A CRITICAL EXAMINATION OF THE ELEMENT OF CONSENT IN MORTGAGE OF LAND UNDER NIGERIAN LAW
Author: O. M. Atoyebi S.A.N FCIArb. (U.K.)., Contributor: VICTOR ATANG
A mortgage is a type of contractual security that grants an interest in real property that is achievable upon meeting the requirement of making a fixed payment, with or without interest, or meeting some other duty. In the recent case of Bank of the North V. Bello,[1] [1] a mortgage was defined as the creation of an interest in a property defeasible or annullable upon performing the condition of paying a given sum of money with interest at a certain time. The legal consequence of a mortgage transaction is that the owner of the mortgaged property becomes divested of the right to dispose of it until he has secured a release of the property from the mortgage. There are two modes of creating a mortgage in Nigeria and they are; a legal mortgage and an equitable mortgage. The general consent to the creation of mortgages will be examined in this study, together with the challenges from the appropriate authority.
Consent Requirement under the Land Use Act
By virtue of Sections 21 and 22 of the Land Use Act, 1978, the approval of the Local – Government or consent of the Governor of the State is required for a valid alienation or assignment of interest in land. The Act in Section 21 provides as follows:
“it shall not be lawful for a 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 to be sold by or under the Order of any Court under the provisions of the applicable sheriff and civil process law, or
(b) In other cases without the approval of the appropriate Local Government
Section 22 of the Land Use Act provides thus:
“It shall not be lawful for a holder of a statutory right of occupancy granted by the Governor to alienate his right of occupancy or any part thereof by assignment, sublease or otherwise howsoever, without the consent of the Governor first had and obtained.
The above statutory provision received judicial recognition in the locus classicus case of Savannah Bank (Nigeria) Ltd V. Ajilo[2] [1] wherein the Supreme Court held that the Consent of the Governor is required for a valid alienation or transfer of interest in land with regard to all types of statutory right of occupancy. Furthermore, in the case of International Textile Industries Nigeria Ltd V. Aderemi[3] [2] the Supreme Court held that in accordance with Savannah Bank V. Ajilo’s case, by virtue of Section 22 of the Land Use Act, the holder of a right of occupancy alienating or transferring his right of occupancy must obtain the consent of the Governor to make the transaction valid. If he fails, then the transaction is null and void under Section 26 of the Land Use Act.
It is pertinent to note here that a careful reading of the provisions of the Land Use Act places a mandatory duty on the holder of a statutory right of occupancy to obtain consent before alienation.
Burden of Proving Validity of Consent
The burden of proving the invalidity of consent as recognized by the Land Use Act lies on the Plaintiff who alleges that there was no valid consent granted for the subsequent transaction. This aligns with the evidential burden placed on the Plaintiff to the effect that he who asserts must prove.
Who Is Statutorily Obligated to Obtain Consent
The position of the Land Use Act is clear that it is the duty of the holder to obtain the requisite consent before alienation or transfer of interest. However, in practice, there exists a situation where the holder who ought to have obtained such consent would turn around seeking to avoid the transaction based on lack of consent as was the case in Savannah Bank V. Ajilo[4] [1]. By way of judicial activism, the Courts had addressed this situation. Instead of nullifying the transaction out rightly based on lack of consent, the Courts had sought to know whose duty it was to obtain the consent. The one question the Courts asked had been: “Was it the mortgagor’s duty to have obtained the consent?”
The answer had invariably been in the positive because he is the holder under the Act. Thus, in Solanke V. Abed the document was defective in such a manner as to make void under the Land Tenure Law[5] [2]. The Court held that the Defendant would not be allowed to take advantage of his wrong and void the transaction.
Furthermore, in the decided case of Adedeji V. National Bank[6] [3] the Mortgage transaction was without the consent of the Governor. The Mortgagor defaulted and in an attempt to prevent the enforcement of security, he contended that the transaction was void. The contention was dismissed by the Court as it was his duty to obtain the consent. The Court further held that
Apart from the principle of law involved, it is morally despicable for a person who benefitted from an agreement to turn around and say that the agreement is null and void.
The above decisions of the Court are in accordance with the maxim ex turpi causa non oritur actio, meaning that no action arises out of a wrongful consideration. However, in the case of Savannah Bank (Nigeria) Ltd V. Ajilo[7] [4], the Supreme Court considered the wording of Section 26 of the Land Use Act and held that it was undesirable to invoke the maxim ex turpi causa non oritur action. The Court further held as follows:
Although the first Plaintiff/Respondent by the tenure of the Land Use Act committed the initial wrong by alienating his statutory right of occupancy without prior consent in writing of the Governor, the express provision of the Land Use Act makes it undesirable to invoke the maxim ex turpi causa non oritur action.
