REGISTRATION OF TITLE UNDER THE NIGERIA LAW

Registration of Titles Act of 1935, now Registration of Titles Law of Lagos State Cap R.4, 2003.  This law was introduced to correct the inadequacies in the registration of instrument Act of 1924, now known as the Registration of Instrument Laws of the various states.  The basic principle of the Registration of Titles law is that ownership of title to land is based on the fact of registration, that is, it operates to register dealings and transactions over titles in land when such titles have been registered.

The Governor of the State may by order apply the Law to any area in the State. Any such area is referred to as a registration district. The Governor may also from time to time by order, alter the boundaries of any such registration district or may by order, abolish any such district – section 2 of Registration of Titles Law (RTL).

The object of the law is to substitute a single established title guaranteed by the state for the traditional title which must be separately investigated before purchase. And, must be proved by several documents of title each time the title is in issue. Transactions in respect of registered land such as leases, creation of charges, and transfer of interest in land are also required to be registered.

In the case of registered land, the purchaser can discover from a mere inspection of the register whether the vendor has the power to sell the land and whether or not there are encumbrances on the land that may be investigated. As such, waste of time and resources is avoided since from an inspection of the register, a purchaser would satisfy himself of the title of the vendor and if the vendor has the power to sell the property – Onagoruwa v. Akinremi & Ors (2001) 13 NWLR (Pt. 729) 38.

The law requires that all titles to land within a registration district shall be registered either compulsorily – section 5 of RTL, or voluntarily – section 6 of RTL.

Application for first registration must be made by the grantee within 2 months of the execution of an instrument. Failure to register would render the instrument void with regard to the legal estate granted – Onoshile v. Idowu (1961) 1 ANLR 3.

It should be noted that the registry is private and confidential in the sense that apart from the proprietor or a person authorized by him, other persons do not have the right to investigate the register containing entries on any title except with the express permission of the registered proprietor of the title authorizing them to do so – section 74(2).

The register under section 69 is divided into three namely the property register, proprietorship register, and charges register.

PROPERTY REGISTER

This contains detailed description and gives other information of the property that is registered. There are also specific contents which are required under property register. They are:

        i.            Description of the title with reference to a map or field plan;

      ii.            Notes relating to ownership of mineral;

    iii.            Any exemptions from overriding interests; and

    iv.            Easements, rights privileges, conditions, and covenants for the benefit of the land and other similar matters.

PROPRIETORSHIP REGISTER

This contains the particulars (name, address, and description) of the registered owner (proprietor) of the property. It also contains cautions, inhibitions and restrictions affecting the right of the proprietor to dispose the title.

CHARGES REGISTER

This contains particulars of any charge, mortgage, and encumbrance that may have been created over a particular property. It also contains:

        i.            Encumbrances subsisting at the date of first registration;

      ii.            Subsequent charges and other encumbrances including notices of leases and other notices of adverse interest or claims permitted by law;

    iii.            Notes relating to covenants, conditions, and other rights adversely affecting the land; and

    iv.            Dealings with registered charges and encumbrances which are capable of registration.

The registrar is not under obligation to file any document brought to him but he is entitled before making an entry in the register, to require such evidence of the authenticity of the document to be filed, its due execution, the identity of persons and of the documents or facts giving occasion for the entry as he may think necessary – section 70(1). There is priority of registration and to guarantee priority, the registrar makes note on the date of the receipt of each application, numbers the application serially and if the application is in order, deems it to have been received in numerical order – section 72(1). The registrar on a first registration and on subsequent changes of ownership wherever practicable should enter on the register the declared value or the price paid of the transaction – section 73.

PROCEDURE FOR FIRST REGISTRATION

This can be done through the following:                                   

1.      A person is requested to make an application to the Registrar to be registered as first owner using Form 1 in the Schedule to the law. A declaration on oath may be demanded in Form 3 by the Registrar to the effect that the applicant has made a full disclosure of material facts respecting the land and any sketch of the land.

2.      The title to the land is then investigated by the Registrar – Bucknor-Mclean & Anor. v. Inlaks Ltd. (1980) ANLR 184; Owumi v P. Z. Ltd (1974) 1 All NLR (Pt. 2) 107; section 8(1). The Registrar is entitled to accept and act on legal evidence or evidence ordinarily required by conveyancers – section 9. The power of the Registrar here is confined to the acceptance or refusal of the application for first registration and he is not expected to decide the question as to ownership of title – Majekodunmi v. Abina (2002) FWLR (Pt. 100) 1336 at 1357.

3.      The application must then be advertised by the Registrar at least one in the State Gazette and if he thinks fit, in one or more Nigerian newspapers – section 8(2). Many applications may be included in an advertisement. The Registrar may also serve on any person he deems fit, each occupier of the land and all owners of adjoining land, the application made for registration. Such application may be made in Form 2.

4.      The Registrar waits for a period of two months for any objection to the application for registration. Where an objection is received, the registration will not be made until the person objecting has been given an opportunity of being heard – section 8(4).

5.      If the Registrar is satisfied that the applicant is entitled to be registered after investigation, an applicant will be registered accordingly. Where an interested person fails to object to first registration before the registrar proceeds to register the title his objection is foreclosed – Balogun v Salami (1963) 1 ANLR 129.

