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Mortgage of Land as Security Under the Land Use Act 1978 Essay

MORTGAGE OF LAND AS SECURITY UNDER THE LAND USE ACT 1978

BY

DOROTHY E. NELSON**

1. Introduction

Land is the very basis of commercial and industrial enterprise in Nigeria. It is the most important factor of production in industry as well as agriculture. Its usefulness and importance cuts across all forms of businesses and professions: Businessmen require land for buildings, factories and warehouses; Professionals in practices such as law, medicine, etc, need land to locate their offices, chambers, clinics, etc. Indeed, every citizen in Nigeria and all over the world needs a piece of land to use for one purpose or the other. Accordingly, everyone stands in some relation to the land either as occupier, holder, tenant, licensee, pledgee or mortgagee. In this way, land law impinges upon a vast area of social orderings and expectations, exerting a fundamental influence on the life-styles of the people. Every person requires land for his support, preservation and self-actualization within the general ideals of the society. Land is the foundation of shelter, food and employment.

Man lives on land during his life and upon his demise, his remains are kept in it permanently. It is as a result of this great value embedded in land that man craves its use as the subject matter of mortgage transactions. Mortgage transactions and the taking of land as security dates back to ancient history. In early Nigeria, pledges were encouraged rather than outright sales as land was held to belong to the community or family rather than the individual. This went on smoothly as the indigenous people had their indigenous ways of resolving their issues, until the promulgation of the Land Use Act 1978, which overhauled mortgage transactions in a tremendous manner.

2. Application of the Land Use Act to Land Use and Management in Nigeria The Act sets out in its section 1 to assert the state ownership of land.

Hence the power of control and management over land in Nigeria is conferred on the government. Section 1 of the Act provides thus: Subject to the provision of this Act, all lands comprised in the territory of each state in the Federation are hereby vested in the Governor of that state and such land shall be held in trust and administered for the use and common benefit of all Nigerians in accordance with the provision of this Act.

The implication of the foregoing provision is that the erstwhile owners are divested of their ownership of land whether occupied or unoccupied. Thus by virtue of section 1 of the Land Use Act the concept of radical title to land existing in the owner prior to the Act has been abolished and substituted with the limited title in the form of a Right of Occupancy. By section 5 of the Act, the governor is empowered to grant statutory right of occupancy to any person for all purposes, and any such grant by the governor operates to extinguish all existing rights to the use and occupation of the land From Sections 21-23, the act firmly established the Governor’s supervision and control over all land in the state such that no transaction would take place in property without his consent having first been sought and obtained The effect of this is that individuals, communities and families who hitherto had the freedom to do as they pleased with respect to their portions of land were stopped in their tracks.

All of a sudden they now held the land at the mercy of the Governor. However, by the combined effects of Sections 34, 35, 36 And 51(1) Paragraphs 3 And 15 Of Act, the rights of any person or community using or occupying land in accordance with customary law are preserved though in a limited form of a Right of Occupancy under the Act. Also, the devolution of right under customary law upon death of the holder of a Right of Occupancy is preserved subject to section 24 of the Act, thereby sustaining the concept of family property.

3.Mortgage of Land
Mortgage of land entails transfer or conveyance of title or interest in land by a debtor or a third party to the creditor as an assurance for repayment of debt or discharge of any obligation. It is a transaction whereby, as security for a loan of money, the borrower transfers to the lender an interest in some property of the borrower on the condition that the lender’s interest in the property will be terminated on repayment of the loan. By the operation of the Land Use Act, fee simple estate does not exist anymore. In its place now is a Right of Occupancy.

4. Problems of mortgage of land as security under the Land Use Act i Uncertainty of Title
In the place of the allodial title formerly held, the Act confers on any person or group of persons the ‘Right of Occupancy.’ The Land Use Act does not define a ‘Right of Occupancy’; but its precursor, the Land Tenure Law (of Northern Nigeria), defines it as “a title to the use and occupation of land” This right can be statutory or customary; expressly granted or deemed granted. The Right of Occupancy created by the Land Use Act to replace the fee simple, fee tail and entailed interest, which is a right that a person can mortgage, pledge, charge or transfer for security, has been a source of extensive academic and judicial debates. Apart from other problems in the Act, the problem has always been on the nature of the Right of Occupancy- whether it is a lease, a license, an absolute right or a new species of right. Lord Templeton laid down the hallmark in Street v. Mountford that for a lease to be valid there must be exclusive possession at a rent and for a term. But a holder of right of occupancy under the Act does not enjoy exclusive possession against the Governor.

The Governor or any public officer authorized by him has unfettered access to and can freely enter upon and inspect the land comprised in any statutory right of occupancy or any improvements effected thereon for inspection at any reasonable hours in the day time. Also, despite the easy revocability and the lack of prospective certainty of duration which are characteristics of a license, the right of occupancy is not a license because, unlike a license, it is alienable, transferable and transmissible. The right of occupancy has also been thought of as a freehold; but it is not a freehold because, as already stated above, the Right holder has no exclusive right to possession, and in the case of the granted statutory right, it is not indefinite in duration but rather it is for a term of years certain and is subject to the payment of rent to the Landlord (Governor). This made The Privy Council in Premchand Nathu and Co. Ltd. v. The LandOfficer to hold that the Right of Occupancy is a right sui generis and that the intention of the lawmakers in introducing the Right of Occupancy system was to establish an entirely new interest in land. Pursuant to the Right of occupancy the Act introduced the issuance of a certificate of Occupancy by the Governor of a state. Section 9(1) (a)-(c) of the Land Use Act provides as follows: 9(1) It shall be lawful for the Governor –

(a)When granting a statutory Right of Occupancy to any person; or (b) When any person is in occupation of land under a customary Right of Occupancy and applied in the prescribed manner; or (c) When any person is entitled to a statutory Right of Occupancy, to issue a Certificate of Occupancy under his hand in evidence of such Right of Occupancy.

