Essay by gboyegsCollege, UndergraduateA, April 2014

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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

legal charge.

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.

Legal Mortgage

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.

Equitable Mortgage

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

equitable security''

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



(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:


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 £5000 to the respondent taking security of a £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

mortgaged property''

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 [1904] 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-flow 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 [1938] 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 effect of the contract. Significantly, 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

£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 [1914] 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 [1912] 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 off, 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 influenced 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.


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 [1996] 1 All ER 449.

husband and five children for 20 years. She and her husband had the house transferred into

her sole name in return for raising a mortgage to finance 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 first 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 first is the specific 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 £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 £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 [1977] 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 £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 £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 £3,400.

In the aggregate, £22,400 of capital and interest are now secured on the property, which is

currently valued at only £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 [1999] 12 NWLR PT 632, PG 683 AT 689. But See OKUNEYE V FBN PLC [1996]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] [1989] ANLR 26 18 [1996] 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)