CONVEYANCING LAW MODULE SECOND

SEMESTER.

Conveyancing Law (LPT 520)

Introduction to Mortgages in Nigeria

Understanding the intricacies of mortgage law in Nigeria is essential for legal

practitioners, financial institutions, and individuals engaging in property transactions.

This module provides a comprehensive overview of the key aspects of mortgages,

from creation to discharge, and highlights the rights and duties of the parties involved.

A mortgage is a legal agreement where a borrower (mortgagor) pledges property to a

lender (mortgagee) as security for a loan. In Nigeria, mortgages are primarily governed

by:

 The Conveyancing Act (CA)

 The Property and Conveyancing Law (PCL)

 The Mortgage and Property Law (MPL) of Lagos State

These laws outline the creation, enforcement, and discharge of mortgages, as well

as the rights and duties of the parties involved.

 2. Types of Mortgages

a. Legal Mortgages

 By Deed: A formal written document executed by the mortgagor,

transferring interest in the property to the mortgagee. This method is

prevalent in southern Nigeria and is governed by the PCL.

 By Assignment or Sub-Demise: Under the CA, a mortgagor may assign their

interest in the property or grant a sub-demise to the mortgagee. These

methods are common in northern and eastern Nigeria.

o Assignment: The mortgagor transfers their entire interest in the property to

the mortgagee.

o Sub-Demise: The mortgagor grants a leasehold interest to the mortgagee,

retaining a reversionary interest.

b. Equitable Mortgages

 Deposit of Title Deeds: The mortgagor deposits the title deeds of the

property with the mortgagee as security for the loan.

 Agreement to Create a Mortgage: A written agreement indicating the

intention to create a mortgage, often accompanied by the deposit of title

deeds.

 Equitable Charge: A non-possessory interest in the property, where the

mortgagee has a right to the property's value in case of default.

 3. Mortgage Institutions in Nigeria

Key institutions involved in mortgage financing include:

 Federal Mortgage Bank of Nigeria (FMBN): Established in 1977 to provide

long-term financing for housing and regulate primary mortgage institutions.

 Primary Mortgage Institutions (PMIs): Licensed entities that offer mortgage

loans to individuals and businesses.

 Commercial Banks: Provide mortgage products alongside other financial

services.

4. Collaterals in Mortgage Transactions

The primary collateral in a mortgage transaction is the property itself.

However, additional securities may include:

 Personal Guarantees: Individuals who guarantee the loan repayment.

 Insurance Policies: Life or property insurance to cover potential losses.

 Other Assets: Additional properties or valuables pledged as security

5. CREATION OF LEGAL MORTGAGES UNDER THE NIGERIAN LAW

To create a valid mortgage in Nigeria, the following steps are typically required:

 Agreement: A written agreement outlining the terms of the mortgage.

 Governor’s Consent: Under the Land Use Act, the consent of the state governor is

required for the mortgagor to alienate their interest in the property.

 Stamp Duty: Payment of stamp duty on the mortgage document.

 Registration: Registration of the mortgage at the relevant land registry to perfect the

mortgage.

The mode of creation of a legal mortgage depends on where the property is

located, and Nigeria may be divided into three jurisdictions namely –

the C. A States, P & C. L States, and land under Registration of Titles Law,

Lagos.

1. Conveyancing Act (C. A) States – There is no statutory provision

governing the mode of creation of a legal mortgage in these States, therefore,

the applicable law is still the common law subject to modifications introduced

by the Land Use Act, 1978. Since no freehold interest in land can be acquired

in Nigeria, the relevant law is that applicable to the creation of a legal mortgage

of leasehold interest.

At common law, a legal mortgage of a leasehold interest may be created by the

following ways:

(i) Assignment of the mortgagor’s interest in the land with a covenant for

reassignment or re-conveyance of the mortgage. Assignment is the transfer of

the unexpired residue of the term in the property to the mortgagee. The

advantage of this mode is that there is no reversionary interest in the mortgagor,

hence in the event of a default, the mortgagee can pass his entire interest to a
purchaser without problem. Although there is no privity of contract between the

Governor/Head lessor and the mortgagee, but there is privity of estate. This

makes the mortgagee liable for all the covenants and conditions in the head

lease. The mortgagee is bound to observe and perform the restrictive covenant

that runs with land in equity; this is no doubt a hardship on the mortgagee being

bound by onerous covenants he was not privy to – Tulk v. Moxhay 41 E. R

1143.