It should be noted that a certificate of occupancy is merely an evidence of a Right of Occupancy and does not on its own confer a title or interest in land. The Act has not provided any conclusive means of proving ones entitlement to a Right of Occupancy. The certificate raises a rebuttable presumptive right of occupancy . In Aziv. Registered Trustees of The Evangelical Churches, the court held that the issuance of Certificate of Occupancy in respect of any land would not validate defects, if any in the title of the holder; thus, the court summed it up by saying that a Certificate of Occupancy granted to one of the claimants who had not proved a better title, was invalid.

This means that a Certificate of Occupancy may be set aside if it turns out that the holder had no right to the land , or in favour of a pre-1978 conveyance or in favour of a deemed grantee of Right of Occupancy under section 34 of the Act. From the dictum of His lordship, Nnameka-Agu J.S.C , it can be inferred that a Certificate of Occupancy issued pursuant to the Act only gives the right to use and occupy land, it neither confers nor is it necessarily an evidence of title. Unlike a conveyance which is the means whereby a right in land arises, a certificate of occupancy confers no interest in land. The horror and hellish implication of this is that where the Certificate of Occupancy is set aside for any reason, the mortgagee who has accepted it as security realizes he has burnt his own fingers. The certificate he is holding automatically becomes “a piece of paper having no value” Thus, where it is shown that another person has a better right to the grant, the court will if asked to do so set aside the grant. In Ogunleye v. Oni, the Supreme Court held that a certificate of occupancy issued pursuant to the Land Use Act only gives right to use and occupy land and never conferred title. iiRequirement of Consent and its Attendant Problems

It is doubtful if there is any step in the mortgage transaction process that gives mortgagees as much nightmare as obtaining consent. It is worse when one considers that each state in the federation has its own conditions and procedures for obtaining consent. Few, if any, of these can be said to be founded on the Act. Each Lands Officer fashions what he deems suitable. Thus, an appraisal of the hardship caused by the consent provisions is pertinent. Sections 21 and 22 provide as follows: S.21. 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 military Governor in cases where the property is to be 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 approval of the appropriate Local Government. S.22 It shall not be lawful for the holder of a statutory right of occupancy granted by the Military Governor to alienate his right of occupancy or any part thereof by assignment, mortgage, transfer of possession, sublease or otherwise howsoever without the consent of the Military Governor first had and obtained.

The judicial construction of this section has burdened Nigerian judges like no other statutory provision in the area of real property. By section 22(1) the Governor’s consent must be “first had and obtained.” Thus in Savannah Bank (Nig.) Ltd. v. Ajilo , the Plaintiff executed a deed of mortgage dated 5th September, 1980 in favour of the 1st Defendant. Upon default by the Plaintiffs, the 1st Defendant sought to sell the property involved by advertising the Auction sale. The Plaintiffs sued for declaration that the Deed of Mortgage was void and also that the Auction Notice was void. The grounds of the action were that -The property involved was situate in an urban area in Lagos; The property was already vested in the 2nd Plaintiff before the Land Use Act 1978 came into force; By Section 22 of the Land use Act, the consent of the Governor of Lagos State ought to have been first sought and obtained before the execution of the Deed of Mortgage and also the Public Auction; and As no consent was sought as aforesaid both the Deed of Mortgage and the Auction Notice were void.

The Supreme Court held that consent must be obtained prior to the mortgage; any failure by a holder under Sections 34(2) or 36(2) of the Act to comply with the provisions of Section 22 would attract the full rigor of section 26 of the Act and render a transaction or an instrument arising out of it void. However, this was an obiter dictum as the stage of obtaining consent was really not an issue before the court. In subsequent cases, the Supreme Court and Court of Appeal have been of the view that consent may be applied for at any time after a concluded transaction. Thus in Awojugbagbe Light Industries Ltd. v. Chinukwe, the Supreme Court held that ‘there is nothing unlawful in entering into or execution of a document of transfer before the Governor’s consent is obtained as this procedure is expressly covered by section 22(2) of the Act. The legal consequence that arises is that no interest in land passes under the agreement until the necessary consent is obtained. Such an agreement so executed becomes inchoate until the consent of the Governor is obtained after which it can be said to be complete and fully effective.’ Where the consent is not obtained at all, it appears that the transaction will be rendered null and void under section 26 of the Act. Section 26 provides thus:

Any transaction or any instrument which purports to confer on or vest in any person any interest or right over land other than in accordance with the provisions of this Act shall be null and void.

