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Property Law > Mortgage 1 > Flashcards

Mortgage 1 Flashcards

1
Q

What is a mortgage?

A

A mortgage is a security transaction wherein an owner of a property transfers the interest in the property to another person for a loan with an agreement that the property will be transferred back to the owner upon repayment of the loan.

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2
Q

What is a tripartite mortgage?

A

A tripartite mortgage arises when the mortgaged property belongs to a third party, where the borrower is different from the property owner. The third party is known as a guarantor or surety.

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3
Q

What are the features of a mortgage?

A
  1. It conveys an interest in land to a lender of money.
  2. The land is held only as security or collateral.
  3. The property is re-conveyed back to its owner upon repayment.
  4. If repayment fails, the lender can sell the land to recover the money.
  5. Once a mortgage, always a mortgage.
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4
Q

What is a contract subject to mortgage?

A

A contract of sale of land made in expectation of a loan should be conditional upon the borrower obtaining the loan, with provisions for returning the deposit if the loan is not obtained.

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5
Q

What are the conditions for a valid contract subject to a mortgage?

A
  1. It must state the source and amount of the loan.
  2. The terms of payment.
  3. The interest paid on the loan.
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6
Q

What is the Federal Mortgage Bank?

A

It is a Federal Government agency, preferred for its long-term credit facilities (up to 30 years), low interest rates (as low as 6%), and government support.

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7
Q

What are the advantages of Housing Corporations?

A
  1. Security of title for properties purchased.
  2. Low interest rates on funds.
  3. Properties built on State land with ready Certificates of Occupancy.
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8
Q

What are the disadvantages of Housing Corporations?

A
  1. Prices are often beyond the reach of ordinary Nigerians.
  2. Scarcity of funds for housing projects.
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9
Q

What are Housing Schemes?

A

Housing schemes set up by employers to help employees own houses at subsidized rates, featuring low interest rates and long-term repayment plans.

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10
Q

What are the disadvantages of Commercial Banks for mortgages?

A
  1. High interest rates.
  2. Short-term loans.
  3. Stringent collateral conditions.
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11
Q

What is Life Endowment in relation to mortgages?

A

A life insurance policy that can be used as collateral for a loan, where the borrower assigns the policy to the lender.

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12
Q

What are the two broad types of mortgages at common law?

A
  1. Legal Mortgage.
  2. Equitable Mortgage.
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13
Q

What is a Legal Mortgage?

A

A mortgage created in accordance with the law, perfected by deed.

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14
Q

What are the modes of creation of Legal Mortgage under the Conveyancing Act?

A
  1. By Assignment.
  2. By Sub-demise.
  3. Charge by deed expressed to be by way of Statutory Mortgage.
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15
Q

What is the feature of creating a mortgage by Assignment?

A

The mortgagor transfers the entire unexpired leasehold interest to the mortgagee, allowing the mortgagee to sell without issues in case of default.

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16
Q

What are the advantages of creating a mortgage by Sub-demise?

A
  1. No privity of contract or estate between the Governor and mortgagee.
  2. Uniformity under CA and PCL states.
  3. Allows successive legal mortgages in PCL states.
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17
Q

What is the disadvantage of creating a mortgage by Sub-demise?

A

The mortgagee cannot sell the property without the mortgagor’s agreement.

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18
Q

What is the significance of the PCL in creating mortgages?

A

The PCL applies to specific states and allows for the creation of mortgages through sub-demise, legal charge, and statutory mortgage.

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19
Q

What are the advantages of creating a mortgage by Legal Charge under PCL?

A
  1. No interest is passed to the mortgagee, avoiding breaches of covenants.
  2. Simpler and shorter to create.
  3. Easily discharged.
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20
Q

What is the distinction between Legal Mortgage by Assignment and by Sub-demise?

A

Legal mortgage by Assignment involves privity of estate, exposing the mortgagee to liability for breaches, while Sub-demise has neither privity, protecting the mortgagee.

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21
Q

What is the process for creating successive legal mortgages under PCL?

