TITLE: MORTGAGE TRANSACTION IN NIGERIA IN LIGHT OF THE LAND USE
It will be apposite to give a working definition of the modern concept of mortgage.
Mortgage is simply an arrangement where one party called the mortgagor borrows money or
takes a loan from another party who is known as a lender (mortgagee), the mortgagor using
his real property as a security for the loan or amount borrowed subject to the condition that, if
the mortgagor repaid a debt he owed the mortgagee by a certain time, the mortgagee would
re-convey the land to the mortgagor. Going further, section 58 of the transfer of property act
1882 defines mortgage as, "A mortgage is the transfer of an interest in specific immovable
property for the purpose of securing the payment of money advanced or to be advanced by
way of loan, an existing or future debt, or the performance of an engagement which may give
rise to a pecuniary liability." 1
The position of mortgage pre 1925 and post 1926
It will also be necessary to examine the position of mortgage before 1925 and after 1926 the
position of mortgage before 1925 was by way of conveyance but after 1926, it is by way of
Also, there are certain formalities for the creation of mortgages the method adapted depends
on whether the mortgage is a legal or an equitable one.
1 See section 58 transfer of property act, 1882.
Legal mortgage is one created under law; the transfer of interest to the mortgagee gives the
mortgagee the right to take the property only if the mortgagor fails to pay as promised.
Mortgage is an actual transfer of title, and the mortgagee is the legal owner of the property
until the mortgagor pays off his debt.
some transactions are recognised as mortgages by equity, which are not so recognised by
common law for example a deposit of title deeds may give rise to an equitable mortgage in
appropriate circumstances, so will a charge or mortgage created by an equitable beneficial
owner of property upon his property the following transactions may give rise to equitable
An equitable mortgage may be created by deposit of title deeds by the owner of the property
to which the deeds relate with the intention that the document be held as security for a loan.
In so far as the intention is clear, it does not matter whether the deposit is accompanied by a
memorandum it is well established that a deposit of a document of title without either writing
or word of mouth showing that it is deposited as security will create in equity a charge over
the property to which the document relates to the extent of the interest of the person who
makes the deposit, such deposit of the title deed is construed in equity as an agreement to
create a mortgage and the deposit is treated as an act of part performance. The deposit is
effective to make the depository an equitable mortgagee with all the rights and remedies of a
mortgagee in law concept power to sell the security since he has no legal title which he can
convey to the purchaser.
Whether a deposit of title deeds creates an equitable mortgage, Fatayi Williams JSC opined
thus '' a deposit of title deed alone, unaccompanied by a memorandum of the terms of the
deposit, does not itself create a charge on the land and the mere possession of the deed
without evidence of the contract under which possession was obtained will not create an
Also In Desalu v Akapo & ors it was held that the essence of an equitable mortgage by
deposit of title deed is a parole agreement between the parties followed by an act of part
performance such as the deposit of title deed with the mortgagee which removes the
transaction from the scope of the statute of frauds, 1677 but that mere possession of title
deed without evidence of the contract under which possession was obtained or of the manner
in which it originated so that a contract may be inferred will not create an equitable mortgage.
A deposit of title deeds in association with a loan of money raises the presumption that the
title deeds are deposited as a security for the loan and nothing could be a better manifestation
of an intention than an actual deposit of the title deeds
Also, it might be that the mortgage is taken out over a merely equitable interest in property.
As such the mortgage itself could only be equitable. An example would be the situation in
which it is an equitable lease which is used as security for the loan moneys. In short,
equitable mortgages are relationships that don't meet a jurisdiction's legal mortgage
requirements when an arrangement looks like a mortgage and smells like a mortgage, some
courts, known as courts of equity, will recognize the arrangement as a mortgage even though
it isn't a legal mortgage. In such cases, courts will usually look for the basic elements of a
ADVANTAGES OF AN EQUITABLE MORTGAGE
(1) It involves minimum formalities.
(2) The information regarding such mortgage is kept confidential between the lender and
borrower. So the reputation of the borrower is not affected
(1) If the mortgagor fails to repay, the mortgagee must get the decree for the sale of the
property. Getting a decree is expensive and time consuming.
(2) The borrower may hold the title deeds not on his own account, but in the capacity of a
trustee. If an equitable charge is created, the claim of the beneficiary under the trust will
prevail over equitable mortgage.