The position of the statute seems to be very clear that it is the duty of the ‘holder’ to obtain the requisite consent before alienation. But in practice there exist situations where the holder who ought to have obtained such consent would turn around seeking to avoid the transaction on the basis of lack of consent, shedding what has been described as ‘The Crocodile tears’ as in Savannah Bank v Ajilo’. The Courts have by judicial activism given the statute a human face. Instead of nullifying transactions outrightly on the basis of lack of consent, the courts have sought to know whose duty it was to obtain the consent. The one question the courts have asked has been: was it the mortgagor’s duty to have obtained the consent? The answer has 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 the transaction void under the Land Tenure Law. The Court held that the defendant would not be allowed to take advantage of his own wrong and avoid the transaction. The dictum of Kayode-Eso JSC in Oil Field Supply Centre Ltd v. Johnson is also in point here. The Learned Justice observed that “certainly equity will not permit the company to benefit from their own illegality” Similarly, in Adedeji v. National Bank, the mortgage transaction was without the Governor’s consent. Mr. Adedeji defaulted and in an attempt to prevent the enforcement of security he contended that the transaction was void.

This contention was dismissed by the court as it was his duty to obtain the consent in question. In the words of Akpata JCA, “Apart from the principle of law involved, it is morally despicable for a person who has benefitted from an agreement to turn round and say that the agreement is null and void” These decisions are in line with the maxim ex turpi causa non oritur actio, meaning that no action arises out of a wrongful consideration. However, in Savannah Bank v. Ajilo , the Supreme Court considered the wordings of section26 and took the view that it was undesirable to invoke the maxim ex turpi causa non oritur actio. The court said at page 324: Although the first Plaintiff/Respondent by the tenor 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 actio.

In Onamade and Ors. v. A.C.B. the Supreme Court emphasized that no alienation of a statutory 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. Similarly, in International Textile Industries v. Aderemi the court held in accordance with savannah bank’s case that by virtue of section 22 of the 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, the transaction is null and void under section26 of the Act. Lastly, in U.B.N. PLC. v. Ayodare & Sons (Nig.) Ltd Oguntade, JSC in abiding by the decision in Savannah Bank’s case stated as follows: I am satisfied that the two courts below were right in following the decision in Savannah Bank (Nig.) Ltd. v. Ajilo in view of the fact that this court had directly adverted its mind to the state of the law and judicial authorities on the equitable doctrine in the maxim exturpi causa non oritur actio. It may seem wrong that the Plaintiffs/Respondents who had procured exhibits 1 and D later turned round to rely on the supposed invalidity of the exhibits but the decision of this Court in Ajilo is still binding on this Court. I have not been called upon to consider overruling same.

Section 22 obligates the Governor to sign in the transfer of a statutory right of occupancy, and under section 21 the Local Government Chairman is to sign where a customary Right of Occupancy is transferred. Section 45 of the Act provides that the Governor may delegate any of his powers to “the State Commissioner” presumably the one in charge of lands. The courts have been called upon to decide the value of a consent document that a person other than the Governor or Commissioner signed. In Union Bank of Nig. Plc. v. Orharghue, the Court of Appeal upheld a Commissioner of Lands’ writing to convey Governor’s consent even where there was no delegation; and in Nigerian Industrial and Development Bank v. Oladunmi Industries Ltd., a consent conveyed in a letter signed by an Acting Chief Lands Officer was upheld even though the Governor had delegated the authority to grant consent to the Permanent Secretary, Ministry of Lands.

However, the consent question assumed an interesting twist in the Supreme Court decision in Union Bank of Nig. PLC. v. Ayodare and Sons (Nig.) Ltd. In that case, an Acting Chief Lands Officers signed the consent letter whereas the Governor had delegated the duty to the Commissioner for Lands. By a majority of 4-1, the Court applied the Agency principle of delegatus non potest delegare to annul the consent. The case now places a further burden on the secured creditor even where consent has been obtained, to make further inquiries to ensure that the “respective appropriate authority” properly empowered the consenting authority. Consent in itself is therefore not enough; the source of the consent is of great importance. In the words of the court, “the appellants should have checked the source of the consent before executing the deeds and parting with their money.” A question arises here whether the Governor can be compelled to give Consent? It is regrettable that the answer is in the negative. In R v. Ministry of Land and Survey, Ex Parte Bank of the North, where an order of mandamus was applied to compel the Minister to give consent, Reed Ag. SPJ stated that: Since the order of mandamus does not lie to compel the exercise of a discretionary power conferred by a statute, it will not lie to compel the Minister to give his consent … if the applications have no other remedy, that is unfortunate for them but the absence of other remedies would not enable the court to grant an order of mandamus to compel the exercise of a discretionary power.

Similarly, In Majiyagbe v. A.G. &Ors , the court maintained that the affected party cannot compel the Governor or the Local Government as the head of the family or the community to grant consent. Consequently, the Governor may not be compelled by an order of mandamus to give his consent. Thus in spite of the short-term remedial measures that have been devised by equity and by the courts, the issue of Governor’s consent as enshrined in the Land Use Act has posed the greatest threat to landed security transactions in Nigeria. iii Revocation and the Problem of Compensation

Under the Land Use Act, the right of occupancy may be revoked where the government wants to use the land for public purposes , or for extraction of building materials or for overriding public interest. The injudicious administration of the Land Use Act, particularly the revocation power has led to the great voices in the wilderness calling for the reformation of the Act. The right of occupancy may be revoked before ever the mortgagee would have the opportunity of realizing his security or exercising his power of sale or foreclosure of the mortgaged property; considering the fact that the legal date of redemption may still be subsisting and unexpired at the time of revocation. The compensation provision under the Act is grossly inadequate and can be described as unjust. This is because under the Land Tenure Law, compensation was paid for the value of the inconvenience caused by the disturbance, and disputes were allowed to be referred to the High Court.

