If you want to know the Perfection of Legal Mortgage in Nigeria Law and Procedure for Getting Loan Property, then this legal guidiance if for you. A legal mortgage involves the transfer of land or property to serve as collateral for the repayment of a debt or fulfillment of other obligations. It includes a provision for redemption, which allows for the reconveyance of the title once the mortgage debt has been fully repaid.
The parties involved in a legal mortgage are the mortgagor (the borrower) and the mortgagee (the lender). To ensure its validity and impact on land ownership, a legal mortgage must be documented in writing as a deed, known as the deed of the legal mortgage.
In Nigeria, mortgages are widely utilized as a form of security. The purpose of perfecting a legal mortgage is to facilitate the lawful transfer of title to land or property to the mortgagee, whether to establish priority over other parties or to retain possession of the documents in case of default by the debtor.
Carefully study this helpful guide to how to create a legal mortgage in Nigeria as well as equitable mortgage under the law. Know The Parts Of A Deed Of Legal Mortgage. It will guide you in exercising the power of sale in a legal practise situation. With this information, you will know how to exercise the power of sale in a legal mortgages and legal charges.
First, you can read about House Mortgage: Meaning, Types, Loans and How it Works. It will serve as Legal guidance when trying to buy a property through mortgage.
Approved Procedures for Perfecting Legal Mortgage in Nigerian Law System
The process of perfecting a deed of legal mortgage shares similarities with other types of conveyances, such as a deed of assignment, and follows standard procedures for transferring an interest in land.
The specific steps involved in perfecting a legal mortgage may vary depending on the location of the property. However, there are three general procedural steps applicable throughout Nigeria, which include Governor’s consent, stamping, and registration.
1.Governor’s Consent
According to Section 22 of the Land Use Act, the consent of the Governor is necessary for the holder of a statutory right of occupancy to transfer or encumber their interest in the land through means such as assignment, mortgage, transfer of possession, sublease, or any other form of alienation. There are two types of Governor’s consent: one for transferring the seller’s interest in the property to a third party, and the other for mortgage purposes.
If a mortgage involves the transfer of an interest in land, an application for the Governor’s consent must be made. Failure to obtain the Governor’s consent would result in an equitable mortgage, which arises when a legal mortgage is incomplete or not properly executed. The court’s decision in the case of Savannah Bank of Nigeria V Ajilo established this concept.
In practice, obtaining the Governor’s consent can be a time-consuming process, typically taking three to four months, assuming there are no unexpected delays or complications. It’s important to note that this timeline can vary depending on the specific state and circumstances involved.
2. Stamping
Transitional words can be used to improve the flow and coherence of the paragraphs. Here’s a revised version with transitional words:
The statutory obligation to stamp documents that transfer or create a proprietary interest in assets, such as legal mortgages, debentures, or charges, is provided for under the provisions of the Stamp Duties Act 2010 (the “Act”), particularly in Sections 3, 23 (1), and (4) of the Act.
Furthermore, according to Section 23 (1) of the Act, any instrument executed in Nigeria or related to Nigeria, regardless of its place of execution, or pertaining to any property situated in Nigeria or any matter or thing done or to be done in Nigeria, must be stamped. If the instrument is executed in Nigeria, it must be stamped within 40 days of its execution. However, in the case of an instrument executed outside Nigeria, Section 23 (4) of the Act allows for stamping within 30 days after it is first received in Nigeria.
Importantly, it should be noted that the failure to stamp a mortgage does not render it void or invalid. Nonetheless, the mortgage deed would be inadmissible as evidence.
3. Registration:
In the registration process, the mortgage deed must be registered at the Land Registry office of the respective state where the property is located. In cases involving a company, registration is also required at the Corporate Affairs Commission (CAC) within 90 days of its creation. Failure to register within the stipulated timeframe would result in the mortgage being rendered void in favor of the creditor or debenture holder.
It is crucial to complete the registration process within 2 months from the date of creating the mortgage. Registration is considered complete when the relevant documents are delivered to the Land Registry.
Furthermore, under section 53 of the Mortgage and Property Law of Lagos State for example, the deed of legal mortgage must also be registered at the Lagos State Mortgage Board.
Documents Required for Legal Mortgage Registration:
- A duly completed application form for Governor’s consent.
- Five copies of the executed mortgage (Deed of Legal Mortgage).
- Certified True Copies (CTC) of the original title documents.
- A copy of the valuation report for the property.
- Three years’ tax clearance certificates for the mortgagor (and any surety or guarantor, if applicable).
- Proof of payment of outgoings, including current ground rent, land use charge, consent fee, inspection fee, and other applicable charges imposed on the property.
- Receipts or evidence of payment for charting, endorsement, and consent fees.
- Receipts or evidence of payment for Neighborhood Development Fees, if applicable.
- Survey plan (mandatory for land located in Lagos).
- Building plan (if the property is developed).
Required Documents if Mortgagor is a Company or Corporate Entity
In addition, when the mortgagor is a company or corporate entity, the following documents will be required:
- Certificate of Incorporation of the company with vvidence of payment of the CAC registration fee.
- A certified true copy of Memorandum and Articles of Association of the company.
- Forms CAC 2 and CAC 7 (Particulars of Directors and Secretary). A duly completed and executed Form CAC 8 (particulars of mortgage or charge created).
- Forms CAC 2.1 and CAC 7.1 (Particulars of Shareholders and Share Capital).
- A copy of the Board Resolution authorizing the mortgage transaction and/or loan.
- Certified True Copies (CTC) of the company’s latest Annual Returns filed with the Corporate Affairs Commission (CAC).
- Evidence of the company’s tax compliance, such as tax clearance certificates for the past three years. That is Tax clearance certificate of at least two directors of the company.
- Certified True Copies (CTC) of any relevant resolution, agreement, or power of attorney authorizing the execution of the mortgage. Also include a certified true copy of the incorporation certificate of the company.
These additional documents are necessary to establish the legal and corporate status of the mortgagor, ensuring compliance with company law requirements and verifying the authority of the company to enter into the mortgage transaction.
What is the Next Step after Document Submission?
Once all the necessary documents have been submitted to the Corporate Affairs Commission (CAC), they will undergo a verification process. Upon successful verification, the deeds will be registered and returned to the mortgagor. From there, a copy will be retained and kept by the CAC in the borrower’s files. This registration with the CAC ensures the proper recording and documentation of the mortgage transaction involving a corporate entity.
In Nigeria, the responsibility for perfecting a legal mortgage primarily lies with the state land registries. However, in the case where the mortgagor or the property being mortgaged is owned by a corporate entity, it is also essential to register the mortgage with the Corporate Affairs Commission.
This dual registration process ensures compliance with both land registry requirements and the regulations governing corporate entities. Finally, you can research more resource on the difference between equitable mortgage and legal mortgage.
Key Takeaway of Mortgage in Practical Law
A legal mortgage is a highly secure and comprehensive form of security interest that involves transferring ownership of an asset as collateral for specific obligations. This transfer is made with the explicit or implied condition that the ownership will be returned or re-transferred upon the fulfillment of the secured obligations.
