48

8.—9

Before loans are granted to local bodies careful scrutiny is made by the Investment Board of the nature of the proposed works and the value of the special rates offered as security. The whole of the legal work connected with loans to local bodies and the printing of the debentures is undertaken by the Public Trustee. During the year a booklet embodying the principal provisions of statute and other law bearing on local body loans work has been prepared and circulated for the information of officers. Associations formed under the Land Settlement Finance Act, 1909. 69. The object of the Act was to promote the closer settlement of land by enabling groups of purchasers to buy private freehold property for subdivision among them, and to raise the purchase-money by means of a loan guaranteed by the Government. For this purpose any five or more persons may by agreement form an incorporated land settlement association, and may purchase in the name of that association any estate consisting of not less than 125 acres. The agreement of purchase must comprise a scheme for the subdivision of the estate into allotments of not less than 25 acres and not more than 200 in extent, and for the allocation of each of these allotments to one of the purchasers at a fixed price. The agreement becomes operative only if it is confirmed by Order in Council in pursuance of a recommendation from the Board of Land Purchase Commissioners. On the confirmation of the agreement the incorporated association, acting through the Public Trustee as its agent, is empowered to raise the total purchase-money of the estate by the issue of debentures under the guarantee of the Government. On the completion of the purchase the estate is transferred to the association, and the several allotments are then transferred by the association to the individual purchasers. Each purchaser must pay in cash to the association not less than 4 per cent, of the purchase money of the allotment. Since the 3rd December, 1910, a sum in addition and equal to \ per cent, of the purchase-money is payable to provide a fund out of which the management expenses of the association may be met. Each purchaser gives a mortgage to the association to secure the balance of purchase money of his allotment, together with interest on such part of the purchase money as is for the time being unpaid. Interest is calculated at per cent, in excess of the rate at which the debentures have been issued. The present rate payable is 4f per cent, in some cases, and in others 5j per cent. The purchase money of each allotment so secured by mortgage is payable by such instalments as the mortgagor chooses, but he must in every year pay at least such part as amounts, together with the interest paid by him in that year, to 6 per cent, of the balance of purchase money secured by the mortgage at the commencement of the year. The balance of purchase money must be paid in twenty years. All capital and interest moneys paid to the association by the purchasers are expended in meeting the interest accruing due on the debentures, and the balance is accumulated in the hands of the Public Trustee as a sinking fund for the redemption of debentures. The title to any allotment is subject to the following restrictive provisions : — (1.) No person can acquire an interest in any land which is subject to the Land Settlement Finance Act, 1909, if the unimproved value of such land, together with the unimproved value of all other land of any description held or occupied by him, exceeds the sum of £6,000. (2.) Until at least one-third of the purchase-money has been paid off a purchaser must reside on his allotment, unless exempted by the Minister of Finance, and has no power to alienate or charge it without the consent of the Minister. The instalments which are payable by a mortgagor are not sufficient to repay the loan within its term, and as the debentures require to be redeemed within twenty-one years of the date of issue—that is, within one year after the maturity date of the relative mortgages —it will be necessary for the members concerned to obtain accommodation in order that repayment may be effected on maturity date,