The Public Lands Acquisition Decree also provided for compensation to be paid for the land and the unexhausted improvements thereon. Curiously, the Land Use Act promulgated much later provided that compensation is payable only on unexhausted improvements on land and no value and compensation is attached to the land itself. More agonizing is the fact that the victim of revocation is allocated to an alternative land without consulting him or taking his preference into consideration as there is no provision to this effect under the Act. The jurisdiction of the court has also been ousted to inquire into any question concerning or pertaining to the amount or adequacy of any compensation paid or to be paid under the Act. In other words what the Governor decides to pay as compensation is not a debatable issue. ivRestrictive Definition of Holder

Another major upsetting provision under the Act as it affects mortgage transactions is the definition given to a “holder” of a right of occupancy. A “holder” in relation to a right of occupancy means, “a person entitled to a right of occupancy.” Section 50(1) of the Act defines “holder” thus: A person entitled to a Right of Occupancy and includes any person to whom it has been validly assigned or has validly passed on the death of the holder but does not include any person to whom it has been sold or transferred without a valid assignment nor a mortgage, sub-lessee or sub-underlessee.

Under Section 29 of the Land Use Act, the holder of a right of occupancy is entitled to compensation at the date of revocation for the value of his unexhausted improvement on the land . The unpalatable effect of this is that although the mortgagee may have been preserving his interest in the mortgage security, the right of occupancy and improvements there on; although he may even be ensuring periodic payment of stipulated rents, once the Right of Occupancy is revoked, his security is gone and cannot attach automatically to the mortgagor’s interest in any changed form. So, whereas, the mortgagor may be entitled to compensation for the value of his unexhausted improvements on the land, the mortgagee cannot lay claim to such compensation money. Moreover, a mortgage is a form of conveyance and therefore disposes of, transfers or passes all the estate, right, title, interest, claim and demand which the conveyancing parties respectively have power to convey in, to or on the same land.

Flowing from the foregoing, it is clear therefore, that the conveyance of land would also operate as assignment of the right to receive compensation therefrom. The Supreme Court endorsed this view long ago in Atunrase v. Federal Commissioner for Works and Housing where the issue was a claim for compensation money under the Public Lands Acquisition Act. The original owner to whom compensation was payable for compulsory acquisition had previously conveyed the land to A who paid him the agreed purchase price and in whose favour a conveyance was also executed. The Law Lords, considering the effects of Section 63(1) of the Conveyancing Act 1881, were unanimous in holding that the conveyance by the original owner/vendor passed all his estates and interests to the purchaser and this necessarily includes receiving the compensation money .

Thus, it is submitted that the mortgagee should be subrogated to the position of the mortgagor in equity for the purpose of receiving compensation for unexhausted improvements in respect of the revoked Right of Occupancy, so that his rights having transmuted into the compensation money, he becomes entitled to it. Persuasion for this view may be found in Rex v. Middlesex where land subject to mortgage was taken compulsorily by a Railway Company under an Act of parliament. Rowlatt, J. stated thus: It certainly is a startling proposition that the mortgagees who have precisely the same land in their hands as security should be in a worse position than their mortgagors, and should be unable to demand all the compensation which their mortgagors could have demanded in respect of the mortgaged property

5. The Implications of the Problems on the Nigerian economy It was thought that the laudable objectives of the Act would lead to the provision of a uniform land tenure system in the country, make land easily and cheaply available to all Nigerians and the government for developmental purposes, protect the inalienable rights of every Nigerian to partake of the factors of production and check the practice of land speculators, whereby some wealthy individuals indulged in shoddy but lucrative trade in land. However events unfolding in subsequent years betrayed these aspirations of its provisions. Land has become painfully unaffordable to the suffering masses.

Private sector participation in Housing, Agriculture and Industrialization cannot be accomplished with the unqualified limitation in the quantum of parcel of land to access, and the rigidity of the consent provisions. General implementation of the Act has undermined its laudable objectives, and the Governor’s powers to make Regulations under the Act have been grossly abused to the detriment of Nigerians. Potential housing developers encounter numerous constraints. Applicants for certificate of occupancy have to provide completed application forms, non-refundable prescribed fees, current three years tax clearance certificate, land site / survey plan; agreement of sales of land which must be duly stamped and registered; an affidavit by the Vendor and customary Right of Occupancy in the case of non-urban designated lands. In case the developer has partially or fully developed the land, a valuation certificate is required before granting the Certificate of Occupancy.

These procedures are too cumbersome. Going through all these protective rigmarole stages before a Certificate of Occupancy can be granted has made it impossible for the problems of access to land rights on equal basis to be solved. There is also undue delay in the issuing of Certificates of Occupancy due to the deliberate efforts of some unscrupulous ministry officials who may want to be bribed before processing the forms of applicants. The great discrepancies between the number of applicants for allocation of plots for all uses and those eventually approved and issued certificate of occupancy to date are manifestations that the implementation of the obvious revolutionary lofty objectives for which the Act was promulgated, are faulty. This has slowed down or reduced the rate of housing development. It is a truism that no development is allowed without a clear title to the land vested by the granting of Certificate of Occupancy.

