Page 4937 - Week 15 - Thursday, 8 December 1994

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I WOULD ALSO DRAW MEMBERS ATTENTION TO THE PROVISIONS IN THE LEGISLATION DEALING WITH MORTGAGES AND

GUARANTEES. ONE IMPORTANT PROVISION IS THE PROHIBITION ON THIRD PARTY MORTGAGES. THIS PROHIBITS A CREDIT

PROVIDER FROM ENTERING INTO A MORTGAGE TO SECURE OBLIGATIONS UNDER A CREDIT CONTRACT UNLESS THE

MORTGAGOR IS A DEBTOR OR A GUARANTOR UNDER A RELATED

GUARANTEE. _

IN ADDITION, ANY MORTGAGE IS VOID TO THE EXTENT TO WHICH IT SECURES AN AMOUNT IN EXCESS OF THE SUM OF THE AMOUNT OF THE LIABILITIES OF THE DEBTOR UNDER THE CREDIT CONTRACT AND REASONABLE ENFORCEMENT EXPENSES OF ENFORCING THE

MORTGAGE. THE CODE SPECIFICALLY RECOGNISES ALL ACCOUNTS

MORTGAGES, WHICH, AS MEMBERS KNOW, WHEN PROPERLY USED, CAN BE OF ASSISTANCE IN MINIMISING STAMP DUTY,

REGISTRATION FEES AND PROFESSIONAL COSTS WHEN ENTERING INTO NEW MORTGAGE ARRANGEMENTS.

IN RECENT YEARS THERE HAVE BEEN CRITICISMS ABOUT THE WAY IN WHICH CERTAIN BANKING INSTITUTIONS HAVE MISUSED

GUARANTEES. THE CODE CONTAINS A NUMBER OF PROVISIONS DESIGNED TO ENSURE THAT PERSONS WISHING TO GUARANTEE THE DEBT OBLIGATIONS OF OTHERS ARE GIVEN KEY INFORMATION UP-FRONT, AND THAT CREDIT PROVIDERS CANNOT IMPOSE

UNREASONABLE OBLIGATIONS ON GUARANTORS. FOR EXAMPLE,

A GUARANTOR MUST RECEIVE A SIGNED COPY OF THE GUARANTEE AND RELATED CREDIT CONTRACT WITHIN 14 DAYS OF EXECUTION.

4937

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