(3) There is the risk of subsequent legal mortgage in favour of another party. If the equitable
mortgagee parts with the security, even for a short period, the debtor may create a second
legal mortgage over the same property. In that case, the second mortgage shall have the first
priority over the equitable mortgagee. The mortgagee should be very careful in this regard.
Now, it is necessary to know the rights of a mortgagor and a mortgagee:
RIGHTS OF MORTGAGOR
The mortgagor is clothed with some rights in the mortgage arrangement they are as follows:
Equity of Redemption: the mortgagor has a legal right to redeem the mortgage property and
this right is specifically reserved in the mortgage deed, the effect of this is, that after the
mortgagor has repaid the money loaned him by the mortgagee, the property be re-conveyed
back to him a mortgagee should deliver the mortgage deed and all documents relating to the
mortgaged property which are in his possession to the mortgagor. In case the mortgagee is in
possession of the mortgaged property, he is liable to deliver possession to the mortgagor.
There is a distinction between equity of redemption and equitable right to redeem the first is
an equitable interest while equitable right to redeem is a mere equity which means the right of
the mortgagor to be allowed to redeem the mortgage property out of time, where the
mortgagor's right has been foreclosed and permanently extinguished. There must be no clog
on the equity of redemption the purpose is to prevent the mortgagee from keeping the
property for himself as the mortgagor may still be in a position to repay the amount secured
thus, in the case of Samuel -v- Jarrah Timber and Wood Paving Corporation Ltd2: The
appellant loaned Â£5000 to the respondent taking security of a Â£30,000 mortgage debenture
stock which would allow him to purchase any part of the stock at 40 per cent within twelve
months. The company sought to repay the advance within the period of twelve months,
whereupon the appellant claimed to purchase the whole of the stock at the agreed price. The
company brought a redemption action, seeking a declaration that the option was void.
Kekewich J. gave judgment for the company, declaring that the stipulation giving the
appellant an option to purchase was void, and that the company was entitled to redeem and
have the stock transferred on payment of whatever was due for principal, interest, and costs,
with consequential relief
The court OF Appeal affirmed this decision, held that the appeal failed the company was
entitled to the declaration now at the House of Lords the law lords also gave their own
Lord Halsbury and Lord Macnaghten held '' If a court determined that a transaction was
truly a mortgage, a court will strike down any term of the loan which prevents the mortgagor
from getting back the property secured on repaying what was due to the mortgagee. A
mortgage may not contain a clause that conferred on the mortgagee an option to buy the
Lord Macnagten held ''my Lords, both Kekewich J. and the Court of Appeal decided in
favour of the company. Having regard to the state of the authorities binding on the Court of
2  A.C. 323
Appeal if not on this House, it seems to me that they could not have come to any other
conclusion, although the transaction was a fair bargain between men of business without any
trace or suspicion of oppression, surprise, or circumvention, It is I think, unnecessary to
consider what the true construction of the agreement between Mr. Samuel and the company
may be, the result would have been precisely the same if the agreement had in terms declared
that the option was not to continue after repayment. The law undoubtedly is that a condition
such as that in question, if legal and binding at all, must come to an end on repayment of the
Also, Lord Lindley said that the doctrine "Once a mortgage, always a mortgage" was not
confined to deeds creating legal mortgages; it applied to all mortgage transactions, and:
"The doctrine means that no contract between a mortgagor and a mortgagee made at the
time of the mortgage and as part of the mortgage transaction, or, in other words, as one of
the terms of the loan, can be valid if it prevents the mortgagor from getting back his property
on paying off what is due on his security. Any bargain which has that effect is invalid, and is
inconsistent with the transaction being a mortgage. This principle is fatal to the appellant's
contention if the transaction under consideration is a mortgage transaction, as I am of
opinion it clearly is."