(ii) Sub-demise at least one day shorter than the term of the original lease with

a proviso for re-conveyance on redemption of the mortgage. The major

advantages of this mode are that there is no privity of contract or estate between

the mortgagee and the head lessor; and there is no uniformity because it is also

an applicable mode under the PCL which makes it attractive to banks. The only

disadvantage is that it preserves the mortgagor’s right to reversion. Title in the

mortgaged property, is vested in the mortgagor. Which means that the

mortgagee cannot give a perfect title to the purchaser in the event of default by

the mortgagor. This interest can be avoided by drafting device – In the white

Rose Cottage (1965) CH. D 940. Either a Power of Attorney Clause or a Trust

of declaration or both may be inserted to vest the mortgagor’s reversionary title

in the mortgagee. In Power of Attorney Clause, it operates to vest irrevocably

authority over the mortgaged property on the mortgagee or his attorney

irrevocably until the loan is repaid. The implication is that in case of a default,

the mortgagee can sell – Labededi v. Odunlana & Anor. (1973) 4 CCHCJ;

Chime v. Chime (2001) 3 NWLR (Pt. 527). In a trust declaration clause on the

other hand, it makes the mortgagor a trustee of the mortgaged property in

favour of the mortgagee. The mortgagee is also empowered to remove the

mortgagor as trustee and appoint new trustees in the management of the

mortgaged property – LCB Ltd. v. Goddard (1897) 1 CH. D. 642.

(iii) Deed of statutory mortgage is also another form by which mortgage in the

C. A States may be created. Section 26(1) of the Conveyancing Act states in

part that “a mortgage of freehold or leasehold land may be made by a deed

expressed to be made by way of statutory mortgage, being in the form given in

Part I of the Third Schedule to this Act…” The form in the schedule may be

modified as circumstances require. The major advantage of this method is that it

is simpler to create and may be discharged by simple receipt; which turns out to

be one of its disadvantage also since the receipt is not registrable and the

mortgage may continue to be reflected in the register.

b. CREATION OF LEGAL MORTGAGES UNDER THE NIGERIAN LAW

The mode of creation of a legal mortgage depends on where the property is

located, and Nigeria may be divided into three jurisdictions namely – the C. A

States, P & C. L States, and land under Registration of Titles Law, Lagos.
1. Conveyancing Act (C. A) States – There is no statutory provision

governing the mode of creation of a legal mortgage in these States, therefore,

the applicable law is still the common law subject to modifications introduced

by the Land Use Act, 1978. Since no freehold interest in land can be acquired in

Nigeria, the relevant law is that applicable to the creation of a legal mortgage of

leasehold interest.(click on the pictures on left or right hand sides for more

insights)

At common law, a legal mortgage of a leasehold interest may be created by the

following ways:

(i) Assignment of the mortgagor’s interest in the land with a covenant

for reassignment or re-conveyance of the mortgage. Assignment is the transfer

of the unexpired residue of the term in the property to the mortgagee. The

advantage of this mode is that there is no reversionary interest in the mortgagor,

hence in the event of a default, the mortgagee can pass his entire interest to a

purchaser without problem. Although there is no privity of contract between the

Governor/Head lessor and the mortgagee, but there is privity of estate. This

makes the mortgagee liable for all the covenants and conditions in the head

lease. The mortgagee is bound to observe and perform the restrictive covenant

that runs with land in equity; this is no doubt a hardship on the mortgagee being
bound by onerous covenants he was not privy to – Tulk v. Moxhay 41 E. R

1143.