Where the Registrar of Titles is not satisfied with the evidence of title, he will dismiss the application for registration.

Grounds for upholding an application for registration are:

1.      The successful proof that the land is family land under customary law or that the applicant has no right or interest in the land – Dania v. Soyenu 13 NLR 143; section 10(1); or

2.      That although not family land, the land is subject to customary law for which the objector has rights of interests, contingent or otherwise in respect of the land – section 10(2).

PROCEDURE FOR INVESTIGATION OF TITLE

To investigate title, the purchaser must approach the Registrar of Title with the following documents:

1.      A letter of consent or authority from the proprietor or a sworn declaration by the solicitor showing that he has consent of the proprietor to investigate the title. The reason for this is that the registry is a private registry not opened to the public. There must hence be authority given to an ‘outsider’ to have access to the registry.

2.      A copy of the land certificate which contains the particulars by which the property will be identified at the lands registry. The particulars the certificate usually contain are:

a)      Title number;

b)      District; and

c)      The property.

3.      A declaration in court by the purchaser to the effect that the proprietor of the title actually granted the permission to conduct searches of the register. This is a requirement imposed in practice to prevent fraud by those who may claim that they have consent of the proprietor when in fact they do not. A declaration may make such persons liable to be charged for perjury.

DIFFERENCES BETWEEN REGISTRATION OF TITLE UNDER THE RTL, AND UNDER THE REGISTRATION OF INSTRUMENTS OF LAW

Section 86 (1) of RTL provides that no document affecting registered land executed after registration shall be required to be registered under the Land Instruments Registration Law. This give rises to the following differences:

1.      Property practice is conducted mostly through the use of forms under the titles system unlike the registration of instruments system which requires contracts and deeds.

2.      The registry under the registration of titles system is a private one unlike deeds registry.

3.      Under the registration of titles, a purchaser investigating title must obtain a letter from the proprietor of the title or a sworn declaration from the court that he has the consent and authority of the proprietor to conduct a search. Under the system of registration of instruments, no such authorization is required.

4.      Under the registration of titles system, a registered proprietor is issued a Certificate of Title. The certificate names the owner of the title and he may use the certificate in any matter he deems fit. Under registration of instruments, it is registered title deeds that are issued to an owner of land that has been duly registered.

5.      Title acquired under registration of title system is more reliable and indefeasible than title acquired under deeds. In the deeds system, the State does not guarantee the title of the owner and it is registered subject to all the defects in it but under the titles systems, the registrar investigates title before registration and moves a guarantee on them.

6.      Property practice under the registration of titles system does not require the production of an epitome or abstract of title by a vendor to prove his ownership of land unlike under the system of registration of instruments.
     
     Barr, Ezekiel chigozie has many years experience in providing legal representation and advising clients across an exceptionally broad range of contentious and non-contentious matters. His main goal is to help clients resolve any contentious or non-contentious legal problem they are having rapidly and cost effectively. Email: victorezekielc@gmail.com. Tel: +2348034997413

LEASE

A lease is a document that creates an interest in a property or land for a fixed term of years usually (but not necessarily) in consideration of the payment of rent. The interest created is called a term of years, but it is also often referred to as a lease or a leasehold interest. Leases are used to describe long term grants.

In a lease, the consideration flowing from the lessor (landlord) to the lessee (tenant) is the demised premises. The consideration paid by the lessee is the rent and the observance of any condition or covenant in the lease.

It should however be noted that title to the land is not conveyed, only the use and occupation of the property is given out; the property reverts back to the lessor after the expiration of the term. The owner of the property who makes the grant is the lessor or landlord/landlady, whilst the person who takes over the exclusive use of the demise is the lessee or tenant.

The difference between a lease and a tenancy is that while the former last for a long term, the latter is for a short term.

PARTIES TO A LEASE

This refers to the capacity of parties. They must be natural or juristic persons having the capability to sue or be sued.

Capacity is always a key issue. A holder of a right of occupancy can create a term of years subject to conditions in the Land Use Act. Any term created under the right of occupancy is a sub-lease.

At common law, a lease created by an infant is voidable and may be avoided by the infant within a reasonable time after attaining majority. An infant may take a lease but is entitled to repudiate it on attaining majority – section 14 Edict No 4 Rivers State 1988; and section 18 Edict No. 17 Kaduna State 1990. An infant cannot create a tenancy in respect of residential premises but the parent or guardian or the High Court upon application may do so on his behalf.

A registered company under CAMA may create or take a lease as authorised by its memorandum and Articles of Association.

Parties are to be identified by their full names, addresses and occupation. In the case of a limited liability company, it is usual to say “registered under CAMA” and then state its registered office. In the case of a natural person, you may want a reference on him from his employer or former landlord to determine if he can pay rent.

A single lady letting the premises may be asked to produce a surety who will also stand as a guarantor in case of default of payment of rent. It should however be noted that a surety will be equally liable for the payment of rent. If a company, the guarantors may be the directors.

The parties to a lease can either be called a landlord/tenant; lessor/lessee and where the lessor is a lady, a landlady. You may wish to extend the meaning of the definition. But there are provisions of the law that make it unnecessary to extend the definition of the parties to include successors-in-title – section 102 and 103 PCL, and section 58 and 59 Conveyancing Act 1881. Successors-in-title can also enforce covenants in the document.