There have also been instances where land has been used as a potent weapon to fight political opponents. In some cases there have been deliberate refusals to process a political opponent’s application. These delays led many who would have invested in housing development purposefully, to divert their resources to other profitable ventures. The requirement for Governor’s consent for land transactions in every state has posed the greatest obstacle to use of landed property as collateral. The Governor also imposes other conditions for grant of the consent which varies from State to State. Even when all conditions have been met by an applicant for consent, the file can stay on the Governor’s table or office for more than three years for no justifiable reason.

6. Conclusion
This paper has examined in detail the use and effectiveness of mortgage of land as security for in Nigeria. The problems in the pre-Act land laws and tenure necessitated the promulgation of the Land Use Act in 1978. The pre-Act land tenure policies were not satisfactory because of their attendant problems, such as insecurity of title, land litigations, fragmentation of holdings, difficulty in acquisition and alienation of land, etc. All these contributed to housing problems, slum development and general lack of infrastructural developments in Nigeria. With the Act in place, these various pre-Act land laws and land tenure policies were largely done away with, but the principles of those pre-Act laws which are inconformity with the spirit and general intendment of the Act are preserved. An analysis of judicial opinions as well as the writers’ views done in this study has shown that the Act by its policy objectives has improved land tenure and administration in Nigeria.

The Act has unified land policy, ensured equitable redistribution of land among the citizens without discrimination on ground of state origin and facilitated both governments and private industrialists’ quick access to land needed for developments. Notwithstanding the foregoing positive impacts of the Act, this paper has figured out the inherent problems in the Act as it concerns mortgage transactions. It has been discovered that there are gaps between the expectations and the achievements of the Act. For instance, vesting of all lands in the state in the Governor has made acquisition of land more difficult especially for the individuals. Moreover, compensations payable under the Act are grossly inadequate. The Right of Occupancy is uncertain and the certificate evidencing it leaves a lot to be desired. Furthermore, the consent provisions under the Act with the rigorous processes and delay usually experienced in obtaining it has stagnated mortgage transactions in the country, and thus has become a clog in the wheel of economic development. One of the issues that call for concern is the true nature of the Right of Occupancy created by the Act.

It is of interest to the mortgagee who accepts the right as security to know the interest he acquires by accepting the Right of Occupancy. Accordingly, there is need for clarity on the meaning of a Right of Occupancy, especially as this is the ultimate right which an individual can have in land and therefore the highest land right which a secured creditor can encumber. It is therefore suggested that the Right of Occupancy should include a right to the use of the land and the improvements thereon. Section 9 of the Act provides that the Governor, when granting a statutory Right of Occupancy shall issue a Certificate of Occupancy as evidence of a Right of Occupancy.

The fact that the Certificate of Occupancy is merely evidence, rather than proof, of the Right makes it unattractive to mortgages as a document of title, and the corollary that it is liable to be set aside in favour of a proven prior better right, makes it all the more illusory as a security. In spite of sections 9, 34(3), 34(9) and 36(3) of the Act which require the governor to be satisfied that the applicant is entitled to a Right of Occupancy in the land before issuing a Certificate of Occupancy, there is usually no thorough investigation of the claim of the applicant. As such, it is possible that the applicant may make false claims to the Right so as to obtain a Certificate. It is therefore recommended that there should be a system of verifying the applicant’s claim, say, enquiries from the occupiers of adjoining lands and obtaining legally admissible title documents where such exist. In this way, by the time the application is advertised all the ground work would have been done and the effect of the advertisement would be to fix the public with notice of the application, with the result that when there is no objection and a certificate is issued, it would be proof rather than mere evidence of a Right of Occupancy to the land.

This will give the needed confidence in the Certificate of Occupancy as a useful document for mortgage transactions. The delay and heavy costs involved in obtaining consent are impediments to the creation of ‘immediate’ security interests. The delay in granting consent impedes the release of credit facilities resulting in loss of business opportunities. While the consent provisions may be required as a means of keeping record of land transactions, the procedure for granting it should remain purely administrative at minimum costs and within a specified time frame. It is also important that consent must not be unnecessarily withheld by the Governor. Where the Governor refuses to give consent, the question is whether he should or should not give reasons for his refusal. A provision should be made that in the event of the Governor refusing to give his consent to any landed security transaction, he should give his reasons(s) for the refusal as this will help check a refusal on political, non-legal grounds. The provision relating to revocation of a Right of Occupancy on grounds of overriding public interest needs to be made more transparent. Information and all the studies relating to the scope of the project for which the land is required should be scrutinized and available for further public debate by the Land Use and Allocation Committee, such that the Governor’s request can be rejected if it does not meet the condition for overriding public interest.

This will minimize the instances where a person’s Right of occupancy is revoked only to be given to another private person. It should also be provided that where the project sought to be embarked upon by the Governor is no longer undertaken, the land would revert to the original holders. This will also check the frequency of the instances where lands meant for public purpose is fenced round for years and later becomes one of a private person’s investments. Since compensation is generally paid to the holder of a right of occupancy, a mortgagee is expressly excluded under section 51 of the Act. The effect of this on existing security interest is disastrous, for the mortgagor who qualifies takes compensation in addition to the loan already granted him by the mortgagee while the mortgagee is left in the cold wind. Thus, it would be welcome if the Act is amended to provide for payment of compensation to the persons interested in order of priority.

