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House Purchase

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Other problems (besides the condition of the property) relating to arrears of mortgage repayments were due to the purchasers having insufficient income, or from having irregular employment. This situation arose in many cases because the Bank had not been able to satisfy themselves as to the means of an applicant for the purchase of a Corporation house and to decide whether an advance should be made before possession was granted by the Estates Department. The Bank's House Purchase Sub-Committee included some of these issues in a report dated January 17th 1927:

 

Loans for Municipal Houses.

 

Your Sub-Committee have had before them particulars of further cases in which applicants desirous of purchasing Municipal Houses by means of a loan from the Bank have, after payment of the appropriate deposit to the Estates Department, been permitted to enter into possession of the house before the Bank have had an opportunity of approving the application for a loan.

 

Your Sub-Committee consider it is most desirable that the Bank should be able to satisfy themselves in all cases as to the means of an applicant and decide whether an advance shall be made before possession is granted by the Estates Department, as the fact that this procedure has not been adopted in the past has resulted in houses coming into the possession of persons who cannot keep up repayments. Your Sub-Committee therefore recommend that the Estates Committee be requested to direct that in no case shall the keys of the property in respect of which a loan is applied for be handed over until the Bank have approved an advance.

 

Arrears.

 

Your Sub-Committee report that in the following cases relating to Corporation Houses the Borrowers are in arrear with repayments under the mortgages, and that no satisfactory arrangement for payment have been made in respect of such arrears:

 

 

They have, therefore, directed the General Manager to inform the Borrowers that steps will be taken to enforce the Bank's powers in the matter, if satisfactory payments are not made.

 

Re-purchase of Municipal Houses.

 

Your Sub-Committee have received the following communication from the Estates Committee:

 

6393. Resolved: That the Municipal Bank Committee be informed that this Committee is of opinion that all applications for repurchase of Municipal Houses should, in the first instance, be made to the Bank Department.

 

As this is a matter of principle, your Sub-Committee have been advised that the matter should be brought before the Joint Conference, consisting of representatives of the Bank, Finance and Estates Committees.

 

A report by the Bank's House Purchase Sub-Committee on the conclusions of that Joint Conference was produced on February 21st 1927:

 

Report of Joint Conference upon the Purchase and Resale of Municipal Houses.

 

Your Sub-Committee have given careful consideration to the recommendations contained in the above-mentioned report, a copy of which has been circulated to the Members. Your Sub-Committee consider that the adoption of the policy and procedure therein defined will result in the disappearance of many of the difficulties hitherto experienced in connection with the sale of Municipal houses, and will serve particularly to ensure that only suitable applicants are accepted, and that possession of properties for sale will not be given by the Estates Department until applications have been approved by the Bank.

 

Further, it is considered that the facilities for resale, if adopted by the Committee concerned, will minimise to a great extent the difficulties at present experienced where houses are repurchased by the Corporation.

 

They accordingly recommend that the whole of the recommendations contained in the report be adopted and put into effect.

 

Valuation of Municipal Houses.

 

Your Sub-Committee have given consideration to the question of the fees paid to the Bank's Valuer in respect of the valuation of Municipal Houses, which fees were reduced on the 19th October, 1925 to 5/- for each house. It was then contemplated that there would not be the same necessity for the Bank's Valuer to make the same inspection of a Corporation house as in the case of a non-corporation house,

 

In view, however, of complaints as to the condition of certain Municipal Houses the matter was referred to this Sub-Committee for re-consideration. The Sub-Committee feel after reviewing the circumstances that it is desirable that the usual report of the Valuer should be submitted in respect of all Corporation houses and that the ordinary charge of 10/- should operate in all cases.

 

The meeting of the Joint Conference was held on February 11th 1927. The report of the Conference (that was circulated to Committee members) was very comprehensive, its remit being: "to consider questions in regard to the sale, etc, of Municipal Houses":

 

The Conference have given careful consideration to the important questions which have from time to time arisen in connection with the purchase of Municipal Houses with the assistance of the Municipal Bank and the subsequent repurchase or resale of the properties in certain cases.