(ii) Sub-demise at least one day shorter than the term of the original lease with

a proviso for re-conveyance on redemption of the mortgage. The major

advantages of this mode are that there is no privity of contract or estate between

the mortgagee and the head lessor; and there is no uniformity because it is also

an applicable mode under the PCL which makes it attractive to banks. The only

disadvantage is that it preserves the mortgagor’s right to reversion. Title in the

mortgaged property, is vested in the mortgagor. Which means that the

mortgagee cannot give a perfect title to the purchaser in the event of default by

the mortgagor. This interest can be avoided by drafting device – In the white

Rose Cottage (1965) CH. D 940. Either a Power of Attorney Clause or a Trust

of declaration or both may be inserted to vest the mortgagor’s reversionary title

in the mortgagee. In Power of Attorney Clause, it operates to vest irrevocably

authority over the mortgaged property on the mortgagee or his attorney

irrevocably until the loan is repaid. The implication is that in case of a default,

the mortgagee can sell – Labededi v. Odunlana & Anor. (1973) 4 CCHCJ;

Chime v. Chime (2001) 3 NWLR (Pt. 527). In a trust declaration clause on the

other hand, it makes the mortgagor a trustee of the mortgaged property in

favour of the mortgagee. The mortgagee is also empowered to remove the

 mortgagor as trustee and appoint new trustees in the management of the

mortgaged property – LCB Ltd. v. Goddard (1897) 1 CH. D. 642.

(iii) Deed of statutory mortgage is also another form by which mortgage in the

C. A States may be created. Section 26(1) of the Conveyancing Act states in

part that “a mortgage of freehold or leasehold land may be made by a deed

expressed to be made by way of statutory mortgage, being in the form given in

Part I of the Third Schedule to this Act…” The form in the schedule may be

modified as circumstances require. The major advantage of this method is that it

is simpler to create and may be discharged by simple receipt; which turns out to

be one of its disadvantage also since the receipt is not registrable and the

mortgage may continue to be reflected in the register.

2. Property and Conveyancing Law States – These are States in the Old

Western Region of Nigeria namely – Oyo, Ogun, Osun, Ondo, Ekiti, Edo and

Delta.

Section 108(1) of the PCL provides that a mortgage of an estate in fee simple

shall only be capable of being effected at law either by a demise for a term of

years absolute, subject to a provision for cesser on redemption, or by a charge

by deed expressed to be by way of legal mortgage.

Section 109 of the Law further provides that a mortgage for a term of years

absolute shall only be capable of being effected at law either by a sub-lease for

a term of years absolute less by one day at least the term vested in the

mortgagor and subject to a provision for cesser on redemption, or by a charge

by deed expressed to be by way of a legal mortgage.

Legal mortgage under the PCL States can be created in the following ways:

Demise is for a term of years absolute, subject to a provision of cesser upon

redemption. Any purported conveyance of an estate in fee simple by way of

mortgage shall operate as a demise of the land to the mortgagee for a term of

years absolute, without impeachment for waste but subject to cesser on

redemption – section 108(2)

PCL. However, the creation of a legal mortgage even though sanctioned under

the PCL is no longer possible because of the Land Use Act which provides that

the greatest interest a person can have is a specified term of not more than

ninety years (90 years). As a result of this, sub-demise is used for the creation

of legal mortgage in the PCL States.

(ii) Sub-demise or sub-lease must be at least one day shorter than the

term of the lease which is being mortgaged otherwise it will operate as an

assignment – section 109(1) PCL. The advantage of the sub-demise is that it

allows for second and subsequent mortgages to be created on the lease. Further,

where a mortgage is created by sub-demise under the PCL, the two remedial

devices, that is, Power of Attorney and Declaration of Trust are not necessary

because section 112 of the PCL grants the mortgagee the right to sell the

property with the reversionary interest of the mortgagor where he defaults to

pay the principal with interest.

(iii) Legal Charge is another means by which a legal mortgage can be

created in the PCL States – Section 108(1) of PCL. Section 110 of PCL

provides that where a legal mortgage of land is created by a charge by deed

expressed to be by way of legal mortgage, the mortgagee shall have the same

protection, powers and remedies. The charge must be made by deed and not by

writing; otherwise it shall have no legal effect. It must also be expressed to be

by way of a legal mortgage. In law, the chargee has as much rights as the

mortgagee. The charge gives the chargee similar rights as a mortgagee in the

enforcement of payment of money loaned. The legal charge has the following

advantages –
a. The form of a legal charge is simple and short.

b. It does not amount to a breach of covenant in a lease against the

assignment and subletting, because the charge creates no actual sub-lease in

favour of the mortgagee, but only gives him rights as if he had a sublease.

c. It is discharged by a simple statutory receipt and not by a deed of release.

d. It is a convenient way of mortgaging freeholds (where permitted) and

leasehold together because the mortgage terms are not stated, but the properties

are listed in the schedule with a statement that they are charged by way of a

legal charge.