TYPES OF A LEASE

1.      Periodic tenancy – This is created for a term renewable at the end of the term by payment of rent by the tenant and reception of rent by the landlord.

2.      Tenant for a fixed period – This is created to last for a fixed term and to expire at the end of such fixed term. This type of lease is not renewable.

3.      Lease of reversion – This is created to run concurrently with an existing lease. Lessee of reversion does not take possession unless the existing lease is brought to an end; he merely steps into the shoes of the lessor in relation to the current lease.

4.      Lease in reversion – This is created to take effect at the expiration of a current lease.

5.      Tenancy at will – This is created where the tenant holds over at the end of a current term with the consent of the lessor for an undefined term subject to termination by either of the parties.

6.      Tenancy at sufferance – This is created where the tenant holds over without the consent of the lessor.

7.      Tenancy at estoppels – This is created where tenancy is made by a grantor who has no good title.

8.      Statutory tenancy – This is created where a tenant’s term has expired but protected from summary eviction by the provisions of the relevant recovery of premises law.

MODE OF CREATION OF LEASES

This can be done through any of the following:

1)      Parol/Oral lease – This is an agreement of mere words. Under section 4 of Statute of Fraud of 1677; sections 78 and 79 of the PCL, it is permissible as having of a lease at will. It must however have the following elements in order for it to be valid –

a)      it must reserve the best rent obtainable (not premium or rack rent);

b)      it must be for a period not exceeding three (3) years; and

c)      possession must be given to the lessee – Foster v. Reeves (1892) 2 QB 255 at 257; Okoye v. Nwulu (2001) All FWLR (Pt. 350) 214.

While parol/oral leases are permissible, they usually present difficulties in proving the essential terms agreed to by the parties; for “a party alleging an oral agreement is duty bound to prove such an agreement to the hilt – Odutola v. Papersack (Nig.) Ltd. (2007) All FWLR (Pt. 350) 1214.

2)      Written lease – This is a mere agreement in writing, and applicable to leases not exceeding three years. It is signed by the parties to it only, and binding on them as a contract and it is enforceable. In Odutola v. Papersack (Nig.) Ltd (supra), Niki Tobi JSC, observed that “it is generally accepted practice that tenancy agreement is made in writing; but I can say that it is mostly made in writing.” The advantage of a lease in writing over oral lease is that a lease in writing are easily ascertainable and enforceable.

3)      Lease by Deed or under seal – It is mandatory and not conditional for a lease above three (3) years to be by deed. And it must be Signed, Sealed and Delivered. Under section 3 of Statute Fraud Act of 1677; and section 77(1) of PCL, a lease which is required to be in writing is void for the purpose of conveying or creating a legal estate unless made by deed. In Anwasi v. Chabasaya (2000) 6 NWLR (Pt. 661) 408, the Court held that a contract under seal is a written document which is required to be signed as well as sealed by the party bound thereby and delivered by him, to or for the benefit of the person to whom the liability is incurred. However, by the rule in the old case of Walsh v. Lonsdale (1882) 21 Ch. D 9, an agreement to create a lease (with all the essential elements) will still operate as a lease, notwithstanding that it is not created under seal. This is based on the maxim that “equity looks at the intention of the parties and not the form” and “equity regards as done that which ought to be done.”

ESSENTIAL ELEMENTS OF A LEASE

In Odutola v. Papersack (Nig.) Ltd (supra), Niki Tobi JSC, stated thus:

“…[For] a lease to be valid and enforceable, [it] must contain the following – the parties concerned, the property involved, the term of years, the rent payable, the commencement date, the terms as to covenants, and the mode of its determination.”

From the above, essential element of a valid lease are:

1.      The parties concerned;

2.      The property involved;

3.      The term of years;

4.      The rent payable;

5.      Date of commencement;

6.      The terms as to covenant; and

7.      The mode of its determination.

The above elements are important for a valid lease which shall be discussed briefly:

1.      The parties concerned – Parties must be juristic persons (that is, having the capacity to sue and be sued) and adequately prescribed. There must be a lessor who is capable of creating a lease and a lessee who is capable of taking the demise.

2.      The property involved - The property must be in existence at the commencement date otherwise, nothing is demised and the agreement is void. In other words, the property must be described and known by both parties.

3.      Terms of years - There must be definite time frame. A lease to be valid must be for a definite or fixed period with a fixed or ascertainable date of commencement. In terms of duration, it must have a certain beginning and a certain end e.g. weekly, monthly, quarterly, or yearly. The lease cannot enure in perpetuity – U. B. A v. Tejumola & Sons Ltd (1988) 2 NWLR (Pt. 79) 662; 5 SCNJ 173. In Lace v. Chantler (1944) KB 364 at 368, the court held that a lease for the duration of the war or until cessation of hostilities did not create a good leasehold interest as the term created was uncertain.

