ABSTRACT
This dissertation aimed at examining the problems associated with mortgage transactions in Nigeria which has created a lacuna in using Landed Property as security for loan. Land being one of the most important security for capital investment business and agriculture because of it’s acceptability is used to raise loans and advance from banks. The sources of information relied upon here are, related text materials, Judicial authorities, Statutes, Journals and Conference papers. Based on this sources this research found that mortgage of Landed Property is beset with a lot of litigation, default, delay and high cost of registration, discouraging investors and bankers, making mortgage transaction difficult and unattractive. Therefore using land as security for loan under banking law in Nigeria is hampered by an interplay of institutional, economic and social factors, such as protracted litigation, default, delay and high cost of registration as a result of inefficient and ineffective laws and also the entrenchment of the Land Use Act in the Constitution. On this note, this research was concluded by recommending that there is need to review laws, policies guiding mortgage transactions. There is also the need for a well defined policy in mortgage transaction and institutions to ease the registration process, the need to separate the Land Use Act from the Nigeria Constitution so as to make room for flexibility of transfer, alienation of interest and obtaining Governors consent in mortgage of Landed property.
CHAPTER ONE
GENERAL INTRODUCTION
1.1 |
Background
to the Study |
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1.2 |
Statement
of the Problem |
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1.3 |
Aim and
Objective of the Study |
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1.4 |
The
Scope of Study |
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Justification |
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1.6 |
Research
Methodology |
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1.7 |
Literature
Review |
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1.8 |
Organizational
Layout |
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CHAPTER TWO
THE DEVELOPMENT OF MORTGAGE INSTITUTION IN NIGERIA AND CREATION OF MORTGAGE TRANSACTIONS
2.1 |
Conceptual Clarification of Terms |
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2.2 |
The
Legal Framework of Mortgage Institutions in Nigeria |
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2.3 |
Mortgage
Institutions |
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2.3.1 |
Federal
Mortgage Bank of Nigeria |
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2.3.2 |
Primary
Mortgage Institutions |
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i. |
Mortgage
Bankers |
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ii. |
Mortgage
Corporation of States |
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iii. |
Commercial
Banks |
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iv. |
Housing
Schemes |
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v. |
Insurance
Companies |
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Creating
Mortgage Transaction |
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2.4.1 |
Legal
Mortgages |
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2.4.2 |
Equitable Mortgage |
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CHAPTER THREE
MORTGAGE UNDER THE LAND USE ACT
3.1 |
Introduction |
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3.2 |
Importance
of Land |
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3.2.1 |
Importance
of Land in the Mortgage Industry |
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3.2.2 |
Land as
Security for Loan Under Banking Law |
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3.3 |
The
Land Use Act |
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3.3.1 |
The
Land Use Act |
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3.3.2 |
Consent |
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3.3.3 |
Consent
Requirement in the Perfection of Legal Mortgages |
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3.3.4 |
Outline
of the Procedure to obtain the Governors Consent |
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to
Mortgage a property covered by statutory Right of |
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Occupation
in Kaduna State |
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3.4 |
Developed
Land |
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Undeveloped
Land |
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3.6 |
Compensation
for Development and Undeveloped Land |
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CHAPTER FOUR
Breach of Mortgage and Consequences
4.1 |
Introduction |
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4.2 |
Enforcement
of the Right of Mortgagee in the Event of a Breach |
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4.3 |
Rights
of a Mortgagor |
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4.4 |
Death
of the Parties to a Mortgage |
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CHAPTER FIVE
SUMMARY, FINDINGS AND RECOMMENDATIONS
5.1 |
Summary |
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5.2 |
Findings |
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5.3 |
Recommendation |
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Bibliography
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CHAPTER ONE
GENERAL INTRODUCTION
1.1 Background to the Study
In Nigeria, there is a plethora of business and commercial laws that
govern different aspects of business environment for example, banking,
insurance, capital market, etc. At this point, it is important to know what
“law is”. For the purpose of this study, we shall adopt some definitions.
The definition by an eminent Nigerian jurist is that, “the law of a
given society is the body of rules, which are recognized as obligatory by its
members”1
It is therefore the entire body of principles, norms or regulation that
governs human conduct, the observance of which can be enforced.
Also “law” is defined by Cicero 1959 as, “the highest reason implanted
in nature, which commands what ought to be done and forbids the opposite . . .
what is right and that is also eternal, and does not begin or end with
written statutes. ..”2
This means natural or moral laws which accord with
our basic sense of justice of what is wrong and right in the state of nature,
as opposed to or in contrast with legislative or man-made law.