Also in Knightsbridge Estates Trust v Byrne3: A deed of mortgage provided that repayments
would be made on half-year days over a period of 40 years and that the agreement would
therefore last for a minimum period of 40 years. Only six years after the mortgage agreement
had been created, the mortgagor sought to redeem the mortgage. The mortgagee refused to
accept repayment, preferring instead to continue to receive that stream of cash-ï¬ow for the
remainder of the life of the mortgage. The High Court held that in the abstract, the mortgage
ought to be considered to be void because the provision constituted a clog on the equity of
3  Ch 741
redemption on these facts and was onerous on the mortgagor. The Court of Appeal held the
parties were commercial people who had been properly advised as to the eï¬ect of the contract. Signiï¬cantly, the Court of Appeal was of the view that the courts could not
introduce notions of reasonableness to the agreements of commercial people and that
intervention could be permitted only if the terms of the mortgage were 'oppressive' or
'unconscionable'. The court thus held '' that the clause 1 which postpone the right of
redemption till forty years was valid because of its non-oppressive and unconscionable.
Luxmoore J. ''held that the provision in the mortgage deferring redemption for a period of
forty years, taken in conjunction with various clauses in the deed which he regarded as
unusual and oppressive, was unreasonable, and constituted an unlawful clog upon the right
of the appellants, who were therefore entitled to redeem the mortgage on the usual notice.''
Luxmoore J. further held that the rule against perpetuities had no application to mortgages,
and, further, that a common mortgage of freeholds was not a debenture within the meaning of
s. 74 of the Companies Act, 1929.''
The respondents' appeal to the Court of Appeal Greene M.R., Scott L.J. and Farwell J. was
allowed, It was thereby held that while the Court would not enforce any provision in a
mortgage which was unconscionable or which operated to prevent the mortgagor from
exercising his right of redemption after the specified date for redemption, or which rendered
the right of redemption illusory, the Court is not further concerned with the question whether
the terms of the mortgage are reasonable and a provision that the date for redemption shall be
postponed for a given period however long is not on that ground alone unenforceable; and
that in the present case, where the mortgage represented a commercial agreement between
two important corporations, experienced in such matters, the provision for repayment by
instalments and the other terms above mentioned were open to no objection which justified
the interference of the Court. The Court also held that the rule against perpetuities has no
application to mortgages, but expressed no opinion as to whether the mortgage is a debenture
for the purpose of s. 74 of the Companies Act, 1929.
At the house of lords, Lord Romer said ' My Lords, at the conclusion of the interesting
arguments of Mr Vaisey and Mr Stamp on behalf of the appellants, it became clear that it is
desirable to ascertain in the first place whether the mortgage of November 6, 1931, is a
debenture within the meaning of s. 74 of the Companies Act, 1929, and, if that question be
answered in the affirmative - whether the claim of the appellants to be entitled to redeem the
mortgage at the present time must not necessarily fail in view of the provisions of that
section. Your Lordships accordingly requested Mr Gover, on behalf of the respondents, to
confine his argument to those particular questions. I understand that on due consideration of
the arguments on the one side and the other all your Lordships have come to the conclusion
that both the questions should be answered adversely to the appellants. In that conclusion I
concur, and will now state quite shortly my reasons for so doing. The section in question is in
these terms: "A condition contained in any debentures or in any deed for securing any
debentures, whether issued or executed before or after the commencement of this Act, shall
not be invalid by reason only that the debentures are thereby made irredeemable or
redeemable only on the happening of a contingency, however remote, or on the expiration of
a period, however long, any rule of equity to the contrary notwithstanding."
It was urged on behalf of the appellants that they are not attacking the provisions of the
mortgage of November 6, 1931, by reason only that it is irredeemable until the expiration of a
period too remote, but by reason of the other conditions contained in the mortgage when read
in combination with the postponement of the right of redemption. It is, however, quite plain
that what the appellants are complaining of is the denial of their right to redeem at the present
time, and that the materiality of the other conditions to which they called your Lordships'
attention is merely this: that the existence of them renders it essential for the appellants, if
they can possibly do so, to redeem forthwith. If it were not for the conditions in the mortgage
making it irredeemable until the expiration of forty years from its date, the appellants would
have no cause of complaint For these reasons I am of opinion that this appeal should be
dismissed with costs.
