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Saturday 16 February 2013

GOVERNOR’S CONSENT FOR CREATING MORTGAGES IN NIGERIA


BARR, CHIGOZIE EZEKIEL
victorezekielc@gmail.com/+2348034997413

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.”
Failure to obtain the consent of the Governor before actual mortgage itself makes the transaction null and void – section 26 of Land Use Act.
The consent is only required where the legal interest is transferred and not for an agreement to transfer the interest.
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.
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.
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.
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.
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.

1 comment:

Legal Oracle said...

Beautifully written counsel. Cheers