TYPES OF MORTGAGES IN NIGERIA
There are two types of mortgages in Nigeria, each with its various modes of creation. There is the Legal Mortgage and an equitable mortgage.
LEGAL MORTGAGE
A legal mortgage is a mortgage created in line with the extant laws. This form of mortgage, usually by deed is subject to the laws it is made in relation to. It is made under seal as it transfers legal interest.
MODE OF CREATION OF LEGAL MORTGAGE
As earlier stated, a legal mortgage can be created in various forms depending on the laws that it is created subject to. Three major laws regulate the creation of mortgages in Nigeria, namely: The Conveyancing Act of 1881, the Property and Conveyancing Act of 1959 and the Mortgage and Property Law of Lagos, 2010.
CONVEYANCING ACT 1881
The Old Northern and Eastern Region States fall under this Act.
This means that any legal mortgage created in a state that falls under this region is made subject to the Conveyancing Act. These states include Rivers State, Bayelsa State, Cross-River, Akwa-Ibom, Ebonyi, Abia, Imo, Enugu, Anambra, and all states in northern Nigeria.
The modes of creation of mortgages in these states are Assignment and Sub-demise.
Assignment: in this mode of mortgage creation, the unexpired residue of the mortgagor is transferred in full to the mortgagee. This form of mortgage creation is most beneficial to the mortgagee as no reversionary right is reserved in the mortgagor. What this implies is that all the interest of the mortgagor is now with the mortgagee, with a cesser upon redemption.
What this means is that although all the proprietary rights of the mortgagor are with the mortgagee, he is still entitled to the property provided he redeems within the stipulated period.
However, the mortgagee can reassign the property or otherwise transfer ownership of the property to a third party upon the default of the mortgagor without his consent because all rights, inclusive of the reversionary right have been vested in the mortgagee.
Sub-demise: In this mode of creation, the rights are transferred to the mortgagee, however, it must be less by at least a day. What this means is that under sub-demise, only a part of the proprietary interest is transferred as the reversionary interest remains with the mortgagor.
Due to the nature of this form of creation, the mortgagee cannot validly transfer the property to the third party without the consent of the mortgagor as the mortgagor still retains the reversionary right.
A power or Attorney clause and trust declaration are known as remedial clauses and this can be included in the mortgage agreement to provide that the mortgagee has the position of an attorney or a trustee of the mortgagor and can validly transfer on his behalf. This dispenses with the need for consent in the event of a default.