This question of advances for the improvement of properties was then the subject of a conference between the Bank and Finance Committee:

MEMORANDUM OF A CONFERENCE BETWEEN REPRESENTATIVES OF THE BANK AND FINANCE COMMITTEES HELD AT THE COUNCIL HOUSE, BIRMINGHAM, ON TUESDAY, MAY 9TH, 1933, TO CONSIDER FURTHER THE QUESTION OF GRANTING ADVANCES FOR IMPROVEMENTS TO PROPERTIES.

PRESENT:

Alderman Gelling, Councillor Cooper, Mr J P Hilton (General Manager), Committee Clerk - Bank Committee

The City Treasurer - Finance Committee

The Town Clerk

The General Manager of the Bank pointed out that to carry out the proposals to make advances for decorations and improvements to properties under the Housing Acts would involve the keeping of separate accounts as between the mortgagor and the Corporation. Having regard to this consideration and the fact that only 8 applications had been received for additional advances, he suggested that it would be preferable to deal with such applications under the previous instructions of the Bank Committee passed on the 17th February, 1930, which would mean excluding such items as painting, decorations and general repairs or renewals.

The Town Clerk agreed that, on the understanding that the improvements were of an appropriate character and definitely added to the value of the property, this course could be adopted, subject to the approval of the Finance Committee in respect of Corporation houses where advances beyond 80% of the valuation have been guaranteed. It was therefore decided to recommend the Committee concerned accordingly.

As previously decided, such advances would be limited so that the total loan or charge upon the property (including the outstanding mortgage indebtedness) shall not exceed 80% of the current valuation of the property as computed by the Bank's Valuer.

4738   RESOLVED:- That the foregoing memorandum be received and entered on the Minutes and the recommendations therein contained; that advances for improvements to properties in approved cases should be made in accordance with the instructions contained in Minute No 3686, be adopted within the limits and on the conditions indicated in the memorandum.

A further meeting was held on May 9th 1933 following a suggestion by the Estates Committee that advances should be made under the Small Dwellings Acquisitions Acts. The Bank Chairman reported on the meeting as follows:

The Bank representatives, consisting of Councillor Cooper and myself with the General Manager and Committee Clerk, together with the representatives of the Finance Committee, Aldermen Grey, the City Treasurer and Committee Clerk, met the Estates (Sub) Committee on Tuesday, May 9th, to discuss the above question.

After hearing the views expressed by the representatives of the Finance and Bank Committees and the arguments against the adoption of a scheme to make advances under the Small Dwellings Acquisition Acts in view of the powers already possessed by the Municipal Bank and the general financial arrangements of the Corporation, the majority of the Estates Committee's representatives appeared to be convinced of the undesirability of proceeding further in the matter.

It appears that the existing procedures for selling Corporation houses, as developed since the Assisted House Purchase Scheme was adopted, continued to operate without the need for further Joint Conferences. In the period prior to the commencement of the Second World War, the Corporation was still keen to encourage owner-occupiers through the Scheme, but it is likely that demand to purchase would diminish as the possibility of hostilities increased.

The General Manager of the Estates Department wrote to the Bank on July 9th 1935 when he thought that a reduction in the Bank's interest rate, and the extension of the repayment period to 30 years, would be a boost to sales:

Dear Sir,

House Purchase.

The Municipal Bank having recently reduced the rate of mortgage interest from 5% to 4½% and agreed to grant to intending purchasers of Municipal houses a scheme whereby the mortgage can be repaid over a period of 30 years, has necessitated a report being prepared for the Estates Committee showing the annual repayments, if the equated scheme is adopted, as against the first annual payment under the Bank's present system of annual reducing payments.

You are aware that all houses are built under the 1925 Act, and in the past were either allocated to the 1923 Housing Act, which provided a subsidy of £6 for 20 years, or, the 1924 Housing Act, which provided a subsidy of £9 for 40 years, subsequently reduced to £7. 10. 0. for the same period. The latter being an Act for the provision of houses to be let.

When any house originally let is sold to either the sitting tenant or to an applicant that house automatically passes from the 1924 Act to the 1923 Act, the latter Act qualifying such houses, as explained above, for the lesser subsidy.

If the sale of houses in the future is encouraged to any degree to sitting tenants, then I am anxious, in the event of a purchaser defaulting in his payments, that the Corporation shall be protected, and with this object in view I wish to make the following suggestion, one in all probability which involves many legal difficulties, but I am hoping that you will be able to consider the question from all angles, and put forward proposals which will overcome any such anticipated difficulties.