The disadvantage of the legal charge is that unlike the deed which creates it and

is required to be registered, the receipt by which it is discharged is not

registrable. The charge may then continue to appear against the property in the

register as an encumbrance. Also, it does not carry any proviso for redemption

since no interest is conveyed in the first place.

3. Registration of Titles Law – Section 18 of the Registration of Titles Law

(RTL) provides that the registered owner of land may in the prescribed manner

charge the land or lease with the payment of money to the like extent as if the

land was not registered land. The charge is completed by entry in the register of

the particulars of the mortgagee and the registration of the charge in the Form 5

of the Land Registry.

Thus, the only way a legal mortgage can be created under this law is by a

charge using Form 5.

The advantage is that it is simpler, speeder, and cheaper. The chargee has

similar rights as a mortgagee under the C. A. States.

SEARCH REPORT

The search report depends on whether the borrower is a natural person or a

company.

The search report should contain the following where the borrower is a natural

person –

1. Date of the search

2. Name of the borrower

3. Name of the person giving security, if different from borrowers

4. Description of the property

5. Name of the property

6. Encumbrances (if any), Registrations and other adverse facts as may be

observed from:

a) Physical inspection of the land or building, that is, whether the property

really exists and if it is vacant or occupied;

b) The register at the land registry, that is, to obtain the details of the

property in the lands registry of the State; and

c) Government acquisition, that is, whether the property is within an area

compulsorily acquired by government or proposed to be acquired.

The search report should contain the following where the borrower is a

company and intends to use the property as security –

1. Name of the company (borrower)

2. Date of the search

3. Date of incorporation

4. Registration number

5. Name and address of Shareholders of the company

6. Particulars of company Directors

7. Borrowing powers of the Company

8. Any registered charge against the company’s assets

9. Annual returns filed

10. Encumbrances, if any.

CONSENT OF THE GOVERNOR FOR CREATING MORTGAGES

The consent of a Governor of a State where the land is situated must be sought

and obtained – Section 22 of Land Use Act; Savannah Bank v. Ajilo (1989) 1

NWLR (Pt. 97) 305; Awojugbabe Light Industries Ltd. v. Chinukwe (1995) 4

SCNJ 162; (1995) 4 NWLR (Pt. 390) 379.

Where the land is subject to a customary right of occupancy, the consent of the

appropriate local government is required so long as the transfer is not one

subject to the Sheriff and Civil Process Law. Under this, section 21 states that

“it shall not be lawful for any customary right of occupancy or any part thereof

to be alienated by assignment, mortgage, transfer of possession, sublease or

otherwise howsoever – (a) without the consent of the Governor in cases where

the property is sold by or under the order of any court under the provisions of

the applicable Sheriffs and Civil Process Law; or (b) in other cases without the

disapproval of the appropriate Local Government.”

1. Failure to obtain the consent of the Governor before actual mortgage itself

makes the transaction null and void – section 26 of Land Use Act.

2. The consent is only required where the legal interest is transferred and not

for an agreement to transfer the interest.

3. The consent of the Governor is also not required for creation of debentures,

since a deed of debenture is a charge on the floating assets of a company and

not a charge on the land which requires the consent of the Governor – Nig.

Ind. Dev. Bank Ltd. v. Olalomi Ind. Ltd. (2002) FWLR (Pt. 98) 995.

