of the Bank's Valuer.
2211 RESOLVED:- That the application be acceded to, subject to the procedure advised by the Town Clerk being followed.
2212 With reference to the case of A Bottomore referred to in the foregoing report, the Committee were informed that this Borrower, who had been served with formal notice of the Bank's intention to take proceedings in the County Court, had now paid £12. 10. 0. and had promised to pay a further sum of £50 by the 28th December. Legal proceedings had been instituted, but providing the promised payment of £50 was made, the action would be suspended.
Bank Committee: January 18th 1926
2240 The following report of the Finance and House Purchase Sub-Committee was presented:
Policy in respect of House Purchase Advances.
In carrying out your Committee's policy with regard to advances for house purchase, questions have arisen from time to time which have made it necessary to reconsider certain of the decisions laid down. Your Sub-Committee had before them reports of the General Manager on these points on which he had consulted the Town Clerk with reference to the legal aspect. After considering such reports, your Sub-Committee have the following observations and recommendations to make in the matter:
(1) Property being leasehold with less than 50 years unexpired
Owing to no definite ruling having been given by your Committee for dealing with these cases, there has been a noticeable lack of uniformity in exercising the powers of the Bank, some applications for loans on short lease property having been granted for varying periods and in other cases where similar circumstances have prevailed applications have been refused.
Your Sub-Committee, having given careful consideration to the matter and feeling that in the majority of instances the security of short lease property is not a desirable one, have come to the conclusion that a definite ruling should now be given to the effect that in future no advances should be made on leasehold property where the lease has less than 50 years to run, and they recommend your Committee to instruct accordingly.
(2) Confining of advances to prospective residents.
The policy of your Committee in this matter has already been laid down, but applications are frequently received in cases where the applicants do not intend to occupy the house, or wish to purchase the house for an employee, caretaker, etc, and the matter has therefore been reconsidered. As a result your Sub-Committee are strongly of the opinion, and recommend, that the principle of confining advances to residents or prospective residents should be maintained. They feel that the only deviation from this principle should be in cases where the applicant has satisfied the Committee that it is necessary to acquire two houses to obtain possession of one. Such cases are, however, dealt with in the next paragraph in regard to the question of advances on a limited number of houses.
(3) Advances in respect of a limited number of houses
With regard to this matter your Committee, on the 19th March 1923, came to a decision that where application is made in respect of more than one house an advance shall only be granted where the purchase of an additional house or houses is necessary to obtain the possession of one for occupation by the applicant, and on condition that the houses adjoin, and are limited to 3 in number. Your Sub-Committee have given this question careful consideration and they are of opinion that it is undesirable to grant an advance to an applicant in respect of more than 2 houses. They appreciate that in many instances houses are sold in pairs and that it frequently happens that an applicant desires to make provision for a member of his family to live in the house adjoining his own, and while agreeing that the granting of advances in approved cases of this nature is desirable they are convinced that to grant application for loans on a greater number of houses than 2 tends towards affecting one of the chief objects of the House Purchase Department of the Bank, namely - to encourage owner-occupiership, and also leads to speculation in house purchase.
They, therefore, recommend that the previous instruction on the matter be rescinded, and that the granting of advances be confined to not more than 2 houses in cases where the purchase of an additional house is necessary to obtain the possession of one for occupation by the purchaser, and on condition that such houses adjoin.
(4) Limitation of Advances
Your Sub-Committee have considered the question of a regulation being framed to require that advances shall only be granted to depositors who have a substantial sum to their credit, and who have been depositors in the Bank for a defined period.
Your Sub-Committee, after, carefully reviewing the matter, do not think that the imposing of such a restriction is desirable, especially at the present time when the housing problem is so acute, and they would point out that in any case the Bank Committee already have the power to refuse to grant advances should they for any reason desire to do so.
(5) Advances on Property already purchased.
The question was also carefully considered by your Sub-Committee as to whether advances should or should not be made upon property which is already belonging to the applicant but the Sub-Committee felt it desirable that a consultation should take place with the Town Clerk, and that the matter should be again considered.
