Building Societies and Pooling Agreements

DOIhttp://doi.org/10.1111/j.1468-2230.1939.tb00744.x
Published date01 June 1939
Date01 June 1939
BUILD1
NG
SOCl
ETl
ES
33
BUILDING
SOCIETIES
AND
POOLING
AGREEMENTS
THE BORDERS CASE AND
ITS
CONSEQUENCES
HE great interest‘ shown by the public in the case of
Bradford Third Equitable Building
Society
v.
Borders,
[I9391
I
All
E.R.
481,
was not solely due to the fact that
a
taxi-driver’s wife (nicknamed
Portia” by the Press) was
arguing her case in person against the best brains of the Chancery
Bar, but was also due to
a
realisation that the legal points in
issue affected many of them very closely. This interest was
indeed fully shared by the legal profession;
so
much
so
that
when Bennett
J.
came to deliver his judgment the corridor out-
side his Court was filled with a crowd of solicitors and barristers
struggling with the ushers in an endeavour to force an entry
into the already over-crowded court.
As will be shown later, the case was important not
so
much
for what it decided,
as
for the points that it raised and the action
of the legislature which it inspired. But before dealing with the
case itself it may
be
advisable to explain shortly the exact nature
of the arrangements usually made between the Building Societies
and builders of estates of houses.
As
is
well known,
a
prudent mortgagee does not normally
lend more than
75
per cent (at the most)
of
the value of the
security; on the other hand, most purchasers
of
small houses
cannot afford to put down a deposit of anything like
25
per cent
of the purchase price and in fact builders usually advertise that
they can arrange building society advances up to
go
or
95
per cent.
This does not mean, as the uninitiated might suppose, that the
building societies are of the opinion that the houses are really
worth substantially more than the purchase price-that,
of
course, is most unlikely to be the case. The building societies
will not be prepared to lend more than
75
or
80
per cent on the
house alone;
if
more is to
be
advanced collateral security
will
have to be given. In order to provide this collateral security the
builder enters into a “Pooling Agreement
with
a
building
society which provides that whenever the society advance more
than their normal proportion the builder shall guarantee the
repayment
of
the excess, the whole or a proportion of which shall
be
retained by the society out of the purchase price and placed
to the credit of
a
pool account which the builder charges as
T
It
was even the subject
of
a music-hall joke--“We may have
no
frontiers
but we have
our
Borders.”

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