4. The consent of the Governor is required by law to be granted by him

although he can delegate his authority for granting consent to a State

Commissioner. In U. B. N Plc v. Ayodare & Sons Nig. Ltd. (2007) All

FWLR (Pt. 383) 1 at 23, the Supreme Court, per Oguntade JSC, stated that

“… section 22 of the Act postulates that the Governor, shall sign the letter

granting consent …” In Union Bank Nig. Plc. Ishola (2002) FWLR (Pt. 100)

1253, the court held that where the Governor’s power to grant consent are

properly delegated vide a legal notice to the State Commissioner for

Housing and Environment who was in charge of land matter, the consent

granted by the latter to the mortgage transaction was proper and valid.

5. It should be noted that where the approval for consent is to be granted to a

mortgagee, the Governor should try and sign the letter. Where however the

Governor grants the consent through his delegate (a State Commissioner),

the Commissioner must convey the approval under his hand and not under

the hand of another state official. In Federal Mortgage bank Plc. v.

Babatunde (2000) FWLR (Pt. 3) 385, the court held that there is no evidence
 to show that the Governor delegated his powers under the Act to any body,

let alone to the Permanent Secretary, Ministry of Works, Lands, Housing

and Environment, Kwara State on whose behalf the letter of approval was

written.

6. It is the duty of the mortgagor to apply for the grant of the consent of the

Governor and not the mortgagee. A common problem in mortgagees is

where the mortgagor has collected the money, deposited the title deeds and

executed the mortgage documents with the expectation that he will apply for

the consent of the Governor, but only to turn round and alleges that the

consent was not obtained or even to frustrate the grant of the consent –

Ugochukwu v. C. C. B (2000) 1 NLLC 361 at 383; Union Bank of Nig. Plc

v. Orharhuge (2000) 2 NWLR (Pt 645) 795. The courts have held that such

person would not be allowed to turn round and claim that because the

consent was not obtained, the transaction was null and void. However in

practice, it is the mortgagee that seeks for the consent since he is the one that

stands to lose if the mortgage is set aside for lack of consent.

The most important documents required to procure the consent of the Governor
are:

1. Application for consent by way of written letter or a duly completed

consent form.
2. Duly executed deed conveying the agreement between the two parties.
3. Tax clearance certificate of the parties.
 4. Receipts of payment of ground rent, consent fee, inspection fee, tenement
rate and other charges imposed on the property.

6. Rights and Duties of Parties to a Mortgage:

THE RIGHTS AND DUTIES

In Nigeria, a mortgage involves a legal agreement in which a borrower (mortgagor)

conveys an interest in real property to a lender (mortgagee) as security for a loan,
with the understanding that the interest will be returned upon repayment. The
rights and duties of the parties to a mortgage are governed by common law
principles, statutory provisions (e.g., the Land Use Act 1978), and equitable
doctrines.
The rights of parties to a mortgage are derived from both common law (and equity)
and statute and they vary according to whether the mortgage is legal or equitable.
The rights of a mortgagee differ from those of a mortgagor. The rights of a
mortgagee are otherwise referred to as the remedies available to a legal mortgagee.
These include:

1. Right to Take Possession of the Mortgaged Property

A legal mortgagee has a right or remedy to enter upon and take possession of the

mortgaged property until the amount of the loan with interest is recovered. The right
to possession does not depend upon any default on the part of the mortgagor.
Besides, the court has held in Awojugbagbe Light Industries Ltd v. Chinukwe &

Anor (1993) 1 NWLR (Pt. 270) 485, that a mortgagee exercising his right to possess

after the expiration of his tenant’s lease or his agent who entered and took possession

of the mortgage property in the exercise of his rights under the mortgage agreement is

not liable in damages for forcible entry, because the right to posses the property has

become vested in the mortgagee.

A mortgagee who takes possession becomes the manager of the property in which the

mortgagor still has a beneficial interest. He therefore has to account to the mortgagor.

He must account not only for all the rents and profits actually received, but also for

all those he should as a prudent man of business have received during the period he

had been in possession. He has to keep the property in a good state of repairs and if it

is a leasehold property, pay all present and future rents to prevent for forfeiture and

thus to preserve the property.

There is a view that the equitable mortgagee should also have the right of

possession under the rule in Walsh v. Lonsdale (1881) 21 Ch. 9. The prevalent view,

however is that the equitable mortgagee has no legal right to possession of the land.