4.      The rent payable – The rent (amount) to be paid must be stated, known and agreed by both parties.

5.      Date of commencement - The lease must take effect from a specified date or upon the happening or occurrence of an ascertainable future event or contingency which is certain in time – U. B. A v. Tejumola & Sons Ltd (supra). In Okechukwu v. Onuorah (2000) 12 SCNJ 146; (2001) FWLR (Pt. 33) 219 and Bosah v. Oji (2002) 6 NWLR (Pt. 762) 137, the question arose on whether leases that had no commencement date, but which were said to commence on “the day the Onitsha Local Government Council issued to the lessees a certificate of occupancy in respect of the premises”, were valid commencement dates? The court answered to the affirmative and concluded that the commencement date which is deponent upon the occurrence of a future contingency (issuance of a certificate of occupancy) was valid and the lease became absolute and enforceable the moment the event in question occurred.

6.      The terms as to covenant - There must be exclusive possession. It is the essence of a lease that a tenant should be given the right to exclusive possession. That is, the right to exclude all other persons from the premises. Where exclusive possession is not confirmed, it is called a licence. Exclusive possession connotes occupation or physical control of land either personally or through an agent, proxy or servant. It also means exclusive power of using the right given in land, retain same and be entitled to undisputed enjoyment of it against all persons except the person who can establish a better title. If one does not have exclusive possession of the property, then what one has is not a lease but licence. Lessee must therefore have exclusive use and control of premises.

7.      The mode of its determination – There must be the cessation of an estate or interest.

DIFFERENCE BETWEEN A LEASE AND A LICENCE

1)      A lease has an estate in the demised premises whilst a licence has no estate but only a right to do a thing on the land.

2)      A lease can be assigned while a licence cannot be assigned.

3)      In a lease, a lessee can maintain action for trespass against anybody including the lessor while in a licence, a licensee can only sue others and not the licensor for trespass because he occupies the property at the pleasure of the licensor who may come upon the land at any moment he wishes.

4)      A lease is inheritable while a licence cannot be assigned.

5)      A lease cannot be revoked while a licence is revocable either expressly by the licensor or by the death of the parties or by assignment of the property.

DIFFERENCE BETWEEN A LEASE AND AN ASSIGNMENT

1)      A lease is granted for a period of term while in an assignment, the assignee receives the entirety of the assignor.

2)      In a lease, grantor has reversionary interest while in an assignment, there is no reversionary interest retained by grantor.

3)      In a lease, all covenants in the head lease (express and implied) bind parties to a lease while in an assignment only covenants that touch and concern the land in the head lease binds assignees (not express covenants as there is no privity of contract between head lessor and assignee.

4)      In a lease, it may not require deed depending on the duration and mode of creation while in an assignment, it always require a deed for legal title to be passed to the assignee.

RENT

This is the consideration (compensation) paid by the tenant to the landlord for the term granted. Payment of rent is however not a strict requirement of a valid lease. For instance, a tenant at will does not pay rent yet he is a tenant. A main feature of a lease is lawful occupation by tenant whether a person pays regular rent, subsidized rent or no rent at all is immaterial – African Petroleum Ltd. v. Owodunni (1991) 8 NWLR (Pt. 210) 391 at 419.

TYPES OF RENT

In practice, there are three kinds of rent payable in lease namely:

1)      Ground Rent – This is the rent paid by the holder of the grant (grantee) for the use of the ground, whether the land is developed or not is immaterial. – G. B Olliviant v. Alakija (1950) 13 WACA 63. This rent is paid annually and it is subject to periodic review. For example, rent paid to the Governor of a State (Government) upon the grant of a Right of Occupancy and subsequently every year – section 5(1) of the Land Use Act, 1978. The amount payable varies depending on where the land is situated or located, and the size of the land. It is usually a small amount and it is subject to a revision period of 5 years or more.

2)      Rack Rent – This is the most popular type of rent also called ‘economic rent’ because it is the landlord’s returns on his investment. This rent is paid by the lessee. It is the rent for the full value of the property or a value near it. The amount payable varies depending on the location of the property and quality of the property. It may be paid monthly, annually or for a fixed sum. Though, it normally fluctuates depending on the change of circumstances in market value.

3)      Premium – This is a lump sum which is paid as rent in addition to the other kinds of rent. For example, the holder of a Right of Occupancy pays both ground rent and premium to Givernment. It is also payable in a long lease.

A premium is regarded as a fine, and prohibited in some States – Section 4 of the Rent and Control and Recovery of Residential Premises Law of 2003 (Lagos). Where a premium is prohibited, the landlord may charge rent in advance, if that is not also prohibited – section 6(1) of Rent and Recovery of Premises Edict No. 4 of 1997 (Plateau State) prohibits rent in advance. However, where payment of premium is required or allowed, it attracts stamp duties payment and it is charged as income tax.

FACTORS TO BE CONSIDERED IN FIXING RENT PAYABLE IN A LEASE

1.      Tax implications – This can be found under section 3(3) of the Personal Income Tax Act (PITA), 2004. It provides that a landlord who collects rent in advance for a period exceeding five (5) years is liable to pay higher tax than when the rent is for five years or below. It is therefore advisable that landlords should not charge rent in advance exceeding five years. This is also made available in the provisions of section 4(2)(c) of the Income Tax Management Act (ITMA), 2004

2.      Inflation – Where a landlord collects many years rent in advance, it may turn out to be disadvantageous because inflation may make the rent collected virtually useless.