Your Sub-Committee are, therefore, unable to present a report on the matter today but hope to submit a recommendation at a later date.
2242 RESOLVED:- That, henceforth, no advances for House Purchase be granted in respect of leasehold property where the lease has less than 50 years to expire.
2243 RESOLVED:- That the practice be continued of confining the grant of House Purchase advances to persons already residing or intending to reside on the property in question.
2244 RESOLVED:- That, where application is made for an advance in respect of more than one house, a loan shall only be granted:
(1) Where the applicant is compelled to buy two houses, in order to obtain possession of one in which he desires to reside, or
(2) Where the applicant wishes to acquire the adjoining house for occupation by a member of his family.
Bank Committee: February 15th 1926
2279 The following report of the Finance and House Purchase Sub-Committee was presented:
Advances on Property already purchased.
Your Sub-Committee have been advised by the Town Clerk that the granting of advances on property already purchased is not in accordance with the powers contained in the Birmingham Corporation Act, 1919, and the Bank Regulations. With a view to your Committee being fully conversant with the legal aspects of this question, your Sub-Committee have instructed the Town Clerk to present a report on the matter to your meeting to-day.
Comprehensive Fire Insurance.
Your Sub-Committee are informed that there is a demand amongst borrowers to effect insurance by way of a comprehensive policy rather than the present limited policy for buildings only. The Regulations provide that the Bank shall insure property in mortgage to them, and shall pay the premiums in the first instance, subsequently recovering the amount from the depositor. Borrowers under the present practice have to recoup the Bank for insuring the building against fire and take out policies themselves to cover other risks on the building and in respect of the contents.
Your Sub-Committee, in view of the fact that the comprehensive policy includes all that which the Bank insurance provides, consider that permission should be given for the scheme to be adopted where desired on the understanding that the appropriate premium will be repaid by the borrower, and they recommend accordingly.
Borrower in default - A Bottomore.
Your Sub-Committee report that in accordance with instructions, the Town Clerk initiated proceedings in the County Court to obtain vacant possession of the property in mortgage by the Bank to this borrower (namely - 163, Yardley Fields Road), in order that the same might be sold for the purpose of realising the amount owing to the Bank. Subsequently, however, Messrs Stephen Gateley & Sons, the Borrower's Solicitors, informed the Town Clerk that they had instructions to effect a permanent mortgage for Mr Bottomore, in order to pay off the amount owing to the Bank. The Town Clerk therefore agreed that the hearing should be adjourned until March 16th, to enable the Corporation's mortgage to be paid off, and your Sub-Committee have confirmed his action in the matter.
2281 RESOLVED:- That the General Manager be directed to make arrangements for house purchase borrowers to effect insurance by way of comprehensive policies where this course is desired by such borrowers.
With reference to the paragraph in the foregoing report relating to the question of the granting of advances on property already purchased, the following report of the Town Clerk was presented:
February 9th 1926
I have been requested to advise the Committee upon the powers of the Bank to advance money to applicants desirous of transferring existing mortgages on houses acquired by them to the Bank and to enable them thereby to pay off the existing mortgage. In some cases it is evident that the property has been acquired and the mortgage granted some years ago and that the reason for the application is to enable the applicant to be rid of an awkward bargain or to ease harsh terms.
Reference may be made to section 12 of the Birmingham Corporation Act 1919, which enables the Corporation to make advances upon property to a depositor who desires to purchase or acquire a dwelling house or dwelling houses within the City or any interest therein. It is necessary to consider what is implied by the expression "any interest therein".
In my opinion the intention of the legislature was to cover the following circumstances:
(a) Where the depositor is the owner of a leasehold house and is desirous of acquiring the freehold thereof but to enable him to do so he requires an advance from the Bank.
(b) Where the property is proposed to be purchased by two persons as joint tenants or possibly by two or more persons as tenants in common.