 

They have considered it desirable in the following Report to set out in some detail the policy and procedure considered necessary in connection with these matters, and to define the inter-relationship between the Departments concerned; and they have been assisted in arriving at their conclusions by having had submitted to them comprehensive Reports containing the considered and agreed views of the Officials of such Departments.

 

Part 1 of the Report relates (A) to the contemplated procedure upon the purchase of Municipal Houses with the assistance of the Municipal Bank and (B) to the method of dealing with applications for advances; while Part 11 indicates the proposals of the Conference with regard to the policy and procedure in respect of the resale of Municipal Houses.

 

PART 1.

(A) Procedure upon purchase of Municipal Houses with the assistance of the Municipal Bank.

 

It appeared that the best way of approaching this difficult matter was to deal with the procedure as a whole and to compile a detailed statement covering all possible transactions which could be foreseen from beginning to end, incorporating recommendations with respect to deposits and fees. In putting forward these proposals the object in view is the adoption of a scheme which should prove workable as between the Departments concerned, and should be as satisfactory as possible to both public and Corporation alike.

 

The scheme which has been prepared is based on the principle that the applicant is in all cases to be clearly informed as to his obligations before he embarks upon them, and is to this end to be called upon to sign forms at suitable stages of the transaction so as to make him fully conversant with the burden which he is taking upon himself and also to bind himself legally to make the necessary deposits which will safeguard both himself and the Corporation.

 

Submitted with this report are two forms prepared by the Town Clerk and which are called Form A and Form B respectively. Form A is to be signed when the application is first made, and Form B when the applicant takes up the keys of the house.

 

First step - Application.

 

A person desiring to purchase a municipal house approaches the Estates Department for that purpose, and may be either (1) an existing tenant of the Corporation, or (2) a person who is not such a tenant. The difference between these two applicants is that it is the policy of the Estates Committee to allow a tenant to enter into a contract of purchase making a deposit only of one per cent of the purchase money, whereas, of course, in the case of a person who is not a tenant he has to pay a total deposit in respect of purchase money of Twenty Pounds in respect of a non-parlour type house, and Twenty-five Pounds in respect of a parlour type house. The applicant is handed or sent Form A by the Estates Department, and is required to fill it up and sign it before the Estates Committee consider his case and allot to him the house.

 

Summary of Form A.

 

Form A is best summarised by saying that it requires all the information to be given which is at present required from applicants as to address, family, amount of cash available for purchase, etc. In addition, however, it has annexed to it form B in order that the applicant may read this and fully inform himself as to the obligations he is undertaking to pay a first deposit of Three Guineas, this sum to be paid when the Estates Committee have set aside a house for the applicant. Form A makes it clear that if the applicant wishes to discontinue the transaction before taking up the keys (when he will be required to sign Form B) he will incur no further costs beyond the Three Guineas.

 

It should be noted here that at this stage neither the Town Clerk's Department nor the Municipal Bank Department have been involved or have been informed as to the existence of the transaction. Therefore, if the transaction is discontinued before Form B is signed, the whole of the forfeited deposit of Three Guineas is to be credited to the Estates Department and is to be paid into the Housing Fund.

 

Second step - Taking up keys of house.

 

When the house set aside for the applicant is ready for occupation by him and the Estates Department and the Bank have, where necessary, agreed that an advance can be made (see below dealing with the approval of applications) he is informed of this fact by the Estates Department, and before the keys are handed to him he is required to sign Form B and to make then and there the second deposit which he is required to do by the form. This deposit is to be £16. 17. 0. in the case of a non-parlour type house, and £21. 17. 0. in the case of a parlour type house, these respective sums being, with the Three Guineas forming the first deposit £20 and £25. In addition to this second deposit is to be paid at the same time the stamp duty upon the necessary lease and mortgage, which is usually a sum between Three Pounds and Four Pounds.