At common law, where a lease has expired but the lessor continues to accept rent, the lessor would be deemed to have renewed the lease on the same terms and rent as the expired lease. This is because, in law, possession of an estate by a lessee and the receipt of rent by the lessor is evidence of a tenancy – Okoye v. Nwulu (supra).

RENT REVIEW CLAUSE

It is important to insert a rent review clause in a lease especially if the term of years granted is a long one. In the absence of such clause, and subsequent disagreement, the court may imply fair market or reasonable rent and this would always be a matter of evidence – Unilife Dev. Co. Ltd. v. Adeshigbin (2001) FWLR (PT 42) 114. The rent review clause is usually inserted in a lease to cushion the effect of inflation and keep to the money value realisable from the demised premises.

This allows the rent to be reviewed periodically.

A rent-review clause should contain the following

a)      Method of initiating the review. For example, a notice to be given by the lessor to the lessee in writing and the time within which the notice is to be given.

b)      The time frame for the review. For example, after every five (5) years of the lease and the date in which the new rent will become payable.

c)      The method of calculating the new rent. For example, whether a valuation by experts is required before the review.

d)     Procedure for resolving any dispute of the new rent. For example, by the use of arbitration clause or negotiation mechanism.

It should be noted that rent is not due until the expiration of the period created. In a monthly tenancy, the rent is due on the eve of the commencement of another periodic month – Re St. Andrews Allotment Association (1969) 1 All E.R. 147 at 151.

Rent is still payable even if the premises cannot be used. For example, due to destruction by fire. This is because the doctrine of frustration hardly applies to leases – E. O. Araka v. Monier Construction Co (Nig) Ltd (1978) 9/10 S.C. 9.

FACTS AND CASES REFERRED TO IN ACTIVITIES 2 & 3 OF LESSON NOTE

BOSAH v. OJI (2002) 6 NWLR (Pt. 762) 137

This is based on a question that arose on whether leases that had no commencement date, but which were said to commence on “the day the Onitsha Local Government Council issued to the lessees a certificate of occupancy in respect of the premises”, were valid commencement dates?

The court answered to the affirmative and concluded that the commencement date which is deponent upon the occurrence of a future contingency (issuance of a certificate of occupancy) was valid and the lease became absolute and enforceable the moment the event in question occurred.

OKECHUKWU v. ONUORAH (2000) 12 SCNJ 146

This is based on the question whether the essentials of a lease existed (particularly the date of commencement).

The court affirmed the essentials of a lease and held further that in the instant case, the words of demise are clearly spelt out in Exhibit 1, which is giving on lease a plot of land to be developed by the defendants to a clear specification and on a completion, to have portions of the building for the plaintiff’s use absolutely without charge.

U. B. A LTD. v. TEJUMOLA & SONS LTD. (1988) 2 NWLR (Pt. 79) 662

The question for determination in this case is whether it can be said on the evidence in this case that 1st May, 1982, the day said by the Plaintiff to be the commencement of the proposed lease, which no doubt is an essential term of an agreement for the lease, has been agreed to by the parties to this case.

The Court of Appeal, the lower court, agreed with the learned trial Judge as to 1st May, 1982 being the day of the commencement of the proposed lease. In coming to its decision the Court of Appeal considered all the relevant correspondence that passed between the parties on the point including Exhibits E and F. The lower court concluded:

“From these series of correspondence that I have examined, I cannot see in them where the date of 1st May as the date wherein the Appellant took physical possession as being in doubt.”

On appeal, the Supreme Court stated that neither the trial court nor the Court of Appeal, made a definite finding that the Defendant agree to 1.5.82 stated in Exh. F, the plaintiff’s letter to the defendant, as the commencement date of the proposed lease. The trial court said the Defendant did not rebut the averment. The Court of Appeal, for its part said that there was no doubt that 1.5.85 was the date of the commencement of the proposed lease. It did not say positively that the Defendant agreed to this date.

Nnaemeka-Agu, J.S.C. stated thus:

“There is one aspect of the ultimate suggestion made in the lead judgment on which I feel quite reluctant to go along with my learned brother. He suggested that, in view of the enormous expenses which the Respondents ran at the request of the Appellants, counsel on both sides should put their heads together to see how justice could be done to them. I cannot agree to this without pointing out that the Respondents were the architects of their own misfortune. With all the clear story which the quality and language of their correspondences tell, they still elected to act for themselves, for a transaction which could have been worth several millions of naira. It was only after they had ruined their case that it dawned on them that they should brief an experienced counsel, for the court case. This is a height of indiscretion. Yet, it is said that the quality of mercy is not strained. It is only on this ground that I associate myself with the suggestion that counsel should agree on what compensation should be paid to the Respondents for the expenses they ran at the request of the Appellants, inspite of the fact that there was no binding contract between the parties.” The Appeal was allowed.

COVENANTS IN A MORTGAGE

Mortgage is a contract. It arises ex-contractual, therefore, the parties to a mortgage must provide for the terms that will bind them. A prudent mortgagee must clearly specify the terms of the mortgage. Common law and relevant statutes still apply in addition to the express terms as nay be stipulated by the mortgagee.