In the cases referred to it is clear that the applicant has already purchased or acquired the dwelling house in question and the only matter for consideration is whether the fact that he desires to obtain a loan from the Bank to enable him to discharge his existing mortgage creates an interest in the property in respect of which the Corporation would be entitled to make the advance under the section referred to.
It is obvious, I think, that the reason for the request for an advance is purely one of personal convenience to the applicant himself and is certainly not an interest in respect of or emanating from the actual dwelling house itself and it will be noted that the section refers to the acquisition of an interest in the property itself.
I therefore come to the conclusion that such an interpretation cannot be read into the words in question and that any advances to applicants in the circumstances referred to would be 'ultra vires' the section.
In this connection reference may also be made to rule 81 which definitely precludes the Bank from making any advance to a depositor upon property which is already subject to a mortgage other than to the Bank.
There is no doubt that the primary object of this rule was to prevent the Bank becoming second mortgagees and it may be suggested that apart from the Act of Parliament to which reference has been made that there is nothing in this rule to prevent the Bank making an advance in the cases referred to since the Bank would take the place of the first mortgagees after payment off.
I would point out, however, that putting the most generous interpretation upon the rule in question there would be a brief period, if these advances were made, during which this rule would be contravened. This point, however, is not material since the position is really governed by section 12 of the Act of 1919.
2282 RESOLVED:- That the report be approved, and that the matter be referred to the Finance & House Purchase Sub-Committee with instructions not to grant advances in respect of property already purchased or acquired, where in accordance with the ruling in the Town Clerk's Report such course would be in contravention of the powers of the Bank.
Finance & House Purchase Sub-Committee: March 15th 1926
Collection of Ground Rents.
Under Bank Regulation 87, all ground rents payable on leasehold property in mortgage to the Bank are to be paid when due by the depositor, who must produce to the Bank the receipt for such payment within thirty days from the date when the payment becomes due. In cases of failure to produce the receipt, the Bank may pay such charge and debit the amount to the depositor, or require the amount to be repaid.
In practice the calling for production of these receipts involves a great deal of time and expense which might be saved if the Bank were to pay the ground rent in the first instance, and debit the account of the Borrower with the amount, subsequently recovering the amount upon the next repayment.
Having regard particularly to the large number of Corporation houses which have been bought through the Bank and the possible continuance of such purchasers, the Estates Department have been consulted on the matter, and a scheme has been considered whereby the Estates Department would render to the Bank each year an account of the individual amounts due from borrowers in respect of ground rent, and such account would be met by the Bank in the first instance, the respective amounts recovered from the individual borrowers through the usual channels in conjunction with the repayments of the mortgage. This would save the Estates Department making out numerous receipts, and would obviate the necessity for the Bank to call for production thereof from borrowers from time to time.
The procedure outlined above would be similar to that in force in connection with the insurance of mortgage properties, which operates very satisfactorily.
It may be advisable for the Bank to be covered in some way and your General Manager will confer with the Town Clerk on the matter and take such steps as the latter may advise with regard to both present and future mortgagors.
The Estates Department have expressed themselves favourable to this scheme provided there be no charges for collection. It is not suggested that any such charges should be made as it is anticipated that the expense involved in collection would be more than counterbalanced by the saving of time and expense in calling for receipts.
Your Sub-Committee also propose that the scheme should be extended to leasehold houses mortgaged to the Bank in which the Corporation are not otherwise interested.
They recommend that the scheme above outlined be adopted, and that the Town Clerk and General Manager be instructed to take the necessary steps to carry the proposals into effect.
Authority to Sign Cheques - Imprest Account - House Purchase.
Your Sub-Committee recommend that Mr F Ellison (the Assistant General Manager) should be empowered to sign cheques requisitioned by the Town Clerk for House Purchase completions during the absence of the General Manager, subject to such safeguards as the Treasurer and General Manager may think fit to introduce.
[Above proposals agreed by Bank Committee under Resolutions 2315 and 2318]