Also, in another case of Krelinga v New Patagonia meat & Co storage company Ltd4 : In
1910 Kreglinger, who ran a woolbroker firm, agreed to lend New Patagonia Meat Ltd
Â£10,000 secured by a floating charge on its business, repayable in five years, with an option
to repay the remaining sum on a month's notice. In addition, New Patagonia agreed to sell
sheepskins exclusively to Kreglinger, or pay a commission if they sold to other persons, so
long as New Patagonia gave the best price. When New Patagonia paid off the loan in 1913,
and wished to start selling its sheepskins to other firms, Kreglinger claimed the right to an
injunction. New Patagonia argued that the exclusivity provision was a clog on the equity of
redemption and should be consequently held void Lord Cozens-Hardy MR, Buckley LJ and
Kennedy LJ held that the agreement was void Kreglinger appealed.
The House of Lords held that the option to purchase the sheepskins exclusively for five years
was separate and sound from the main contract and not void, given that the purpose of the
clog on equity of redemption rules was chiefly to preclude unconscionable bargains. Lord
Haldane LC gave a general background to the rule that there be no clogs on the equity of
redemption and remarked
''the rules I have stated have now been applied by Courts of Equity for nearly three centuries,
and the books are full of illustrations of their application. But what I have pointed out shows
that it is inconsistent with the objects for which they were established that these rules should
4  AC 25
crystallize into technical language so rigid that the letter can defeat the underlying spirit and
purpose. Their application must correspond with the practical necessities of the time.
Lord Halsbury and Lord Atkinson concurred. Lord Mersey delivered a short concurrence.
Lord Parker held too that the agreement was not void
'' This is consistent with the principle underlying the rule as to clogging the equity. In
relieving from penalties or forfeitures equity has always endeavoured to put the parties as far
as possible into the position in which they would have been if no penalty or forfeiture had
occurred. It is only in the case of mortgages to secure moneys advanced by way of loan that
there was ever any equity to redeem on terms not involving performance of the bargain
between the parties''
''there is now no rule in equity which precludes a mortgagee, whether the mortgage be made
upon the occasion of a loan or otherwise, from stipulating for any collateral advantage,
provided such collateral advantage is not either (1.) unfair and unconscionable, or (2.) in the
nature of a penalty clogging the equity of redemption, or (3.) inconsistent with or repugnant
to the contractual and equitable right to redeem.
Another decision which demonstrates this distinction between cases in which the parties are
considered to be of equal bargaining strength and cases where they are not is
Fairclough v Swan Brewery5. In that case, the mortgagor took out a mortgage with the
brewery as part of a larger agreement under which the mortgagor took over the running of
licensed pub premises for the brewery. The agreement stated that the loan could not be
redeemed, rather, moneys had to be paid in perpetuity throughout the mortgagor's term at the
premises, and there was a covenant requiring that beer be bought only from the brewery. It
was held that this provision constituted a clog on the equity of redemption. Lord Macnaghten
5  AC 565
held that 'equity will not permit any contrivance to prevent or impede redemption'. It was
held that on the facts of Fairclough it was clear that the purpose was to make the mortgage
Similarly, in Noakes & Co Ltd v Rice,6 the contract contained a covenant that the mortgagor,
who was a publican, would continue to buy all its beer from mortgagee even after the
redemption of a mortgage. This was found to be a void collateral advantage on the basis that,
once the mortgage amount is paid oï¬, there is no obligation on the mortgagor to continue to provide security nor to continue to make payments to the mortgagee. In that context, the court
was inï¬uenced by the lack of equality of bargaining power between the parties
After a careful perusal of the cases, it is clear that on the facts of samuel -v- Jarrah case
above, both the high court and appeal upheld that no clog should be inserted into equity of
redemption, but on the facts of Knightsbridge Estates Trust v Byrne above, the high court
also gave the same judgement it was affirmed on appeal but in the house of lords, the law
lords went extra mile to define the meaning of debenture as it relates to mortgage . And also
is Krelinga's case which are above the courts also gave credence that no clog should be
inserted into the equity of redemption
Inspection of documents: Now, there are other rights of a mortgagor, a mortgagor is entitled
to inspect and make copies or abstracts of documents of title relating to the mortgaged
property which are in the custody or power of the mortgagee.
A mortgagor who has executed two or more mortgages in favour of the same mortgagee
should, when the principal money of any two or more of the mortgages has become due, be
entitled to redeem any one mortgage separately.
6 1902] AC 24.
A mortgagor may require that, instead of re-transferring the property to himself, the
mortgagee assigns the mortgage debt and transfers the mortgaged property to a third person
as the mortgagor may direct. The mortgagee is bound to assign and transfer accordingly.