That way, the mortgagee will have a prior right to the compensation money. In the absence of legislation, it is advisable the mortgagee ensures that a covenant is included in the mortgage deed to the effect that in the event of the Right of Occupancy being revoked the mortgage debt shall be secured additionally on any compensation payment due to the mortgagor in respect of the unexhausted improvements, or that the mortgagor shall hold such payment on trust for the mortgagee, to the extent of the mortgagee’s claim on the secured debt, or that the debt is additionally secured on any alternative land right which might be granted to the mortgagor in lieu of compensation. This way, the mortgagor would be compelled in equity to claim the compensation on behalf and for the benefit of the mortgagee in preference and priority to other subsequent secured and unsecured creditors. This would be the best option as there is certainly no way the mortgagor can claim the compensation money and retain it for himself when he is accountable to the mortgagee.

Abstract
The mortgage of land as security is undoubtedly a nightmare to banks, corporate organizations, individuals and other financial institutions in contemporary times because of the multifarious problems posed by the Land Use Act at both the time of creation and the enforcement of landed security. Since the radical title to land has been vested in the Governor with the power to revoke a Right of Occupancy for overriding public interest, the security in the hands of the lender may vanish overnight as a result of the revocation. This article examines the various areas where the Land Use Act has had its impact on mortgage of land as security in Nigeria. It analyzes the hurdles that impede the use of land as security for mortgages. Suggestions are proffered in this paper to the Government policy makers, land administrators and other researchers in this area of the law with the aim of addressing the perceived lapses in the law.

MORTGAGE OF LAND AS SECURITY UNDER THE LAND USE ACT 1978

BY

DOROTHY E. NELSON**

1. Introduction

Land is the very basis of commercial and industrial enterprise in Nigeria. It is the most important factor of production in industry as well as agriculture. Its usefulness and importance cuts across all forms of businesses and professions: Businessmen require land for buildings, factories and warehouses; Professionals in practices such as law, medicine, etc, need land to locate their offices, chambers, clinics, etc. Indeed, every citizen in Nigeria and all over the world needs a piece of land to use for one purpose or the other. Accordingly, everyone stands in some relation to the land either as occupier, holder, tenant, licensee, pledgee or mortgagee. In this way, land law impinges upon a vast area of social orderings and expectations, exerting a fundamental influence on the life-styles of the people.

Every person requires land for his support, preservation and self-actualization within the general ideals of the society. Land is the foundation of shelter, food and employment. Man lives on land during his life and upon his demise, his remains are kept in it permanently. It is as a result of this great value embedded in land that man craves its use as the subject matter of mortgage transactions. Mortgage transactions and the taking of land as security dates back to ancient history. In early Nigeria, pledges were encouraged rather than outright sales as land was held to belong to the community or family rather than the individual. This went on smoothly as the indigenous people had their indigenous ways of resolving their issues, until the promulgation of the Land Use Act 1978, which overhauled mortgage transactions in a tremendous manner.

2. Application of the Land Use Act to Land Use and Management in Nigeria The Act sets out in its section 1 to assert the state ownership of land. Hence the power of control and management over land in Nigeria is conferred on the government. Section 1 of the Act provides thus: Subject to the provision of this Act, all lands comprised in the territory of each state in the Federation are hereby vested in the Governor of that state and such land shall be held in trust and administered for the use and common benefit of all Nigerians in accordance with the provision of this Act.

The implication of the foregoing provision is that the erstwhile owners are divested of their ownership of land whether occupied or unoccupied. Thus by virtue of section 1 of the Land Use Act the concept of radical title to land existing in the owner prior to the Act has been abolished and substituted with the limited title in the form of a Right of Occupancy. By section 5 of the Act, the governor is empowered to grant statutory right of occupancy to any person for all purposes, and any such grant by the governor operates to extinguish all existing rights to the use and occupation of the land From Sections 21-23, the act firmly established the Governor’s supervision and control over all land in the state such that no transaction would take place in property without his consent having first been sought and obtained The effect of this is that individuals, communities and families who hitherto had the freedom to do as they pleased with respect to their portions of land were stopped in their tracks. All of a sudden they now held the land at the mercy of the Governor.

However, by the combined effects of Sections 34, 35, 36 And 51(1) Paragraphs 3 And 15 Of Act, the rights of any person or community using or occupying land in accordance with customary law are preserved though in a limited form of a Right of Occupancy under the Act. Also, the devolution of right under customary law upon death of the holder of a Right of Occupancy is preserved subject to section 24 of the Act, thereby sustaining the concept of family property.

3.Mortgage of Land
Mortgage of land entails transfer or conveyance of title or interest in land by a debtor or a third party to the creditor as an assurance for repayment of debt or discharge of any obligation. It is a transaction whereby, as security for a loan of money, the borrower transfers to the lender an interest in some property of the borrower on the condition that the lender’s interest in the property will be terminated on repayment of the loan. By the operation of the Land Use Act, fee simple estate does not exist anymore. In its place now is a Right of Occupancy.