The general covenants usually provided in a covenant are as follows:

1.      Covenant to repay the mortgage sum and interest on it at a fixed date – The mortgage sum is the principal advanced to the mortgagor by the mortgagee while the interest is the sum accruing on the principal over a period of time. It must be agreed between the parties that the mortgage sum and interest will be paid at a fixed date. Instances where it is not expressly stated in the deed of mortgage, equity holds the mortgagor obligated to repay the mortgage sum which is seen as a debt. This has the following effect:

i.                    It determines the mortgagee’s right of action against mortgagor. The mortgagee cannot commence any cause of action against the mortgagor until the expiration date.

ii.                  It determines whether or not the mortgagee can dispose the security in order to recover the outstanding loan and interest. The mortgagee cannot sell or dispose the security until the fixed date expires – Twentieth Century Banking Corporation v. Wilkinson (1977) 1 Ch. 99.

iii.                It determines the time the mortgage can call for the mortgage sum. This can only be done before or after the expiration of the legal date – AIB Ltd. v. Lee & Tee Industries Ltd. (2003) 7 NWLR (Pt. 819) 366.

iv.                It determines when the mortgagor’s right of redemption can be extinguished by the operation of the Statute of Limitation. The mortgagor’s right to redeem elapses where he does not redeem the security after a period of 12 (twelve) years or 16 (sixteen) years, calculated from the date of redemption – Federal Administrator–General v. Cardoso (1973) All NLR (1973) NSCC 577.

2.      Covenant to insure the property – The safety of the property is of great interest to the mortgagee. It is advisable to always insure the property against fire for example. The insurance can be undertaken by the mortgagee or the mortgagor. The mortgagee, once it is a mortgage by deed, has the statutory right to insure the property where the mortgagor fails to or neglects to insure – section 123(1)(ii) of the PCL; and section 19(1)(ii) of the CA.

In practice, the mortgagee will usually insure the mortgaged property and to charge the premium on the security, at the same interest rate. The mortgagor can insure the property can insure the property either in his name or in the name of the mortgagee, and either of them can make the payment for the insurance. However, where the mortgagee does it, the premium will be charged on the security. But the power of the mortgagee to insure the mortgaged property is not absolute because he has no power to insure the security where:

i.                    There is an agreement between the parties that there should be no insurance;

ii.                  The mortgagor insures the security pursuant to the mortgage agreement;

iii.                Though the mortgage agreement is silent on insurance, the mortgagor insures the security to the amount the statute authorizes the mortgage to insure, and this insurance by the mortgagor is with the consent of the mortgagee – section 130(2) of the PCL; and section 23(2) of the CA.

The covenant to insure should contain the following:

i.                    The date of the commencement of the insurance policy – The insurance will usually be taken at the commencement of the mortgage.

ii.                  The insurance company – This will be any reputable insurance company to be chosen by or with the consent of the mortgagee.

iii.                The amount of the insurance – This is a policy which will cover the amount of the mortgage and preferably the amount required to restore the property, in case of total destruction – section 130(1) of the PCL; and section 23(1) of the CA.

iv.                The risk to be insured – This is usually fire, but depending on the place where the property is situated, it could include flood, etc.

v.                  The person to insure the property and take out the insurance policy in his name or the name of the other party – This is usually the mortgagor, but in the name of the mortgagee.

vi.                The application of the insurance money in the event of damage, whether to use it to reinstate the property or not – The parties can agree on the application of the insurance money.

vii.              Provision for Declaration of Trust or Power of Attorney in relation to insurance money where the mortgagor insures the security in his name – He will either declare himself the mortgagee’s trustee in respect of the insurance money or appoint the mortgagee his Attorney to collect the insurance money upon the occurrence of the insured risk. The consequence of not including this is that the mortgagee will not be able to compel the mortgagor to surrender any insurance money paid to him by the insurer.

3.      Covenant to repair – The mortgaged property is liable to depreciation, from change in weather and other factors. The value of the property affect’s the mortgagee’s interest as this will determine the amount of money the mortgagee will realize from the sale of the security. Thus, the covenant to repair essentially deals with the reinstatement of parts that have fallen into disrepairs. It is therefore in the mortgagee’s interest to provide for the repair of the security. The mortgagor usually covenants to repair but where the mortgagor refuses or neglects to repair, the mortgagee has the right to repair.

4.      Covenant on leases and sub-leases on the property – The mortgagor, like any owner or holder of real property, has the power to create leases of his property. This he can do before the creation of a mortgage – Gomez v. Williams (1972) NMLR 149 and during the existence of a mortgage – Turner v. Walsh (1909) 2 KB 484. Or after the creation of a mortgage. If there was a lease on the property before the mortgage, the lease will be binding on the mortgagor and even on a subsequent purchaser and the mortgagee will not be entitled to the rent. Where the lease is created after the mortgage, the CA and PCL regulates the relationship. By virtue of section 121(1) – (18) of the PCL; and section 18(1) – (18) of the C. A, a mortgagor in possession has the right to create a lease.

This is however, subject to the following conditions –

(i)                 It is a building lease, which must not exceed 99 (ninety-nine) years, that is expressly stated under the Law – section 121(1) of the PCL; and section 18(3) of the CA.