 

Summary of Form B.

 

Form B is merely the agreement to purchase, but has now been framed so as to provide not only for the deposit of £20 and £25 in the case of the two types of houses respectively, but also for a further weekly deposit throughout the period intervening prior to completion. This further weekly deposit will vary from about One Guinea in the case of a non-parlour type house, to about Twenty-seven Shillings in the case of a parlour type house. This course is suggested in order that the deposit of £20 or £25 may be left intact for reduction of purchase money, while the further deposits are applied to payment of ground rent, interest, insurance, etc, as it has been found that inability to pay the latter sums when the time to complete approaches has been a fruitful cause of failure to complete on the part of applicants. Form B has been designed so as to make it clear to the applicant as to his liability to pay costs in the event of failure to complete. These costs are to be such legal costs as may have been actually incurred, together with Two Guineas to each of the Departments concerned. This course is recommended for adoption in order to avoid any increase in the already numerous cases involving re-acquisition by the Corporation.

 

It is further suggested, as a matter of procedure, that if any transaction has been prematurely terminated, and the applicant has conformed with the requirements indicated by the above arrangements, he should, in the event of his again approaching the Corporation with a view to purchasing a municipal house, be dealt with, if the Corporation agree to do so, in every respect as if he were making an entirely new application.

 

Procedure subsequent to Completion.

 

Where the transaction has been actually completed Form B makes it clear that the purchaser will be charged the stamp duty, but no costs whatever of any kind.

 

 

(B) Scheme for dealing with Applications for Advances.

 

With the object of simplifying the existing procedure in dealing with applications for the purchase of Municipal Houses the Conference recommends that the following scheme be adopted:

 

(1) That the principle of the adoption of the following Income limit as a guide in dealing with applications for the purchase of a Municipal House be approved:

 

	Non-Parlour	Parlour
Man & Wife	£3.   1.  0.	£3.   6.  0.
& 1 child	£3.   9.  0.	£3. 14. 0.
& 2 children	£3. 17.  0.	£4.   2.  0.
& 3 children	£4.  5.  0.	£4. 10.  0.
& 4 children	£4. 13.  0.	£4. 18.  0.
& 5 children	£5.  1.  0.	£5.   6.  0.
& 6 children	£5.   9.  0.	£5. 14.  0.

 

It is recommended that in cases coming within this income limit and provided that continuity of employment and income of the applicant is indicated, and that no other change in circumstances whereby financial embarrassment is likely to be occasioned is anticipated, the application form be initialled on behalf of the Bank and the Estates Committee by persons duly authorised so to do and submitted to the Bank and Estates Committee for formal approval.

 

(2) That cases outside the income limit (where special circumstances exist, or where the applicant is prepared to pay a larger deposit) be considered by the General Managers of the Bank and Estates Departments. If both the officers agree that the case is a "border line" case, or that special circumstances exist which would justify the advance, then such application should be dealt with as in paragraph (1) above.

 

(3) That cases outside the income limit, where the officers do not agree, should go to the Estates Committee for consideration. If that Committee be of opinion that an advance should be made, the full facts of the case should be forwarded to the Bank through the usual channel and brought before the Bank Committee for consideration and for their approval or disapproval as the case may be.

 

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PART 11.

Re-Sale of Municipal Houses.

Proposed Policy.

 

In considering this question regard has been given to the fact that in respect of Municipal Houses sold there is neither loss nor gain to the Council, the capitalised value of the Government subsidy (namely, £75) being passed on to the purchaser.

 

In the event of the re-purchase of such houses, however, and if the same are subsequently let, instead of again being sold, an annual charge would have to be borne by the Corporation, and it should be pointed out that such annual charge would be greater than if such houses had been originally set aside for letting. This is due to the fact that houses allocated for sale, not being subject to the special conditions of the Housing Act, 1924, only rank for the Government subsidy of £6 per annum for 20 years instead of for the higher subsidy of £9 for 40 years payable in the case of houses subject to such conditions and allocated for letting.