4. Problems of mortgage of land as security under the Land Use Act i Uncertainty of Title

In the place of the allodial title formerly held, the Act confers on any person or group of persons the ‘Right of Occupancy.’ The Land Use Act does not define a ‘Right of Occupancy’; but its precursor, the Land Tenure Law (of Northern Nigeria), defines it as “a title to the use and occupation of land” This right can be statutory or customary; expressly granted or deemed granted. The Right of Occupancy created by the Land Use Act to replace the fee simple, fee tail and entailed interest, which is a right that a person can mortgage, pledge, charge or transfer for security, has been a source of extensive academic and judicial debates. Apart from other problems in the Act, the problem has always been on the nature of the Right of Occupancy- whether it is a lease, a license, an absolute right or a new species of right. Lord Templeton laid down the hallmark in Street v. Mountford that for a lease to be valid there must be exclusive possession at a rent and for a term. But a holder of right of occupancy under the Act does not enjoy exclusive possession against the Governor.

The Governor or any public officer authorized by him has unfettered access to and can freely enter upon and inspect the land comprised in any statutory right of occupancy or any improvements effected thereon for inspection at any reasonable hours in the day time. Also, despite the easy revocability and the lack of prospective certainty of duration which are characteristics of a license, the right of occupancy is not a license because, unlike a license, it is alienable, transferable and transmissible. The right of occupancy has also been thought of as a freehold; but it is not a freehold because, as already stated above, the Right holder has no exclusive right to possession, and in the case of the granted statutory right, it is not indefinite in duration but rather it is for a term of years certain and is subject to the payment of rent to the Landlord (Governor). This made The Privy Council in Premchand Nathu and Co. Ltd. v. The LandOfficer to hold that the Right of Occupancy is a right sui generis and that the intention of the lawmakers in introducing the Right of Occupancy system was to establish an entirely new interest in land. Pursuant to the Right of occupancy the Act introduced the issuance of a certificate of Occupancy by the Governor of a state. Section 9(1) (a)-(c) of the Land Use Act provides as follows: 9(1) It shall be lawful for the Governor –

(a)When granting a statutory Right of Occupancy to any person; or (b) When any person is in occupation of land under a customary Right of Occupancy and applied in the prescribed manner; or (c) When any person is entitled to a statutory Right of Occupancy, to issue a Certificate of Occupancy under his hand in evidence of such Right of Occupancy.

It should be noted that a certificate of occupancy is merely an evidence of a Right of Occupancy and does not on its own confer a title or interest in land. The Act has not provided any conclusive means of proving ones entitlement to a Right of Occupancy. The certificate raises a rebuttable presumptive right of occupancy . In Aziv. Registered Trustees of The Evangelical Churches, the court held that the issuance of Certificate of Occupancy in respect of any land would not validate defects, if any in the title of the holder; thus, the court summed it up by saying that a Certificate of Occupancy granted to one of the claimants who had not proved a better title, was invalid.

This means that a Certificate of Occupancy may be set aside if it turns out that the holder had no right to the land , or in favour of a pre-1978 conveyance or in favour of a deemed grantee of Right of Occupancy under section 34 of the Act. From the dictum of His lordship, Nnameka-Agu J.S.C , it can be inferred that a Certificate of Occupancy issued pursuant to the Act only gives the right to use and occupy land, it neither confers nor is it necessarily an evidence of title. Unlike a conveyance which is the means whereby a right in land arises, a certificate of occupancy confers no interest in land.

The horror and hellish implication of this is that where the Certificate of Occupancy is set aside for any reason, the mortgagee who has accepted it as security realizes he has burnt his own fingers. The certificate he is holding automatically becomes “a piece of paper having no value” Thus, where it is shown that another person has a better right to the grant, the court will if asked to do so set aside the grant. In Ogunleye v. Oni, the Supreme Court held that a certificate of occupancy issued pursuant to the Land Use Act only gives right to use and occupy land and never conferred title. iiRequirement of Consent and its Attendant Problems

It is doubtful if there is any step in the mortgage transaction process that gives mortgagees as much nightmare as obtaining consent. It is worse when one considers that each state in the federation has its own conditions and procedures for obtaining consent. Few, if any, of these can be said to be founded on the Act. Each Lands Officer fashions what he deems suitable. Thus, an appraisal of the hardship caused by the consent provisions is pertinent. Sections 21 and 22 provide as follows: S.

21. 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 military Governor in cases where the property is to be 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 approval of the appropriate Local Government. S.22 It shall not be lawful for the holder of a statutory right of occupancy granted by the Military Governor to alienate his right of occupancy or any part thereof by assignment, mortgage, transfer of possession, sublease or otherwise howsoever without the consent of the Military Governor first had and obtained.

The judicial construction of this section has burdened Nigerian judges like no other statutory provision in the area of real property. By section 22(1) the Governor’s consent must be “first had and obtained.” Thus in Savannah Bank (Nig.) Ltd. v. Ajilo , the Plaintiff executed a deed of mortgage dated 5th September, 1980 in favour of the 1st Defendant. Upon default by the Plaintiffs, the 1st Defendant sought to sell the property involved by advertising the Auction sale. The Plaintiffs sued for declaration that the Deed of Mortgage was void and also that the Auction Notice was void. The grounds of the action were that -The property involved was situate in an urban area in Lagos;

The property was already vested in the 2nd Plaintiff before the Land Use Act 1978 came into force; By Section 22 of the Land use Act, the consent of the Governor of Lagos State ought to have been first sought and obtained before the execution of the Deed of Mortgage and also the Public Auction; and As no consent was sought as aforesaid both the Deed of Mortgage and the Auction Notice were void. The Supreme Court held that consent must be obtained prior to the mortgage; any failure by a holder under Sections 34(2) or 36(2) of the Act to comply with the provisions of Section 22 would attract the full rigor of section 26 of the Act and render a transaction or an instrument arising out of it void. However, this was an obiter dictum as the stage of obtaining consent was really not an issue before the court. In subsequent cases, the Supreme Court and Court of Appeal have been of the view that consent may be applied for at any time after a concluded transaction.

