A legal mortgage is a conveyance of land or assignment of property as a security for the repayment of a debt or the discharge of other obligations for which it is given, with a proviso for redemption (subject to the condition that the title shall be re-conveyed) once the mortgage debt is paid.
Parties to a legal mortgage are known as mortgagor(borrower) and mortgagee(lender). Legal mortgage must be in writing in the form of a deed (deed of legal mortgage), this is because it is a legal transaction affecting title to land.
Mortgage is one of the most used types of security in Nigeria. The essence of perfection of legal mortgage is to easily and legally convey title to land or property to the mortgagee either against third parties or to retain documents upon default by the debtor.
Procedures for Perfecting Legal Mortgage
The procedures involved in perfecting a deed of legal mortgage is very similar to that of deed of assignment and all other conveyances of interest in land, the extent of steps to be taken for perfecting legal mortgage is dependent on where the property is located. The general procedural steps include; Governor’s consent, Stamping and Registration, which applicable throughout Nigeria.
Under Section 22 of the Land Use Act, the consent of the Governor of a state is required in order for the holder of a statutory right of occupancy to alienate his right of occupancy by assignment, mortgage, transfer of possession, sublease or otherwise. There are two types of Governor’s consent, approval to transfer part or all of a seller’s interest in the landed property to a third party and the other is the consent to mortgage. Where the mortgage involves transfer of interest in land, application will be made for Governor’s consent, where Governor’s consent is not obtained it will result in an equitable mortgage which can be derived as a result of inchoate or incomplete legal mortgage. This was the decision of court the case of Savannah Bank of Nigeria V Ajilo.
Typically, obtaining Governor’s consent may take three to four months, all things been equal.
The statutory obligation to stamp documents that transfer or create a proprietary interest in assets i.e. legal mortgages, debentures or charges, is provided for under the provisions of the Stamp Duties Act 2010 (the “Act”) with specific emphasis on Sections 3, 23 (1) and (4) of the Act.
By virtue of Section 23 (1) of the Act, any instrument that is executed in Nigeria or relating to Nigeria (regardless of its place of execution) or to any property situate or any matter or thing done or to be done in Nigeria is required to be stamped. Where the instrument is executed in Nigeria, it must be stamped within 40 days of the execution of the document. However, where the instrument is executed outside Nigeria, Section 23 (4) of the Act provides that the instrument may be executed within 30 days after it has been first received in Nigeria.
It is pertinent to note here that failure to stamp a mortgage does not render the mortgage void or invalid, but the mortgage deed will be inadmissible in evidence.
The mortgage deed is to be registered at the Land Registry office of the State in which the property is situated and where a company is involved registration is also required to be done at the Corporate Affairs Commission (CAC) within 90 days of creation, failure to register will render the mortgage void in favour of the creditor or debenture holder.
Registration must be done within 2 months from the date of creation of the mortgage, registration is deemed to occur when the relevant documents are delivered to the Land Registry.
Also, by virtue of section 53 of the Mortgage and Property Law of Lagos State, the deed of legal mortgage must also be registered at the Lagos State Mortgage Board.
Documents that will be required for registration:
>> Duly completed application form for Governor’s consent
>> 5 copies of duly executed mortgage (Deed of Legal Mortgage)
>> CTC of Original Title Documents
>> A copy of valuation report of the property
>> 3 years tax clearance certificate of the mortgagor (and surety or guarantor if any)
>> Evidence of payment of outgoings such as current ground rent on the property to be mortgaged, land used charge, consent fee, inspection fee and other charges imposed on the property.
>> Evidence of payment of charting, endorsement and consent fees
>> Evidence of payment of Neighborhood Development Fees, where applicable
>> Survey plan where it involves land (for land in Lagos mandatory)
>> Building plan where the property is developed.
Where the Mortgagor is a company or corporate entity, the following documents that will be required in addition:
>> A certified true copy of the memorandum and articles of association
>> A copy of the resolution of the Board of Directors authorizing the mortgage and the loan
>> A certified true copy of the incorporation certificate of the company
>> Tax clearance certificate of at least two directors of the company
>> Updated annual returns
>> Evidence of payment of the CAC registration fee
>> A duly completed and executed Form CAC 8 (particulars of mortgage or charge created)
When all the required documents have been submitted at the CAC, they will be verified, after verification, the Deeds will be registered and returned, a copy will be retained and kept by CAC in the Borrowers files.
Finally, the perfection of a legal mortgage in Nigeria is primarily the responsibility of the state land registries. However, where the mortgagor or the property to be mortgaged is owned by a corporate entitle, such a mortgage must also be registered with the Corporate Affairs Commission.