Another definition is that, “law is a body of rules
designed or formulated to guide human conduct or action which are enforced
among members of a given state or society.”3
This refers to man-made law which exists to ensure
legal order and due administration of justice in an organized society.
During the period of the state of nature, man and
animals wondered about in the bush, forest, searching for food, a place to rest
and eventually to lay head when it is night in order to sleep. Sleep at that
time (state of nature) used to be at any place in the bush, like animals
without shelter. This was prone to
attack by animals, reptiles, birds and even
stronger human beings. Later, the state was established or founded. This
brought the nomadic lifestyle of the man of the state of nature to stagnation
by way of shelter. By shelter, it means any enclosure used for resting or sleep
built purposely by man for that purpose. This took the form of gathering of
grass, sticks, and leaves. Later, with the advancement in technology of that
time, mud, wood, stones were gathered to form enclosures and shelter . With
further sophistication of technology, man developed skill to build houses, with
wood, mud, stones, bricks, just like we have today, with all amenities for
comfort and pleasure. Some people nowadays cannot have shelter without
assistance from financial institution, though it is a right to have shelter in
the Nigerian Constitution4. This leads us to the need for mortgages as transaction to secure loan
from banks with any given security. The Mortgage Institution Act5 provides for the establishment
of mortgage institution in the country. S. 7 (a) provides that, “a mortgage
institution shall not grant a loan or advance for the building, improvement of
extension of dividing houses unless adequate securities have been taken on an existing
property in respect of which the loan or advance is being granted”
The Bank and Other Financial Institution Act6 also provides for the
establishment
of loan by banks as follows:
a bank
shall not without the prior approval in writing grant any advance, loan, credit
facilities against the securities of its own share or any unsecured advances,
loan, or credit facilities unless in accordance with the bank rules and
regulations and where any such rules and regulations require adequate securities
such securities shall be provided or, as the case may require deposited with
the bank.
The
securities are of diverse kinds, among which are land and other real
estates,
ships, debentures on assets of a company, life insurance policies,
stocks and
shares. “The general principles underlying these diverse forms of
security
are the same, regardless of the different modes of effecting them, as
well as
the fact that in some instance, the legal rules applicable vary from one
kind of
security to another”7.
Landed
property has been chosen as the security for loan for the purpose of
this work
for the following
reasons. First, land
is a more
stable asset.
Secondly,
the value of land is more likely to appreciate than other assets.
Thirdly,
arguably, it is easier for the banks to enforce their security in the
case of
landed properties than other assets such as debentures, insurance
securities,
guarantees, stock and shares, charge over fixed deposit account,
trust receipts, bill of sale, letter of set off, trust deed8. Also physical control of the property is hardly necessary and its
characteristic feature of immovability affords the creditor a reassuring grip
on the security.
The banking industry is one of the major institutions involved in
mortgage transactions and so there is need to ensure that it has the proper
legal frame work for mortgage transactions to thrive. Alongside comes the Land
Use Act, which is the single law that defines land rights, obligations and
specific conditions precedent for any alienation or encumbrance of land rights
in Nigeria.9 Inspite of this, title to land
appears to be more insecure than the ever was.10 This research therefore seeks to unravel the problems and proffer
plausible solutions considering the importance of mortgage transactions to the
development of any nation.
1.2 Statement of Problems
As important as mortgage of
landed property is to the economy of this nation Nigeria, it is beset with a
lot of problems which has discouraged investors and bankers, making mortgage
transactions difficult and unattractive. In view of which this research work
has come up with the following research questions, that will eventually serve
as an enablement to mortgage market development.
i.
The enactment of the Land Use Act
has seriously eroded the relative security enjoyed by a creditor (the bank) in
a mortgage transaction.
This is because of the provisions of some sections of the Act like
Section 28 which deals with the power of the Governor to revoke rights of
occupancy. The commercial banks are uncertain as to the value of a certificate
of occupancy, which they are being asked to take as security for loan, bearing
in mind that these certificates can be revoked at the Whims and caprices of the
Governors.
ii.
The Land Use Act appears to hinder economic progress.
This is because of the unwillingness and inability
of banks and other financial institutions to give out loan on mortgage due to
the fact that if a right of occupancy is revoked, a mortgagee has no right to
the compensation payable, as the definition of “holder” or “occupier” in
section 51 of the Land Use Act does not include a mortgagee.
iii.