In Barclays Bank Ltd v. Bird (1954) Ch. 274 at 280 HARMAN J. said that, “the only

limitation on the equitable mortgagee is that he has no right to possession until the
court gives it to him. He is entitled to take out a summons asking for possession. He

may however, have such right conferred on him in the mortgage deed.

2. The Right or Power of Sale by the Mortgagee:

The mortgagee’s power of sale may be conferred on him expressly by the

mortgager by a stipulation to that effect in the mortgage. Apart from an express

conferment by the mortgagor, the mortgagee’s power or right of sale may be

derived

from statute. Section 19(1) of the Conveyancing Act, 1881 provides that:

A mortgage, where the mortgage is made by deed, shall by virtue of this Act, have
the following powers, to the like extent as if there had been in terms conferred by
the mortgage deed, but not further (namely):

i. A power, when the mortgage has become due, to sell, or to concur with any
other person in selling, the mortgaged property, or any part thereof, either subject
to prior charges or not, and either together or in lots, by public auction or by
private contract… with power to vary any contract for sale and to buy in at an
auction, or to rescind any contract for sale and to resell, without being answerable
for any loss occasioned thereby.

1. Duties of the Mortgagor (Borrower)

- Repayment of the Loan: The mortgagor must repay the principal and interest
following the terms of the mortgage deed.
- Preserve the Property: The mortgagor must maintain the property and not allow
its value to deteriorate.
- Pay Rates and Taxes: All statutory payments related to the property (e.g., ground
rent and land use charges) must be paid by the mortgagor.
- Insure the Property: Where required, the mortgagor must insure the property
against loss or damage.
- No Disposal without Consent: The mortgagor is typically restricted from selling
or leasing the property without the mortgagee’s consent.

2. Rights of the Mortgagor:

- Right to Redeem: This is the mortgagor’s right to recover the property upon
repayment. It is an equitable right that cannot be fettered.
In the Bank of North v. Bello (1995): the mortgagor’s right to redeem upon
payment and the duty of the mortgagee to release the mortgage was substantiated.
- Right to Quiet Possession: Unless the mortgagee takes possession due to default,
the mortgagor has the right to occupy and use the property.
- Right to be Informed: The mortgagor is entitled to clear terms of the mortgage
and full disclosure of financial obligations.

3. Duties of the Mortgagee (Lender)

- Advance the Loan as Agreed: The mortgagee must provide the loan as stipulated
in the agreement.
- Act in Good Faith: When exercising rights such as sale or possession, the
mortgagee must act fairly and not oppressively.
- Give Reasonable Notice: Before selling the mortgaged property, the mortgagee
must usually give reasonable notice to the mortgagor.
- Account for Sale Proceeds: If the property is sold, the mortgagee must account
for the proceeds and return any surplus to the mortgagor.

4. Rights of the Mortgagee:

- Right to Interest and Repayment: The mortgagee is entitled to repayment of the

loan with interest.

- Right to Possession: Upon default, the mortgagee can take possession of the

property without a court order (though court action is often taken to avoid

disputes).

- Right of Sale: The mortgagee can sell the mortgaged property upon default,
subject to certain conditions.

- Right to Appoint a Receiver: The mortgagee can appoint a receiver to manage the

property and recover the debt.

- Right to Foreclosure: In rare cases, the mortgagee may seek a court order to

extinguish the mortgagor’s right to redeem

7. Topic 2: THE POWER OF SALE

The power of sale is a legal right that allows a mortgagee (lender) to sell a
mortgaged property without going to court, upon the mortgagor's (borrower's)
default in repayment. This power is an important remedy for the mortgagee to
recover the loan and is typically governed by:
-Common law principles
-The terms of the mortgage deed
-The Property and Conveyancing Law (PCL) (applicable in Western states)
-The Conveyancing Act 1881 (applicable in old Eastern states)
The Land Use Act 1978

1. When the Power of Sale Arises;

Under the Property and Conveyancing Law (PCL), Section 123 provides that the
power of sale becomes exercisable under the following conditions:

- Notice of Default: The mortgagor must be in default for at least 3 months, and a
notice requiring payment must have been served.
- Non-payment after Demand: There must be a failure to comply with the demand
notice.
- Interest Arrears: If interest under the mortgage is unpaid for two months.
- Breach of Mortgage Terms: Any covenant or obligation in the mortgage deed is
violated.