THE RIGHTS OF A MORTGAGEE
Foreclosure: legal proceeding by which a mortgagor's rights to a mortgaged property may be
extinguished if the mortgagor (borrower) fails to live up to the obligations agreed to in the
mortgage. The mortgagee (the lender) may then declare the entire debt due and owing and
may seek to satisfy the debt by foreclosing on the property, this right extinguishes the
mortgagor equity of redemption
Rights to possess the land: It is a feature of the law of mortgage that the mortgagor has the
rights to repossess the mortgage property A right to repossession entitles the mortgagee to
vacant possession of the property either to generate income from that property (perhaps By
leasing it out to third parties), or as a precursor to exerting its power of sale. The mortgagee
has a legal estate in the property from the date of the mortgage and can enter into possession
as soon as the ink is dry, unless there is an express contractual term to the contrary however,
does provide the court with a discretionary power to delay (or stay)
The operation of such a right of possession where the court considers that the mortgagor
would be able to make repayments within a reasonable time. So, under s 36 of the
Administration of Justice Act 1970, there is a general power in the court to adjourn or
suspend an order where the mortgagor is likely to be able to make good arrears due under the
mortgage contract within a 'reasonable time'. Thus, in the case of Cheltenham & Gloucester
Building Society V Norgan7: This case considered the meaning of the expression 'reasonable
period' in that case, Christina Norgan, the appellant, had lived in a farmhouse with her
7  1 All ER 449.
husband and ï¬ve children for 20 years. She and her husband had the house transferred into
her sole name in return for raising a mortgage to ï¬nance her husband's business. The
mortgage provided for the capital sum to be paid at redemption with monthly payments of
interest. The mortgage provided that the mortgagee could repossess the property where it fell
one month into arrears. Mr Norgan's business fell into trouble. Christina Norgan could not
maintain the repayments. The mortgagee sought to repossess the property.
The judge at ï¬rst instance had adopted a period for repayment of four years in exercising his
discretion under s 36 of the 1970 Act. Christina Norgan appealed on the basis that the judge
had erred in his choice of reasonable period. The Court of Appeal overturned this decision on
the basis that the period of four years was unrelated to the mortgage term of 13 years The
core of the Court of Appeal's decision was that a trial court should take into account the
whole of the remaining period of the mortgage in deciding on a 'reasonable period'
Insurance: This is another right of the mortgagee to insure the loss property against loss or
damage by fire, section 101 LPA 1925 Stipulates this, the mortgage deed will repeal and
widen this power to cover insurance against all usual risks
The mortgagee's power of sale: The right to redeem is lost as soon as the mortgagee enters
into a contract to sell the property in that regard, as soon as the mortgagee enters into a
contract to sell the property in favour of a third party prospective purchaser, The mortgagee
acquires statutorily provided powers of sale over the mortgaged property by one of two routes
The ï¬rst is the speciï¬c power of sale set out under s 101 of the LPA 1925 on the following
terms, A mortgagee shall have the following powers: (i) A power, when the mortgage money
has become due, to sell, or to concur with any other person in selling, the mortgaged
property, or any part thereof (ii) A power, when the mortgage money has become due, to
appoint a receiver of the income of the mortgaged property or any part thereof.
But the power is subject to certain provisions there must be no collusion, the condition of sale
is that they must sell at market value subject to the provisions of s 103, which require the
mortgagee to have given notice of arrears, that arrears have continued for two months, or that
there has been a breach of some other provision in the mortgage contract
The mortgagee should ensure that he does not sell to himself and is only entitled to the
amount due under the mortgage in addition to the interest and cost the mortgagor may
challenge the sale of the subject property if the mortgagee does anything to the contrary, one
thing to bear in mind is that as soon as the mortgagee enters into a contract to sell the
property, the right to redeem is lost in which case it can be said that he has created an
equitable interest in favour of a third party prospective purchaser Eccles v Bryant8.