A

Successive legal mortgages can be created if the first mortgage was by sub-demise or legal charge, with terms longer than the previous mortgage.

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22
Q

What is an Equitable Mortgage?

A

A mortgage created under equity rules, enforceable only in equity.

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23
Q

What are the modes of creating Equitable Mortgages?

A
  1. Deposit of title deed with intent to create a mortgage.
  2. Agreement to create a legal mortgage later.
  3. Incomplete legal mortgage.
  4. Mortgage over an equitable interest.
  5. Equitable charge of the mortgagor’s property.
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24
Q

What is a Covenant in a mortgage?

A

A covenant to repay the principal and interest at a fixed date, which aids the mortgagee in knowing when the power of sale may arise.

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25
Q

What is a mortgage in favour of the mortgagee?

A

A mortgage in favour of the mortgagee is established by assignment of an equitable interest in favour of the mortgagee as per section 18 of MPL.

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26
Q

What is the covenant to repay the principal and interest at a fixed date?

A

This covenant ensures that the loan is repayable on an agreed date with interest, helping the mortgagee know when the power of sale may arise.

Example: A well-drafted clause would state, ‘The interest payable on this loan is 20% but where the mortgagor pays promptly, it will be reduced to 15%.’

27
Q

What is the purpose of the covenant to insure the security?

A

This covenant provides for the insurance of the property to protect against damages or destruction, which could adversely affect the rights of the parties.

28
Q

What should the insurance covenant contain?

A

The insurance covenant should include: who to insure, the risk to be insured against, the insurance company, the amount of insurance cover, and the use of the insurance money.

29
Q

What is the covenant to consolidate different mortgages?

A

This occurs when a mortgagor uses different properties to secure a loan from the same mortgagee, requiring redemption of all properties at the same time.

30
Q

What are the conditions for consolidation of mortgages?

A

The conditions include: same mortgagor and mortgagee, mortgage by deed, legal due date for all mortgages must have passed, and express agreement in the deed of mortgage.

31
Q

What is the covenant to repair?

A

This covenant deals with reinstating parts of the property that have fallen into disrepair to maintain its value.

32
Q

What does the covenant to create lease and sub-lease on the property depend on?

A

It depends on whether the lease was created before or after the mortgage.

33
Q

What is the covenant not to redeem for a fixed term?

A

This covenant ensures that the mortgagor does not redeem the property immediately, allowing the mortgagee to enjoy accrued interest.

34
Q

What particulars are needed to prepare a mortgage deed?

A

Particulars include: full names and addresses of the parties, date of commencement, duration of the mortgage, principal sum, interest rate, description of the mortgage property, value of the property, the various covenants, execution, and witnesses.

35
Q

What is up-stamping in the context of mortgages?

A

Up-stamping occurs when a mortgagor wants an additional loan from the same mortgagee using the same property as security, requiring a new agreement and additional stamp duty.

Example: Owoniboys Technical Services Ltd. v. Union Bank of Nigeria.

36
Q

What are the rights and remedies of a legal mortgagee upon default?

A

Rights include: right of action to recover the mortgage sum and interest, right to sell the mortgaged property, action for foreclosure, right to appoint a receiver, right to take possession of the property, and right to sue for specific performance.

37
Q

When can a mortgagee take possession of the property?

A

A mortgagee can take possession immediately upon execution of the mortgage, while an equitable mortgagee requires a court order.

38
Q

What are the reasons why it is not advisable for a mortgagee to take possession?

A

Reasons include liability to account for profits, negligence for sums not recovered, liability for property deterioration, and being deemed to have accepted payment by instalment.

39
Q

What is the role of a receiver in a mortgage?

A

A receiver is an independent party appointed to manage the mortgaged property, with powers to demand income, pursue debts, and pay expenses.

40
Q

What is the action in court to recover principal sum and interest?

A

The mortgagee can institute an action in court against the mortgagor to claim the principal sum and accrued interest.

41
Q

What is the power of sale in a mortgage?

