UNIT 13

MORTGAGES

A mortgage is a legal agreement by which a bank or creditor lends money at interest in exchange for taking the title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt. Mortgages are commonly used for the purchase of real estate, where the property itself is used as collateral.

TYPES OF MORTGAGES

1. Legal mortgages: A legal mortgage involves the transfer of the legal title of the property to the lender until the debt is repaid. Under Nigerian law, this type of mortgage must be perfected through proper registration. See the case of Okuneye v. FBN Plc (2015) LPELR-24647(CA).
2. Equuitable mortgages: An equitable mortgage does not transfer the legal title to the lender but creates a beneficial interest in the property. This type of mortgage is typically created through deposit of title deeds, a memorandum of deposit, or an agreement in writing. See the case of Onwunalu v. Osademe (1971) 1 All NLR 14.

CREATION OF MORTGAGES

1. Formalities: Under the Land Use Act, 1978, the consent of the Governor is required for the creation of a mortgage on land and the agreement must be in writing and properly executed. Legal mortgages must be registered with the appropriate land registry to be effective against third parties. See sections 21 and 22 of the Land Use Act, 1978.
Equitable
2. Mortgage creation: Simply depositing the title deeds with the lender can create an equitable mortgage when there is an agreement indicating the intention to create an equitable mortgage. See sections 20-25 of the Property and Conveyancing Law, 1959.

RIGHTS OF THE MORTGAGOR

1. Right to redeem: this is where the mortgagor has the right to redeem the property by paying off the debt at any time before foreclosure. See the case of Owoniboys Technical Services Ltd v. John Holt Ltd (1991) 6 NWLR (Pt. 199) 550.
2. Right to quiet enjoyment: this is where the mortgagor retains the right to use and enjoy the property as long as they are not in default.

DUTIES OF THE MORTGAGOR

1. Payment of debt: this is where the mortgagor must repay the principal sum along with any agreed interest.
2. Maintenance of property: this is where the mortgagor must keep the property in good repair and not commit waste.

RIGHTS OF THE MORTGAGEE

1. Right to foreclose: this happens if the mortgagor defaults, the mortgagee has the right to foreclose and sell the property to recover the debt. See the case of Okonkwo v. CCB (Nigeria) Ltd (2003) 8 NWLR (Pt. 822) 347.
2. Right to possession: this is where the mortgagee has the right to take possession of the property if the mortgagor defaults.

DUTIES OF THE MORTGAGEE

1. Duty to account: this is where the mortgagee must account for any surplus funds if the sale of the property exceeds the amount of the debt.
2. Duty of care: this is where the mortgagee must take reasonable care to sell the property at the best possible price.

ENFORCEMENT AND REMEDIES

1. Foreclosure: Foreclosure is the legal process by which the mortgagee obtains a court order to sell the property and apply the proceeds towards the debt. In Nigeria, this process must be conducted through judicial proceedings. See the Conveyancing and Law of Property Act, 1881 provided under sections 21-23.
2. Sale by the mortgage: this is where the mortgagee may sell the property without going to court if the mortgage agreement contains a power of sale clause. However, proper notice must be given to the mortgagor. See the case of Akinbola v. Bank of the North (2001) 12 NWLR (Pt. 736) 412.
3. Appointment of a receiver: this is where the mortgagee can appoint a receiver to manage the property and collect rents or profits, applying them towards the debt. See section 123 of the Property and Conveyancing Law, 1959.

CONCLUSION

Mortgages play a critical role in financing real estate in Nigeria, providing security for lenders while enabling borrowers to access necessary funds. Understanding the legal framework and rights and duties of both parties is essential for effective mortgage transactions. Legal precedents and statutory provisions guide the creation, enforcement, and remedies available in mortgage relationships, ensuring a balance between the interests of the mortgagor and mortgagee.