2. Conditions for Exercising the Power of Sale;

- The power must have arisen (based on the conditions above).
- The power must be properly exercised, usually requiring:
- Issuance of statutory notice to the mortgagor.
- Reasonable time to allow payment or compliance.

Note: Court approval is not strictly required before exercising the power, but
disputes or improper exercise can lead to litigation.

3. Duty of the Mortgagee When Exercising Power of Sale;

- The mortgagee must act in good faith and take reasonable care to obtain the best
possible price (not necessarily the market value).
- The mortgagee is not a trustee but owes a duty not to act recklessly or
fraudulently.
- The proceeds of the sale must be applied in the order:
a.. Expenses of sale

b.. Payment of mortgage debt

c.. Payment of subsequent mortgages (if any)

d.. Surplus to be returned to the mortgagor

4. Legal Consequences of Wrongful Exercise;

- If the power of sale is exercised before it arises or in bad faith, the sale can be set
aside or the mortgagee can be liable in damages.
-A purchaser in good faith is generally protected if the sale appears valid on its
face.

8. Discharge of Mortgages

Topic 3: THE DISCHARGE OF A MORTGAGE;

The discharge of a mortgage refers to the process by which the mortgagor (borrower)
is released from all obligations under the mortgage, and the mortgagee (lender)
relinquishes all rights over the mortgaged property. This marks the legal end of the
mortgage agreement. Discharge can occur through various means, either by operation
of law or by the actions of the parties.

1. Methods of Discharging a Mortgage in Nigeria;

a. Redemption (Full Repayment)

This is the most common form of discharge.
The mortgagor repays the full loan amount, including interest and any fees, after which
the mortgagee must release the security.
The right to redeem is equitable and cannot be fettered or denied arbitrarily.
Kindly refer to Ogundiani v. Araba (1978) Which clarified that redemption is a right
that cannot be restrained or restricted by any term of the mortgage

b. Foreclosure
This is a court-ordered process where the mortgagee seeks to terminate the mortgagor's
right of redemption.
If granted, the mortgagee becomes the absolute owner of the property.
Rare in Nigeria, as courts prefer sale over foreclosure.

c. Sale of the Mortgaged Property

If the mortgagee exercises the power of sale due to default, the mortgage is discharged
once the sale is completed and proceeds are used to settle the debt.
Any balance is returned to the mortgagor; surplus discharges the mortgage obligation.

d. Surrender or Merger
The mortgagee may voluntarily surrender the mortgage interest back to the mortgagor.
In some cases, legal and equitable interests may merge, extinguishing the mortgage.

e. Lapse of Time / Statute of Limitation

Under the Limitation Law, if a mortgagee does not enforce the mortgage within a
certain period (e.g., 12 years), the right to recover the loan may lapse, leading to
discharge by operation of law.

2. Legal Requirements for Discharge

Deed of Release or Discharge: A formal document executed by the mortgagee
confirming that the mortgage has been repaid and the security interest is extinguished.
Registration: If the mortgage was registered (as with legal mortgages), the discharge
must also be registered at:
The Land Registry (for legal mortgages)
The Corporate Affairs Commission (CAC), if a company is involved (under CAMA)

Delivery of Title Documents: The mortgagee must return original documents of title to
the mortgagor upon discharge.

Conclusively,
Discharge of a mortgage is a crucial final step in the mortgage relationship, ensuring
that the property is fully restored to the mortgagor. It can be done either by repayment,
sale, foreclosure, or lapse of time, but it must be properly documented and registered
where required.
Would you like a template of a mortgage discharge deed or guidance on registering a
 discharge at the Land Registry?

9. Forms and Contents of Mortgages

A typical mortgage document includes:

 Parties: Identification of the mortgagor and mortgagee.

 Recitals: Background information and purpose of the mortgage.

 Operative Clauses: Terms and conditions of the mortgage.

 Covenants: Obligations of both parties.

 Schedules: Details of the property and loan.