 

As there are already a number of cases in which arrangements have been made for re-purchase by the Corporation it will be apparent that, in the event of the former purchasers being allowed to remain on as tenants, a substantial burden would fall upon the Corporation.

 

For this reason, and in order to encourage the sale of Municipal Houses to the greatest possible extent by the removal of restrictions as to resale, the Conference are strongly of opinion that the principle of re-purchase by the Corporation should be discountenanced, and that persons should be encouraged to effect their own sale of the property, both in the cases where application is made to the Corporation for re-purchase on the ground of inability to keep up re-payments, and also where the Mortgagor desires to dispose of the property for any other cause.

 

The Conference consider that exception might be made to this course in respect of house which it has been proved that defects in construction exist, and in which case it may be justifiable for the Corporation to re-purchase; the proposed procedure in these cases has already been indicated on this Report. It may also be necessary to repurchase in certain exceptional cases where the Mortgagor being in arrear and the Bank Committee having appointed a Receiver, a direct sale cannot be effected without loss, but it is recommended in such cases that it be a condition of repurchase that vacant possession of the property should be given and the surrender charges paid with, in addition, costs of Two guineas to each of the two Departments. It is contemplated that the Estates Committee would decided whether, after considering the circumstances, accommodation should be found for such de-housed persons in a house allocated for letting.

 

The Conference realise that in order that sales of Municipal houses may be effected by the Mortgagors in the open market it will be necessary for the Corporation to afford low deposit facilities to the second purchaser comparable to those granted in the first instance. It is considered therefore that, if circumstances so admit, it would be desirable in approved cases for the additional amount guaranteed by the Finance Committee, over and above the ordinary advance of the Bank, to be applicable to such second purchasers. In such cases the Bank would require to be satisfied with the circumstances of the applicant, and it would also be necessary for a fresh valuation of the property to be made by the Bank's Valuer. As it may happen, owing to depreciation of the property, that the second valuation is lower than the one arrived at by the Bank's Valuer when the house was originally sold, the Conference propose that in such event the additional advance to be granted by the Finance Committee should be based on the ratio that the first valuation bears to the new valuation.

 

It is suggested that a Mortgagor desiring to sell, and who cannot find a purchaser, could approach the Estates Department, who would be in a position to bring him into touch with suitable persons desirous of purchasing municipal houses, provided the Department are satisfied of the desirability of doing so.

 

The procedure recommended in the case of a second purchaser desiring a loan from the Bank is that he should fill up the application form of the Bank, who would conform to their usual practice in regard to ordinary applications. If, when the valuation of the property has been ascertained and the amount has been computed which the Bank would be prepared to advance, the sum desired by the purchaser is in excess of 80% of the Bank's valuation, the City Treasurer's Department should be communicated with in each case so as to determine the extent to which the Finance Committee would be prepared to indemnify the Bank, before a loan is finally approved.

 

With regard to the question of costs on resale, it is proposed that, in the event of the assignment being carried out by the Town Clerk the Vendor should be charged the appropriate legal fees.

 

Cases where re-purchase by the Corporation has already been decided upon - As already pointed out there are a number of cases in which the Estates Committee have agreed to re-purchase, and in a few of such cases Mortgages have already been discharged. In the majority of instances the Borrowers have been unable to keep up repayments and have desired the Corporation to re-purchase the properties and to allow them to remain on as tenants.

 

In view of the fact, as before mentioned, that these houses can only rank for the lower Government subsidy and consequently would become a higher charge upon the Corporation than houses set aside for letting in the first instance, it is suggested that the Estates Committee be recommended to direct that where it is considered desirable that the occupiers of the houses re-purchased should continue to be accommodated in a Corporation house, arrangements should be made for the tenants to be transferred to houses allocated for letting in order that the re-purchased house might again be sold and the Corporation thus saved the charge otherwise involved.

 

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