A

The power of sale is the mortgagee’s right to sell the property, which is automatic in legal mortgages created by deed, provided certain conditions are met.

42
Q

What protects innocent purchasers in a mortgage sale?

A

Protection is offered to bona fide purchasers for value without notice of default, even if the power of sale has arisen but not yet become exercisable.

43
Q

What are the grounds for setting aside a mortgage sale?

A

Grounds include lack of good title, fraud or collusion, sale without arising right of sale, sale after payment of outstanding mortgage sum, or sale for gross undervalue.

44
Q

What is action for foreclosure?

A

Foreclosure is a court order extinguishing the mortgagor’s equity of redemption, initially made nisi and becoming absolute after 6 months.

45
Q

What are the mortgagor’s rights and remedies?

A

A mortgagor has the right to redeem the property at any time before or after the due date, known as equity of redemption.

46
Q

What is the perfection of a legal mortgage?

A

Perfection of a legal mortgage involves ensuring all legal requirements are met for the mortgage to be enforceable.

47
Q

What is the legal right to redeem?

A

The legal right to redeem refers to the right of the mortgagor to repay the loan and recover the property.

48
Q

What is the equitable right to redeem?

A

The equitable right to redeem is the right granted by equity to the mortgagor to recover his security by paying the mortgage sum and interest after the due date.

49
Q

When does the equitable right to redeem become extinguished?

A

The equitable right to redeem becomes extinguished when the mortgagee has exercised its power of sale or has obtained an order of foreclosure that has become absolute.

50
Q

What is required for the perfection of a legal mortgage?

A

The consent of the Governor must be sought and obtained for the creation of a legal mortgage.

51
Q

What happens if the Governor’s consent is not obtained?

A

Failure to obtain the consent of the Governor makes the transaction null and void.

52
Q

What documents are required for the Governor’s consent?

A
  1. Application letter for consent
  2. Title documents (e.g., right of occupancy)
  3. Copy of the deed of legal mortgage
  4. Tax clearance certificates
  5. Receipts of payments (ground rent, consent fee, etc.)
  6. Valuation report
  7. Approved building plan
  8. Company documents if applicable.
53
Q

What is the stamping requirement for a legal mortgage?

A

A deed of legal mortgage must be stamped as evidence of payment of stamp duties within 30 days of execution.

54
Q

What is the registration requirement for a mortgage?

A

A deed must be registered within 60 days of its execution.

55
Q

What is the effect of non-registration of a mortgage?

A
  1. The instrument is inadmissible in evidence to prove title.
  2. An unregistered deed loses priority in conflict of interest.
  3. If not registered within two months, the transaction will be void.
56
Q

How is a legal mortgage discharged?

A

A legal mortgage is discharged by a Deed of Discharge, Deed of Surrender, or Deed of Release.

57
Q

How are equitable mortgages discharged?

A

Equitable mortgages are discharged by receipt of payment of principal and interest under hand.

58
Q

What is the discharge method for a legal mortgage created by charge under PCL states?

A

It is discharged by way of statutory receipt.

59
Q

What must be executed when a mortgagor is a company upon repayment?

A

A memorandum of satisfaction at the CAC must be executed in favor of the company.

60
Q

How is a legal mortgage created in PCL states?

A

Legal mortgage in PCL states is created by sub-demise, legal charge, and statutory mortgage.

61
Q

What are four covenants that must be in the mortgage deed?

A
  1. Payment of principal and interest
  2. Maintenance of the property
  3. Insurance of the property
  4. Compliance with laws.
62
Q

What are five remedies available to the bank upon default by the mortgagor?

A
  1. Foreclosure
  2. Sale of the property
  3. Appointment of a receiver
  4. Action for debt
  5. Possession of the property.
63
Q

What is required for a bank to sell a property if the mortgagor merely deposited title documents?

A

The mortgagee must obtain an order of court before selling the property.

64
Q

Can a mortgagor borrow an additional loan using the same property as security?

A

Yes, it is possible through up-stamping, where additional stamp duties are paid on the new loan.

Property Law (11 decks)

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