My suggestion is:

1. That a house shall be agreed to be sold to a sitting tenant without a deposit having to be found.

2. That the lessee shall enter into an agreement to take a lease for 99 years of the house in which he resides, at a fixed rental for the first 30 years, which will include repayment of capital interest and ground rent, and thereafter at an annual ground rent.

3. That any time during the 30 years the lessee can, providing a sufficient sum has been repaid in respect of the capital, ask for the property to be conveyed to him, a mortgage in respect of the balance being provided through the Municipal Bank, or through some other source.

4. In the event of the lessee during the 30 years period being desirous of disposing of the house, he may do so on introducing a prospective lessee who is:

(a) Prepared to deposit an initial sum sufficient to satisfy the requirement of the Municipal Bank, and enter into a mortgage with the Bank, or is:

(b) Able to find a sum equivalent to that which has accrued in accordance with the terms of the agreement entered into by the existing lessee, and enter into a similar agreement to take a lease as did the existing lessee.

These suggestions were made with one object, to protect the Corporation against any loss of subsidy now enjoyed under the 1924 Act, and are on the lines I discussed with Mr Minshull and Mr Rourke on Friday last.

There is at the moment a line of thought by some members of the City Council that every endeavour should be made to encourage those sitting tenants who can afford to buy their houses, to enter into arrangements to do so, and whilst every endeavour should be made to make this as easy as possible, it is my one desire to also protect the interest of the rate payers.

I shall be glad if you will kindly give consideration to the suggestions I have now put forward, and let me know whether the legal difficulties which I know exist can be overcome.

Yours faithfully,

(Sd) Wallace Smith

General Manager.

Following receipt of the letter, conferences were held between the Town Clerk, the General Manager of the Bank, the General Manager of the Estates Department and Mr Wallond representing the City Treasurer, that were held in the Town Clerk's Room on July 24th, 1935 and October 16th 1935.

Mr Wallace Smith explained that these suggestions were intended to enable the ordinary sitting tenant without capital eventually to purchase a Corporation house by paying weekly amounts representing slightly more than his present rental. Such payments would be credited against the sale price of the house as fixed by the Valuer and when a sufficient amount has accrued the Assignment would take place and a Mortgage with the Municipal Bank could be arranged for the balance, the object being to safeguard the Corporation both against the possibility of loss in the event of default and consequential foreclosure and also in respect of the loss of Government subsidy which was entailed if a house was sold and subsequently reverted to the Corporation. Such a scheme would also be a safeguard against possible loss in consequence of a sudden slump taking place in the value of property.

The Town Clerk raised the question as to the advisability of adopting a scheme on the lines referred to in Mr Wallace Smith's letter which would be rather difficult to operate from a legal point of view and would possibly not prove sufficiently attractive to a sitting tenant, having  regard to the time which would necessarily elapse before the property would be conveyed to him.

It was pointed out that the Corporation had already agreed the principle of selling to sitting tenants on payment of one per cent of the purchase price of the house. It was true that few tenants had availed themselves of this facility, and the Meeting considered it hardly likely that the more complicated scheme put forward would prove more attractive.

At the same time the view was expressed that the existing facilities might be rendered more popular if a scheme could be devised whereby the payments under the mortgage could be equated weekly and the loan spread over a period of thirty years. In this connection the General Manager of the Bank reminded the Conference that it was already competent for any borrower to arrange his payments by weekly instalments if desired to do so, in spite of the fact that the Mortgage Deed itself specified monthly repayments. The experience of the Bank was, however, that the monthly repayments generally met the needs of borrowers. The Conference agreed that the option of selecting the method and period of repayment should continue to be available to the individual borrower.

The Conference was of opinion that if suitable publicity was given to a scheme formulated on the lines suggested in the previous paragraph and giving special prominence to the system of equated payments as allowed by the Bank, many sitting tenants would be attracted by the possibility of buying their owner-occupiers houses at slightly more than the existing rent. It was felt, moreover, that having regard to the procedure for ascertaining the suitability of the applicant, as laid down by the scale of income limits adopted by the joint conference between the Bank and Estates Committees held on the 11th February, 1927, there would not be undue risk to the Corporation of loss from the non-payment of instalments; and at the same time any loss that did arise would be more than offset by the saving to the Corporation of the contributions paid under the Housing Acts in respect of annual loss on such houses while remaining in the hands of the Corporation.

It was, therefore, agreed that the Bank, Estates and Finance Committees should be recommended to authorise steps to be taken for the sale of Corporation houses to sitting tenants on the basis already approved by the City Council, and on the lines above suggested, with provision for the repayments to be spread over a period of 30 years as agreed by the Bank Committee.