Property Law (Mortgagee's Power of Sale) Amendment Bill

Extract from Hansard
[COUNCIL — Thursday, 3 November 2011]
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Hon Adele Farina; Hon Michael Mischin; Hon Lynn MacLaren; Hon Dr Sally Talbot

PROPERTY LAW (MORTGAGEE’S POWER OF SALE) AMENDMENT BILL 2009

Second Reading

Resumed from 22 September.

HON LYNN MacLAREN (South Metropolitan) [10.59 am]: The Greens (WA) are incredibly concerned about
the sorts of practices that are targeted by the Property Law (Mortgagee’s Power of Sale) Amendment Bill 2009.

Banks taking advantage of people in financial distress and quickly selling mortgaged properties for less than they
are worth is a deep concern for us, and it is clearly reprehensible conduct. I have listened with care and interest
to the speakers we have heard thus far on both sides of the debate. The comments I am about to make will
somewhat echo the government’s response to this bill. I want to note in particular that we are aware that the
Western Australian Council of Social Service supports this legislation and that that is reason enough for the
Greens (WA) to look very favourably on it. However, like the government, we have a range of questions for Hon
Sally Talbot, essentially trying to work out whether the bill has the potential to generate the unintended
consequences that the government has shone some light on while pursuing its very worthy goal.

I note that Hon Michael Mischin has very carefully expressed that he is concerned about fire sales and that
property law is a complex area of law. I was concerned that over the long time that this bill has been on the
notice paper, the government did not put forward its own solution to this problem, which has been attempted to
be addressed by other state legislatures. Rather than the intellectual grunt that the government has put into
pulling apart this bill, I would like to have seen from it at this time the careful legislation that we could have had
to protect mortgagors. Some of the questions that I have identified are, as I said, repetitive of what the
government has said. Has anyone estimated how many questionable below-market fire sales there have been in
recent months or years, because, of course, home repossessions do not equal inappropriate fire sales? This is
something that we need some more data on. I looked at this issue in March 2011, when I thought I would get an
opportunity to speak to this bill, and I had a look at some of the figures coming out of New South Wales. I know
that by now we will potentially have some figures for Western Australia, but I did not have the foresight to look
for those figures to put them before members today because I was not aware that this bill would be debated
today. However, those figures should be there, and we should be informed by them if we are to make some good
legislation to protect people who are affected by fire sales. Only this morning I was on the phone to my mother
in Oregon, and she talked to me about a house that was on sale for $375 000. It was a mansion that would
normally go for maybe $1 million or, as my mother estimated, $700 000.

Hon Simon O’Brien: Where was that?

Hon LYNN MacLAREN: That was in Medford, Oregon. It costs $375 000 for a four-bedroom house. Each
bedroom had its own bathroom; it was pretty fancy. Members are all looking at me wondering what the address
is because they want to make a bid! But my mother moved to that area six years ago, and she indicated that her
house is now worth less than half what she paid for it. Because of the global financial crisis, we have seen
housing markets in economies such as Australia’s, and I point to America in this instance, just crashing; the
housing markets are crashing. We are in a bit of a bubble here in Western Australia; we have talked about it
before. But it still raises the question: what is the data? How many fire sales are occurring? How many bargains
have we seen on the market? Let us look at it; let us see whether the banks are behaving irresponsibly.

Hon Michael Mischin: Just because it is a bargain does not mean it is disposed of at less than market value.
Leaving aside fire sales for a moment, it’s the market value we are focusing on.

Hon LYNN MacLAREN: Thank you very much, Hon Michael Mischin. That is why I have said that home
repossessions, or even low-priced homes, do not necessarily mean inappropriate fire sales. Therefore, we have to
have a mechanism to measure that. That is something that I think we need to know before we pass this bill.

My other point is that I have acknowledged that WACOSS was consulted about this bill, but I, too, would like to
know which other stakeholders were consulted and what their feedback was. It has been pointed out that very
similar legislation has been in place in New South Wales for a long time. How is it going there? What has
happened since the bill was passed? Which parties, if any, oppose similar amendments that were passed through
the Queensland Parliament in 2008? Which parties are concerned about this legislation and why? I think one
advantage of taking our time and reviewing it from a distance is that we can find the correct solution and not just
act off the cuff in an urgent reaction to the global financial crisis. I would like to know whether Hon Sally Talbot
has sought the views of banks and mortgage institutions and/or lawyers or other professionals with experience on
the mortgagee side of these transactions. I know there are consumer protection advocacy groups in New South
Wales, for instance, that we do not have here, but perhaps those consumer advocacy groups would be able to
guide us in developing our legislation.

We have a few questions so far that would be more appropriately addressed by Hon Sally Talbot as part of the
Committee of the Whole, should we get to that stage. I wanted to flag them in case she wanted to address them;
she can address them separately with me. Would it be worth defining “reasonable care” in proposed section
59A(1) or are any definitional ambiguities foreseen in that term? That might be a question on which we might
also get the view of Hon Michael Mischin. Is it possible for Hon Sally Talbot to clarify with us in what
circumstances proposed section 59A(1)(b) might apply? That is when we are talking about an ascertainable
market value. What if there is not an ascertainable market value? When does that proposed section apply? How
realistic a remedy does proposed section 59A(4) provide, given that the victim of a submarket value sale is likely
to be quite cash-poor and therefore, by definition, unlikely to be able to sue the mortgagee? Finally, just what are
the consequences if the parties contract out of their obligations under the bill, if it becomes an act, contrary to
proposed section 59A(5)? I am trying to be constructive; I recognise the problem. I see that it is an area that
Western Australia should be legislating on to protect these homeowners. I am trying to be constructive in
looking at how we can get a better bill and how we can get a bill that will protect those people. I also ask for a bit
more data on this matter. Therefore, in view of the significant questions above, and because of our desire to see
this bill progressed, I will move a motion for referral.

Discharge of Order and Referral to Standing Committee on Legislation — Motion

Hon LYNN MacLAREN: I move without notice —

That the Property Law (Mortgagee’s Power of Sale) Amendment Bill 2009 be discharged from the
notice paper and referred to the Standing Committee on Legislation, for report no later than 28 March
2012.

I think that date would give us a good chance to look at all the other legislation that has attempted to address this
issue and try to put in place some good laws that will protect people from fire sales. I totally support the
principle of the bill, but I really feel that we should look at it more carefully, as this house is empowered to do,
and I suggest we refer it to the standing committee.