(ii)               The lease shall take effect in possession within the 12 (twelve) month of its creation – section 121(4) of the PCL; and section 18(5) of the CA. Thus, a lease under the section cannot be created to take effect in possession more than the stipulated period. Though a lease created to take effect beyond 12 (twelve) months remains valid and binding on the parties to the lease, it takes it outside the purview of the statutory protection afforded the mortgagor to create a lease that will be binding on the mortgagee.

(iii)             Best rent reasonably obtainable must be reserved – section 121(5) of the PCL; and section 18(6) of the CA.

(iv)             Covenants to pay rent must be included and upon the lessee’s failure to pay the reserved rent for a period of 30 (thirty) days, the right of re-entry must be provided – section 121(6) of the PCL; and section 18(6) of the CA.

(v)               The mortgagor shall have a counterpart of a formal lease duly executed and delivered by the parties – section 121(7) of the PCL; and section 18(8) of the CA.

(vi)             A counterpart kept by the mortgagor shall be handed over to the mortgagee within one month of its execution – section 121(10) of the PCL; and section 18(11) of the CA.

(vii)           The lease must be in consideration of the mortgagee agreeing to erect either a new building or renovate or cause improvement on an existing building on the demised premises – section 121(8) of the PCL; and section 18(9) of the CA.

(viii)         This is subject to the express agreement – section 121(12) of the PCL; and section 18(13) of the CA; and

(ix)             Where the mortgagee has not taken possession or appointed a receiver – section 121(8) of the PCL.

This means that the power of the mortgagor or mortgagee to create a valid lease that will be binding on the other party is regulated by the statute and the agreement of the parties.

5.      Covenant to consolidate different mortgages – Consolidation of mortgages occurs where a mortgagor uses different properties to secure a loan of money. It is possible for a mortgagor to borrow several sums of money from the mortgagee at different times using different properties to secure these loans. These mortgagees are consolidated in the sense it will be impossible for the mortgagor to redeem one or some of the properties and abandon the others. For there to be consolidation, the following conditions or elements must co-exist:

(i)                 The same Mortgagor – There cannot be consolidation unless the mortgages are created by the same mortgagor. Mortgagees created by different mortgagors cannot be consolidated even if the mortgagee is the same – Sharp v. Rickards (1909) 1 Ch. 109; Pledge v. White (1896) AC 187.

(ii)               The same Mortgagee or Union of Both Mortgagees and Equities – Different mortgages can only be consolidated where they are either created by the same mortgagee or at least, both must have been vested or merged in the same mortgagee.

(iii)             Date of Redemption in All the Mortgages must have Elapsed – There cannot be consolidation unless the legal dates for redemption for all mortgages have elapsed – Cummings v. Fletcher (1880) 14 Ch. D 699.

(iv)             There must be Agreement to Consolidate – Consolidation is expressly prohibited by the statute – section 115 of the PCL; and section 17 of the CA. There can only be consolidation where the right to consolidate is reserved, that is, there is an express agreement to that effect in any of the mortgages – Hughes v. Britannia Benefit B. S (1906) 2 Ch. 607. However, the exceptions provide in both statutes are that the right to redeem any of the mortgages, in a situation where there are other mortgages involving the same parties as described above, will not be exercisable where there is a contrary intention expressed in any of the mortgages; and the prohibition of consolidation does not apply to mortgages created before the commencement of the statutes.

6.      Covenants to observe and perform any conditions in the head-lease – To avoid the mortgagee becoming liable for breach of covenants in the head lease, especially those that touch or concern the land e.g. payment of rent. The mortgagor might be made to covenant with the mortgagee to continue with the performance or observation of the covenants in the head lease. This is relevant in a mortgage by assignment.

7.      Covenant not to redeem for a term – Generally, a mortgage is a security transaction and as such, the mortgagor always has the right to redeem; hence the statement – once a mortgage, always a mortgage. This right to redeem is always exercisable anytime on or before the expiration of the legal due date; or after the legal due date except the property is either sold or the right is foreclosed or is caught up with statute of limitation.

8.      Covenant as to a declaration of trust and power of attorney – This is usually provided in certain instances to protect the mortgagee.

PARTICULARS OF INFORMATION REQUIRED IN A DEED OF MORTGAGE

1.      Commencement and Date

2.      Parties

3.      Recitals

4.      Testatum

5.      Mortgaging clause

6.      Proviso for redemption

7.      Mortgaging covenants

8.      Proviso for redemption (if necessary)

9.      Consideration clause (if any)

10.  Testimonium

11.  Execution and Attestation.

COMMENCEMENT AND DATE

(THIS LEGAL MORTGAGE is made the …………… day of ………… 20…)

A deed takes effect from the date of the delivery not necessarily the date on the deed.

PARTIES

(BETWEEN …………………. and ……………………)

The terms used to describe the parties are Mortgagor / Mortgagee or Borrower / Lender. Whichever is used should be adapted to throughout, that is, there should be consistency.

RECITALS

(BACKGROUND / THIS AGREEMENT RECITES AS FOLLOWS)

The recital should contain the following:

1.      The borrower’s title.

2.      The agreement to borrow

3.      The fact that the guarantor or surety (if any) has agreed to guaranty or provide surety for the loan. It is advisable that the guarantor or surety should covenant to be primarily liable in the event of a default by the mortgagor.