Therefore, despite the equitable viewpoints that the Courts stated in the prior cases, the recent judgment swung in favour of Savannah Bank V. Ajilo. Also in Onamade & Ors V. A.C.B[8] [5] the Supreme Court emphasized that no alienation of a Right of Occupancy whether by assignment, mortgage, transfer of possession, sublease or otherwise howsoever without the consent of the Governor first had and obtained shall be lawful.
At What Stage of the Transaction Is Consent Required?
Section 22 of the Land Use Act provides to the effect that the Governor’s consent shall be first had and obtained. This provision implies that it is imperative to seek and obtain consent before alienation. However, in the recent decision in Yaro V. Arewa Construction Ltd & Ors[9] [1]the Supreme Court held that it is after a mortgage has been executed that obtaining the Governor’s consent falls due. The Court further stated that it is normally after the parties have agreed that the Deed of Assignment is prepared and sent for the Governor’s consent.
Furthermore, in the recent case of Salami V. Wema Bank (Nig) PLC & ORS[10] [2] It was held that the Courts have ameliorated the harsh provision contained in Section 22 requiring that consent must be first had and obtained and that such consent endorsing the consent on the instrument is enough compliance. It was also held that if a party obtains the Governor’s consent before executing the deed of mortgage complies with the law in its purest form.
Can the Power of the Governor to Issue Consent be delegated?
Section 22 of the Land Use Act stipulates 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 mortgage without the consent of the Governor first had and obtained and Section 45 recognized that the Governor may delegate the power to grant consent to the State Commissioner and says that where the power to grant consent has been delegated, such consents shall be expressed to be granted on behalf of the Governor.[11] [1]
Concerning the issue of the power of the Governor to delegate consent to his Commissioner, it is worth noting that such delegated power cannot be sub-delegated by the Commissioner. Thus for the exercise of the Governor’s delegated power of consent to be valid, it must be exercised personally and directly by the Commissioner to whom it was delegated and not by someone else on his behalf. This received judicial flavour in the case of Union Bank of Nigeria PLC V. Ayodare and Sons (NIG) LTD[12] [2] where the Governor delegated its power of granting consent to mortgages to the Commissioner for Lands and the letter conveying the approval of consent to a mortgage deed was signed by an Acting Chief Lands Officer and not by the Commissioner for Lands personally, the Supreme Court held that the letter was ineffective and ineffectual and that the consent to the transaction conveyed by the letter was invalid.
Challenges Associated with Obtaining of Governor’s Consent
In light of the legal requirement for obtaining of Governor’s Consent for purposes of alienation of land or transfer of interest in land, all States of the Federation, including the Federal Capital Territory, Abuja, have established departments with the responsibility of receiving and processing applications for the Governor’s consent. However, there is no uniform process for obtaining the Governor’s consent within the Federation, as each state in the Federation has its own conditions and procedures.
In Lagos State, the process for obtaining the Governor’s consent at the Land Bureau begins with a formal application accompanied by documents such as a duly endorsed Form 1c, original copies of Deeds evidencing the transaction, certified true copy of root of title, incorporation document where a company is a party to the transaction, etc. Upon fulfilling the forgoing, a file is opened and assigned to a land officer charged with supervising the application until it is completed. Fees such as consent fees, registration fees and income gain tax are paid by the applicant.
The above process is not, however without some challenges and hurdles. Oftentimes, an applicant is faced with challenges such as poor staffing, unreasonable assessment fees and bureaucratic challenges. There are also some cases where a party who is supposed to obtain consent turns around to say that the transaction is invalid as a result of lack of the Governor’s consent.
Conclusion
This article has examined the requirement of the Governor’s consent as a sin qua non for the mortgage of land under the Land Use Act. It has been established that a mortgagor is saddled with the obligation of obtaining the Governor’s consent to render the mortgage transaction valid. However, it often turns out that the mortgagor who has the responsibility of obtaining the Governor’s consent complains that the mortgage transaction is null and void for lack of relevant consent and this puts the financial institution in a difficult situation. It is recommended that to cure this defect, it is imperative for a holistic legislative reform or necessary amendments to the relevant law.
[1] (2000)7 NWLR (Pt 664) 224
[2](1989) LPELR-3019(SC)
[3] (1999) 6 SC (Pt 1) 1
[4] Ibid 2
[5] In pari-material with the Land Use Act
[6] (1989) 1 NWLR 212
[7] Supra
[8] (1997) NWLR (Pt 480) 123
[9] (1998) LPELR-3517(SC)
[10] (2009) LPELR-8875(CA)
[11] Umeasiegbu & Anor V UBN(2015) LPELR-25734(CA)
[12] (2007) LPELR-3391(SC)