Now, in order to fully get when the power of sale arise and how, the case of Twentieth
Century Banking corpration v. Wilkinson9 will shed more light on the mortgagee power of
sale in this case, By a legal charge dated November 1, 1973, and made between the
defendants, Clive Philip Wilkinson and Keith Norman Smaldon, and the plaintiffs, Twentieth
Century Banking Corporation Ltd., the defendants charged the freehold property known as
Park-an-Ithan, Sithney, Nr. Helston, Cornwall, to secure repayment of Â£19,000, then
advanced to the defendants, and interest thereon. The charge contained, inter alia, covenants
by the defendants to pay the principal sum of Â£19,000 on October 31, 1988, and to pay
interest at a specified rate on the seventh day of every month beginning with December 7,
1973. The defendants were in default in respect of payment of interest. On August 20, 1975,
the plaintiffs issued a summons seeking payment of all moneys due to them under the charge,
possession of the property and sale or foreclosure.
8 CA 1947 9  Ch. 99
TEMPLEMAN J read the following judgment '' The question in this case is whether,
having regard to the express provisions of a defective legal charge, the plaintiff lenders can
sell or can be authorised to sell the mortgaged property. By clause 2 of the legal charge
dated November 1, 1973, the defendant borrowers covenanted to pay the plaintiffs the
principal sum of Â£19,000 on the expiry date, which was defined as 15 years less one day from
the date of the legal charge. Thus the expiry date is October 31, 1988. By clause 3 the
defendants covenanted to pay interest at 12 per cent. Per- annum or if greater 6 per cent.
Above the plaintiffs' base rate (the plaintiffs being a bank) on the seventh day of every month
beginning with December 7, 1973. By clause 4 the defendants charged the property, a
residential guest house at Sithney in Cornwall, with payment of all moneys payable to the
plaintiffs by the defendants. Clause 6 (1) provided that for the purposes of the Law of
Property Act 1925, the mortgage money should become due on the expiry date. Clause 11
provided that subject to interest having been paid in accordance with the terms of the legal
charge, the plaintiffs agreed to accept and the defendants covenanted to pay instalments of
capital beginning in the fifth year from the date of the charge and ending in the 15th year.
The capital and interest instalments amount to Â£1,400 each year, and the payments are to
continue beyond the 15th year if an increase in interest rates makes this necessary. The
defendants defaulted in the payment of interest, the arrears of which now amount to Â£3,400.
In the aggregate, Â£22,400 of capital and interest are now secured on the property, which is
currently valued at only Â£18,750. The difficulty and the defect is that the legal charge does
not expressly provide for the mortgage money to become due, or for the power of sale to
arise, if the defendants, in breach of the terms of the legal charge, fail to pay interest. Even if
the defendants default in the payment of an instalment of principal in or after the fifth year
there is no express provision for the mortgage money to become due or for the power of sale
to arise before 1988. The plaintiffs and the first defendant, Mr. Wilkinson, wish the property
to be sold and the proceeds used towards repayment of the legal charge. The second
defendant, Mr. Smaldon, immigrated to America. He, through an American attorney,
acknowledged receipt of the documents involved in this application but, as I think as at
present advised, perversely denies that the documents have been served and, again as I think
as at present advised, ignorantly and wrongfully reserves the right to contest jurisdiction.
Accordingly, no assistance whatever is available from the second defendant in selling the
property or in fulfilling his contractual duties to the plaintiffs and his obligations to his co-
borrower. Nor is any assistance afforded by the second defendant to the court to grant any
sensible relief or reach any sensible conclusion.''
The Land use act as it relates to our own concept of mortgage
The growth of Nigeria economy due to discovery of oil in the 1970s, made large number of
people rich enough to build better houses and maintain large farms thereby contributing to
high demand of land especially in commercial centres. Industries were also established thus
bringing about demand on land and increase in the Exodus of people from rural to urban10.
For Government, land became so scarce and expensive and acquiring land for public
purposes became very difficult and sometimes even impossible, the guarantee of a piece of
land to everyone was a problem thereby calling for government intervention in the land
distribution11. Thus in June 1977, the Federal Government set up the land use decree panel to
undertake an indepth study of land, to examine step for controlling future land use among
others. The report of the panel culminated in the enactment of land use act 1978, the act was
10 See Yakubu notes on land use act 1978 published 1986 at Pg 9 11 See Oluyede P.A.O, Nigerian conveyancing practice, drafting and precedence (1994), pg 324.
enacted as a military decree and it came to force on 29th March 1978, the decree assumed the
appellation of an act in 1980, through sections 1-13 of the adaptation of laws (re-designation
of decree order 1980). The land use act is an existing law in terms of the provision of section
315 (5) of the constitution of the Federal republic of Nigeria 1999 as amended. Thus, the
alteration, modification or changes thereto can only be made possible in accordance with the
provisions of the constitution relating to amendment.
