UNDER WHAT CIRCUMSTANCE CAN THE MORGAGEE SELL THE MORTGAGED PROPERTY
A mortgage is the transfer of the ownership of an asset by way of security by a borrower to a lender upon the express or implied condition that it will be re-transferred to the mortgagor upon discharge of the secured obligations. Put differently, a mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given. The security is redeemable on the payment or discharge of such debt or obligation, any provision to the contrary notwithstanding.
A mortgagor is a person or entity that borrows money to purchase a piece of real estate. Mortgagors can obtain loans from financial institutions or individual lenders and are often evaluated based on their credit history and the quality of collateral they post. In mortgage loans, the mortgagor is required to pledge the title of the property as collateral.
A mortgagee is a lender: specifically, an entity that lends money to a borrower for the purpose of purchasing real estate. In a mortgage transaction, the lender serves as the mortgagee and the borrower is known as the mortgagor.
Under the Conveyancing Act, the Property & Conveyancing Law and the Mortgage & Property Law, every legal or equitable mortgagee whose mortgage is created be Deed may enforce its/his security after the facility maturity date by selling the mortgaged property. The power of sale here is automatic and the mortgagee does not require a court order before he/it can sell. However, for the mortgagee to be entitled to exercise its power of sale, the power must have arisen and become exercisable. For the power of sale to arise, the following conditions must be fulfilled:
a. The mortgage must have been created by a deed;
b. There must be no contrary intention against sale in the mortgage deed; and
c. The facility maturity date, which is the date of redemption of the mortgage must have
For the power of sale to become exercisable, it must be shown that:
a. A notice requiring payment has been served on the mortgagee at least three months
before the proceedings;
b. Some interests on the facility has been in arrears for at least two months; and
c. The mortgagor is in breach of some covenants in the mortgage deed or some other
provisions of the law.
Similarly, the Mortgage and Property Law, 2010 provides that:
"a mortgagee shall not exercise the power of sale conferred by this Law unless-
(i) A notice requiring payment of the mortgage money has been served on the mortgagor or one of two or more mortgagors, and default has been made in payment of the mortgage money, interest on it or of part of it, for two months after such service; or
(ii) There has been a breach of some provisions contained in the mortgage deed or in this Law, on the part of the mortgagor, or of some person concurring in making the mortgage, to be observed or performed, other than and besides a covenant for payment of the mortgage money or interest thereon".
The Act also gives the mortgagee the right to foreclosure or sale. As per this provision, in case the mortgage money has become due to the mortgagee, before a decree has been made for the redemption of the mortgaged property, the mortgagee has a right to obtain a decree from the Court that the mortgagor be absolutely debarred of his right to redeem the property, or a decree that the property be sold. This suit to obtain a decree that the mortgagor be absolutely debarred of his right to redeem the mortgaged property is called a suit for foreclosure.
1. Suberu v A.I.S. & L. Ltd. (2007) ALL FWLR (Pt. 380) 1512 at 1526 Paras. B - C (CA).
4. sections 19 (1) of the CA and 123 (1) of the P& CL and 40 of the M & PL.
5. section 37(1) M&PL, 2010.
6. Section 67 M&PL, 2010.
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