The Land Use Act has reduced
considerable the efficacy of land as security for loan in a mortgage
transaction and invariably it’s value and reliability.
This is because of the consent requirement of
section 22, which has been criticized for being responsible for the delay and
cost which both mortgagor and mortgagee usually face in mortgage transaction.
iv.
The uncertainties surrounding the
enforcement of mortgage transactions has remained unsolved.
This is because default by mortgagor is a common practice due to the
fact, that the laws on ground to protect mortgagees from defaulting mortgagors
who breach their mortgage covenant and vice versa are ineffective.
1.3 Aim and Objectives of the Study
The fundamental aim of this research is to
critically analyze and attempt to unravel the problems associated with mortgage
transaction in Nigeria. In line with this, it seeks:
i.
To identify the provision of the
Land Use Act that has hindered the use of land as security for loan in mortgage
transaction.
ii.
To examine the reasons for
default by mortgagors of their essential obligations and proffer plausible
solutions that will make mortgage transactions more secure, favourable and
rewarding
iii.
To examine the reasons for some
of the hardship encountered by mortgagors and how it has discouraged
prospective businessmen from embarking on a mortgage transaction to secure loan
from banks.
iv.
To identify hindrances to the
enforcement of legal provision in mortgage transactions and examine the legal
machinery and laws on ground and its inability and inadequacy to prevent,
enforce and nip in the bud default by mortgagors to liquidate indebtedness.
Presently the mortgage industry is struggling with government and law markers
to put in place the right legal framework for the industry to be a safe haven,
hence the foreclosure bill and mortgage finance corporation.
1.4 The Scope of Study
The research work seeks to look at the law affecting mortgage of landed
property in Nigeria and if need be those of other countries for comparative
purposes. This research also seeks to examine the hindrances, inadequacies and
bottlenecks in mortgage transactions and the lack of a well defined legal framework.
1.5 Justification
It is expected that the practical outcome of this study will be
beneficial to the following:
i.
Those who need loan for
investment in the economy of this nation, Nigeria.
ii.
The banks and other lending
institutions who provide credit facilities for prospective investors in the
form of loan.
iii.
The executive, judicial and
legislative arms of the government who make policies, enact laws, amend,
interpret and apply laws affecting mortgage transactions.
iv.
Others include legal practitioners,
legal luminaries, students, judges, accountants, financial institutions other
than banks i.e (Finance houses).
1.6 Research Methodology
This research used the doctrinal research method, which is library
oriented. The materials used are primary documents such as legislations
(legislative enactment), decision of superior courts of records (case law) and
secondary documents such as discussions, analysis and criticisms made by legal
luminaries in textbooks and periodicals, articles and journals.
It also used the Empirical method, which is field oriented research
through collection of facts and data through interview. This research was
partly conducted in the Land registry in Kaduna State where some facts and data
were collected from the principal estate officer (Deed) and deed registrar,
bureau of lands, survey and country planning, Governors office, Kaduna.
1.7 Literature Review
It is a fact that volumes of scholarly work have been written on
mortgages, but none has been able to put it in the perspective of this research
work. Example of which are Goldface Irokalibe in his book, Law of Banking in
Nigeria11. This research starts with this
work because it seems to be the nearest text to this research topic as it
relates to banking. However, on reading it, I could not get much from it.
Though banking is the main subject matter of the book and not mortgages, the
author committed a chapter of it to securities and mentioned land as one of the
security for advances. It was rather brief, considering the fact that land is
said to be and remains the most valued security for bank lending because of its
reliability and the fact that its value appreciates over the years, unlike
chattels and other moveable assets whose value depreciate from
year to year. The omission of an indepth study of this topic in the
book, “Law of Banking in Nigeria”, has created a lacuna in that work inspite of
the fact that it is a well researched and enlightening work in the area of the
historical development of banking and banking law.
Aboki,12 in his book “Introduction to
Statutory Land Law in Nigeria”, exhaustively
defined land and traced the historical development of customary land tenure
system in Nigeria, right down to the Land Use Act and its effect on landed
property in Nigeria. However, though he also dealt with mortgage of landed
property, he did not discuss the importance of land and security for advances
in the banking industry in mortgage transactions. In Nigeria today and the
world over, banks are one of the primary mortgage institutions dealing with
mortgage transactions.