4.      That the Governor’s consent and where necessary, the consent of the head-lessor or in the case of the mortgage of a family land, the consent of the head and principal members of the family, has been obtained.

TESTATUM

(NOW THIS DEED WITNESS AS FOLLOWS)

In a mortgage deed, unlike the deed of assignment, there are two testatum.

First Testatum – This is where the borrower covenants to repay the principal sum and interest on an agreed date, which is the legal due date. In practice, the date inserted as the legal due date is a technical matter. The mortgagee insert in the mortgage a date that is shorter than the agreed date. The advantage of inserting a shorter date is that the legal due date will arise early enough and the mortgagee is able to exercise its statutory power of sale after that date. The alternative is to insert a longer date as the legal due date (though not advisable) because the mortgagee must wait until that date before it can exercise its statutory power of sale. Apart from providing for the legal due date, the first testatum also provide for the interest rate on the loan, which the mortgagor is expected to pay punctually, that is, on the date fixed for payment – Maclaine v. Gatty (1921) 1 AC 376.

Second Testatum – (AND THIS MORTGAGE…) This is where the mortgagor states the capacity in which he is mortgaging, usually he conveys to the mortgagee as a ‘beneficial owner’. Where a mortgagor conveys and he is expressed to convey as a beneficial owner under sections 7(c) of the CA; and section 100(1)(c) of the PCL which provides for 7 (seven) covenants namely:

        i.            A right to convey

      ii.            Quiet enjoyment

    iii.            Freedom from encumbrances

    iv.            Further assurances

      v.            That the lease is valid and subsisting

    vi.            That all the rents/rates have been paid and covenants performed

  vii.            That the mortgagor will continue to pay rents/rates and perform covenants.

The covenants implied in the mortgage are the same as the six covenants implied where a vendor conveys as beneficial owner, except that, after the sixth covenant, there is a seventh covenant that states that the mortgagor covenants with the mortgagee that “he will at all times, as long as the money remains owing on the security of the conveyance, pay, observe and perform all the covenants, conditions, and agreements contained in the lease” and will keep the mortgagee indemnified against all actions, claims and demands, if any, arising from the default of the mortgagor in the performance and observance of the covenants and conditions in the lease.

This second testatum also contain the description of the property mortgaged.

THE MORTGAGING CLAUSE

(TO HOLD UNTO)                            

This is the clause that provides for the interest conveyed by the mortgagor or mortgagee. The form of the mortgaging clause depends on whether the mortgage is created by assignment or sub-demise.

PROVISO FOR REDEMPTION

(PROVIDED THAT)

The date inserted here should be the same as that inserted in the first testatum; and after redemption, the mortgage should be properly discharged. The proviso is not contained in a mortgage created by a charge by way of a legal mortgage.

CONSIDERATION CLAUSE

The consideration clause states the amount the property is being sold or demised to a mortgagee. It is on the disclosed amount that stamp duties will be paid.

BORROWER’S COVENANT

The mortgage should include all covenants on the mortgagor’s part such as the covenant for repair, insurance, postponement of redemption, leasing by the mortgagor, and consolidation.

TESTIMONIUM

(IN WITNESS OF WHICH)

This is the clause in the deed of mortgage that connects the parties to the contents and covenants in the deed of mortgage.

EXECUTION AND ATTESTATION

(SIGNED, SEALED AND DELIVERED) and (IN THE PRESENCE OF)

The mortgagee is usually a corporate entity. However, every document executed by a company shall be attested in accordance with its articles of association – section 131 of Evidence Act. Where the mortgagor is an individual then he should execute the mortgage deed as follows – SIGNED, SEALED AND DELIVERED… IN THE PRESENCE OF …

SAMPLE OF A DEED OF MORTGAGE

(covering commencement, testatum, and consideration clauses)

Commencement - THIS DEED OF MORTGAGE is made this ………. day of ………….. 20…. BETWEEN (name of the borrower) of …………………………….. (address) (“the mortgagor”) of the one part AND (name of lender) of …………………………….. (address) (“the mortgagee”) of the other part.

THIS AGREEMENT RECITES AS FOLLOWS:

1.      By a lease dated the …………………… day of …………… 20….. between (the lessor) of one part and the mortgagor (original lessee) of the other part, the said lessor demises to the mortgagor the property described in the scheduled attached below for a term of ………….. years at ……………. Rent per annum and subject to the performance and observance of the lessee’s covenants and conditions contained here.

Testatum - NOW THIS DEED WITNESSES AS FOLLOWS:

1.      The mortgagor as beneficial owner conveys to the mortgagee ALL THAT parcel of land located at ……………………… (address).

2.      The mortgagor has agreed with the mortgagee to mortgage the residue of the term of years less one day as security for a loan of ………………. (amount) subject to censer on redemption.

Consideration clause –

In consideration of the sum of ……………… (amount) paid by the mortgagee to the mortgagor, the receipt of which the mortgagor acknowledges.

IN WITNESS of which the parties have set their hands and seals the day and year written above.

SIGNED, SEALED AND DELIVERED by the within named …………………….

IN THE PRESENCE OF:

Name……………………………………………………………………………

Address…………………………………………………………………………

Occupation………………………………………………………………………

Signature…………………………………………………………………………