The Land use act 197812 vests the title, management and control of the use of land in the
Governor and regulate the interest of the land holder by prescribing consent to alienate in all
cases which involve subsequent transaction in land covered by a right of occupancy the Land
Use Act 1978 was enacted by the Military Government and today is one of the most
important legislation affecting land in Nigeria. While all the other legislations had been
regional, the Land Use Act 1978 is general and nationwide in its application and effect.
Section 1, of the Act provides '' subject to the provisions of this act all land comprised in all
the territory of each state in the federation are hereby vested in the Governor of that state
and such land shall be held in trust and administered for the use and common benefit of all
Nigerians in accordance with the provisions of the act''
Pursuant to section 21 (a) (b) of the land use act the prior consent of the Governor is required
before a holder of a right of occupancy can transfer, mortgage, or dispose of his interest in the
right of occupancy. Section 21 of the act 1978 provides that it shall not be lawful for any
right of occupancy or any part of it to be alienated by assignment, mortgage, transfer of
possession, and sublease without the consent of the Governor in cases where the property is
to be sold by or under the order of any court
12 LAND USE ACT CAP L5 L.F.N. 2004
Similarly, a combine reading of section 22 (a-c) of the same act it provides that '' It shall not
be lawful for the holder of a statutory right of occupancy granted by the Governor to alienate
his right of occupancy or any part thereof by assignment, mortgage, transfer of possession,
sublease or otherwise however without the consent of the Governor first had and obtained''
Provided that the consent of the Governor-
(a) shall not be required to the creation of a legal mortgage over a statutory right of
occupancy in favour of a person in whose favour an equitable mortgage over the right of
occupancy has already been created with the consent of the Governor:
(b) shall not be required to the re-conveyance or release by a mortgage to a holder or
occupier of a statutory right of occupancy which that holder or occupier has mortgaged and
that mortgage with the consent of the Governor:
(c) to the renewal of a sub-lease shall not be presumed by reason only of his having
consented to the grant of a sub-lease containing an option to renew the same
From a careful perusal of the act, it is clear that the Governor's consent is a pre-condition for
the validity of any alienation, mortgage inclusive for a transaction in the nature of
conveyance to be valid the parties to it must first enter into a binding agreement to alienate
subject to the consent of the Governor. It is that consent that vests a valid title on the
purchaser. The effect of noncompliance with this provision is contained in section 26 of the
act i.e not obtaining the requisite consent of the governor is to the effect that '' any
transaction or any instrument which purports to confer on or vest in any person any interest
or right over hand other than in accordance with the provisions of this Act shall be null and
A learned Judge Unsworth F.J opined in the case of SOLANKE V ABED13 ''where a statute
not only declares a contract or transaction void but imposes a penalty for making it the
contract is not merely void but is also illegal''
Also, in In P.I.P Ltd v Trade Bank (Nig) Plc the 2nd Respondent attempted to sell the
property charged under the mortgage transaction between it and the appellant without the
prior consent of the Governor having first had and obtained. The court held it was attempting
the impossible in view of the absolute prescription of section 26 of the Land Use Act. The
Court of Appeal case of JACOBSON ENG CO & ANOR V UBA LTD14 has once more
brought to the open the vexed issue of consent under the Act as it relates to mortgages. The
facts of the case are that the 1st appellant obtained a facility from the Respondent. As security
for this facility the 2nd appellant, Managing Director of the 1st appellant executed a personal
guarantee in favour of the Respondent. In addition, he deposited his original title documents
as further security for the facility. Following the failure of the 1st appellant to liquidate the
debt as agreed, the Respondent filed an action claiming the debt plus interest, a declaration
that as an equitable mortgagee, it (the mortgagee) was entitled to sell, and an order of sale of
the property covered by the title document deposited. Based on this, the lower court granted
judgment in favour of the Respondent as claimed. In an appeal to the Court of Appeal, Lagos
Division, the 1st and 2nd appellants sought to set aside the lower court's judgment. A major
plank of their contention was that the deposit of title documents was an equitable mortgage
which required the consent of the Governor under the Act. As none was obtained the
transaction was null and void pursuant to section 26 the Act.