Elias,13 in his book “Nigeria Land Law”
which was published before the Land Use
Act was enacted in 1978 made no mention on the Land Use Act. This is not
unexpected. Though, he dealt with mortgages but did not link it up with banking
law. This has created a lacuna in his work in Nigeria today.
Smith,14 in his book “Practical Approach to Law of Real Property in Nigeria”, x-rayed the law of property and
everything to do with land, including mortgages and the effect of the Land Use
Act on land. But he failed to link it up with banks or other financial
institutions. This creates a lacuna in his work that needs to be filled up to
create a wholesome picture.
Smith,15 in his book “The Land Use Act:
Twenty Five Years After”, focused his research on the effect of the Land Use
Act and its effect on various strata of the economy and the legal system of
Nigeria and its government, dealing with issues of customary land ownership
right down to individual interest in land under the Land Use Act, housing and
the Land Use Act and also criminalization of fraudulent dealings in land.
Though he dealt with the importance of landed property as security for loan
with the banks, he did not relate it with the banking law. But rather, his
focus was on its relationship with or effect of the Land Use Act. This creates
a lacuna in his work because land provides the physical substratum for social,
economic interaction and is an instrument of social engineering which
invariably should involve banking law.
Imhanobi,16 in his book legal Drafting and Conveyancing, which is a book on legal drafting, deed and conveyance,
also dealt with mortgages, but limited it to its relationship with the Land Use
Act, leading to the practical aspect of drafting a mortgage agreement. He did
not go into an in-depth study of its importance in the banking sector of the
economy. Not even the historical development or its relationship with banking
law was looked into. This creates a lacuna in his work.
Adekanya,17 in his book “Elements of Banking in Nigeria” did a good job by tracing the historical development of
banking, banking law, and other elements of banking in Nigeria, which is
expected of a banker. He went further to deal with securities for bank lending
in Nigeria and actually focused on land as one of the most important security
for bank lending. But unfortunately, not being a legal luminary, he did not
relate it to the effect of the Land Use Act on landed property in Nigeria. This
creates a lacuna in his work which was first published in 2002, long after the
Land Use Act. In Nigeria, today you cannot do a research on land without the
Land Use Act.
Ohonbamu,18 in his book “Introduction to Nigeria Law of Mortgages”, dealt extensively on mortgage, tracing its
historical development from customary law right down to the modern trend of
mortgage in English form as at that time. Inevitably, the book having been
published in 1972, is now somewhat outdated and does not reflect the recent
trend. In not relating mortgages to the Land Use Act and law of banking, there
is a big lacuna in that piece of research because it does not reflect the
present position of things in Nigeria today.
Olong,19 in his book, Land Law in Nigeria,
just like the other authors on land law,
extensively dealt with the historical development and ownership of land in
Nigeria, with an exquisite exposition on the Land Use Act, but fell short of
relating mortgages to the law of banking and finance, though he highlighted
some aspects of the law of mortgage, this creates a lacuna in his research.
Adewale,20 in his book “The Nigerian Land
Law”, traced the source of Nigerian
Land Law, right down to the Land Use Act. A chapter of the book extensively
dealt with mortgages, but failed to look at it as a security for advance from
banks, which creates a lacuna in that work.
Uwakwe,21 in his book Land Use and Reform
in Nigeria, x –rayed the Land Use Act, but made no mention of
mortgage or land as security for advance from banks. This is not surprising
since his focus was on the Land Use Act, 1978 and its effect on the Nigerian
Land Law and Land Reform, and not on the use of Land as security for loan.
Nwabueze,22 in his book “Nigeria Land Law”,
thoroughly researched the Nigerian
Land Law and received English Land law right before the Land Use Act 1978.
Though he dealt with mortgage, it is out dated because in Nigeria today you
cannot talk about land without the Land Use Act and he failed to relate it to
security for loan from banks, this creates a lacuna in his book.
Finally, Dadem,23 in his book “Property Law and Practice in Nigeria”, thoroughly researched
property law and practice in Nigeria, a chapter of which dealt with mortgage
practice in Nigeria. He looked into mortgage practice in Nigeria under the
relevant laws like the Mortgage Institution Act, Land Use Act and others but as
expected it was lacking in depth since it was compressed in a chapter thereby
creating a lacuna in the work.
Department | Law |
Project ID Code | LAW0009 |
Chapters | 5 Chapters |
No of Pages | 166 pages |
Methodology | Null |
Reference | YES |
Format | Microsoft Word |
Price | ₦4000, $15 |
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Contact Us On | +2349067372103 |
Contact Us On | +2349094562208 |
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