In a considered judgment, the Court of Appeal partially upheld the appeal and set aside, the
part of the judgment of the lower court granting a declaration that an equitable mortgage
13 (1962) N.R.N.L.R.92. 14 (1993)3 NWLR part 283 at Page 586. See also Lenboye v. Ogunsiji (1990) 6 NWLR (Pt. 155) 210
existed, and ordering a power of sale. In the judgment, the court stated that "After the
commencement of the Land Use Decree, whatever was created upon the delivery of the Title
deeds whether equitable or legal mortgage, the law is the same and that is to the effect that
the bank cannot sell nor an order be made that the bank should sell without the consent of the
Minister first had and obtained"
Where the power to grant certificate has been delegated to the state commissioner such
certificates shall be expressed to be granted on behalf of the Governor.
In Federal Mortgage Bank of Nigeria v Dr Bamidele Babatunde15 the holder of a statutory
right of occupancy granted by the Governor, cannot alienate his rights of occupancy without
the Governor's consent first had and obtained...
Finally, in EBITEH V OBlKI16 is that the lower court is free to decide which of the conflicting
decisions of a higher court that it wants to follow.
Now, after I carefully perused the land use act 1978, I discovered that the land use act has
created a lot of pitfalls which if not avoided in the creation of the mortgage will ultimately
impede the mortgagee's power of sale when same arises Given that the responsibility to
obtain consent to alienate a statutory right of occupancy lies on the holder (i.e. mortgagor),
sometimes unscrupulous mortgagor's deliberately neglect to obtain consent, thereby making
the mortgage prima facie void in law , and upon default the mortgagee would not be able to
exercise his power of sale.
15  12 NWLR PT 632, PG 683 AT 689. But See OKUNEYE V FBN PLC 6 NWLR AT PART 457 the court held that the deposit of a title document is an equitable mortgage not requiring the consent of the Military Governor on the basis that it is not alienation, but an agreement to alienate. In this case the appellant had appealed the judgment of the lower court that granted the order of sale of his property deposited as security for loan on the premise that the consent of the Governor was lacking 16 (1992) 5 NWLR (Pt. 243) 599
The Supreme Court in Savannah Bank Ltd. v Ajilo17 did not have the opportunity of
clarifying the cardinal principle of equity on this issue, as the issue was not canvassed before
it so that it would be wrong to suggest that the decision in that case stand for the proposition
that the mortgagor can impeach a mortgage on the ground that consent was not had and
obtained by him. The correct proposition of the law can be found in a number of judicial
authorities in recent years for example, in Ugochukwu V. Co-operatiive and Commerce Bank
(Nig) Ltd18 it was held that it would be unconscionable for the mortgagor to turn around and
maintain that no consent was obtained or that such consent obtained was flawed having
received valuable consideration in the form of a loan from the mortgagee.
As an obiter dictum in Savannah Bank (Nig) Ltd vs. Ajilo supra, the Supreme Court of
Nigeria said consent must be obtained prior to the mortgage. However, in order to give a
human face and protect the efficiency of mortgage transactions under the Act, the Nigerian
courts have rather held such a mortgage transaction inchoate rather than illegal or void. So,
despite the mandatory statutory consent requirement, "first had and obtained", the courts have
held it means no more than that the mortgage transaction concluded becomes inchoate (in
complete) pending when the requisite consent is eventually sought and obtained. Departure
from doing this would have drastically had a telling effect on efficiency of mortgage
transaction in Nigeria.
Finally, I therefore conclude that the consent provisions of the Land use act have incidental
negative impacts on the operation of mortgages in Nigeria.
This essay is written by Gboyega Ogundele, a final year law student of Afe Babalola
University, Ado-Ekiti, Ekiti State, Nigeria. (ABUAD)
17 S.C. 188/1987]  ANLR 26 18  7 SCNJ 22
Omotola, .J A. (1984), Essays on the Land Use Act, Lagos University Press.
Adewale T. Land Law
Elias T.O. Nigerian Land Law (1971) (London: Sweet and Maxwell)