Thus in Awojugbagbe Light Industries Ltd. v. Chinukwe, the Supreme Court held that ‘there is nothing unlawful in entering into or execution of a document of transfer before the Governor’s consent is obtained as this procedure is expressly covered by section 22(2) of the Act. The legal consequence that arises is that no interest in land passes under the agreement until the necessary consent is obtained. Such an agreement so executed becomes inchoate until the consent of the Governor is obtained after which it can be said to be complete and fully effective.’ Where the consent is not obtained at all, it appears that the transaction will be rendered null and void under section 26 of the Act. Section 26 provides thus:

Any transaction or any instrument which purports to confer on or vest in any person any interest or right over land other than in accordance with the provisions of this Act shall be null and void.

The position of the statute seems to be very clear that it is the duty of the ‘holder’ to obtain the requisite consent before alienation. But in practice there exist situations where the holder who ought to have obtained such consent would turn around seeking to avoid the transaction on the basis of lack of consent, shedding what has been described as ‘The Crocodile tears’ as in Savannah Bank v Ajilo’. The Courts have by judicial activism given the statute a human face. Instead of nullifying transactions outrightly on the basis of lack of consent, the courts have sought to know whose duty it was to obtain the consent. The one question the courts have asked has been: was it the mortgagor’s duty to have obtained the consent? The answer has 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 the transaction void under the Land Tenure Law.

The Court held that the defendant would not be allowed to take advantage of his own wrong and avoid the transaction. The dictum of Kayode-Eso JSC in Oil Field Supply Centre Ltd v. Johnson is also in point here. The Learned Justice observed that “certainly equity will not permit the company to benefit from their own illegality” Similarly, in Adedeji v. National Bank, the mortgage transaction was without the Governor’s consent. Mr. Adedeji defaulted and in an attempt to prevent the enforcement of security he contended that the transaction was void. This contention was dismissed by the court as it was his duty to obtain the consent in question. In the words of Akpata JCA, “Apart from the principle of law involved, it is morally despicable for a person who has benefitted from an agreement to turn round and say that the agreement is null and void” These decisions are in line with the maxim ex turpi causa non oritur actio, meaning that no action arises out of a wrongful consideration.

However, in Savannah Bank v. Ajilo , the Supreme Court considered the wordings of section26 and took the view that it was undesirable to invoke the maxim ex turpi causa non oritur actio. The court said at page 324: Although the first Plaintiff/Respondent by the tenor 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 actio.

In Onamade and Ors. v. A.C.B. the Supreme Court emphasized that no alienation of a statutory 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. Similarly, in International Textile Industries v. Aderemi the court held in accordance with savannah bank’s case that by virtue of section 22 of the 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, the transaction is null and void under section26 of the Act. Lastly, in U.B.N. PLC. v. Ayodare & Sons (Nig.) Ltd Oguntade, JSC in abiding by the decision in Savannah Bank’s case stated as follows: I am satisfied that the two courts below were right in following the decision in Savannah Bank (Nig.) Ltd. v. Ajilo in view of the fact that this court had directly adverted its mind to the state of the law and judicial authorities on the equitable doctrine in the maxim exturpi causa non oritur actio. It may seem wrong that the Plaintiffs/Respondents who had procured exhibits 1 and D later turned round to rely on the supposed invalidity of the exhibits but the decision of this Court in Ajilo is still binding on this Court. I have not been called upon to consider overruling same.

Section 22 obligates the Governor to sign in the transfer of a statutory right of occupancy, and under section 21 the Local Government Chairman is to sign where a customary Right of Occupancy is transferred. Section 45 of the Act provides that the Governor may delegate any of his powers to “the State Commissioner” presumably the one in charge of lands. The courts have been called upon to decide the value of a consent document that a person other than the Governor or Commissioner signed. In Union Bank of Nig. Plc. v. Orharghue, the Court of Appeal upheld a Commissioner of Lands’ writing to convey Governor’s consent even where there was no delegation; and in Nigerian Industrial and Development Bank v. Oladunmi Industries Ltd., a consent conveyed in a letter signed by an Acting Chief Lands Officer was upheld even though the Governor had delegated the authority to grant consent to the Permanent Secretary, Ministry of Lands.

However, the consent question assumed an interesting twist in the Supreme Court decision in Union Bank of Nig. PLC. v. Ayodare and Sons (Nig.) Ltd. In that case, an Acting Chief Lands Officers signed the consent letter whereas the Governor had delegated the duty to the Commissioner for Lands. By a majority of 4-1, the Court applied the Agency principle of delegatus non potest delegare to annul the consent. The case now places a further burden on the secured creditor even where consent has been obtained, to make further inquiries to ensure that the “respective appropriate authority” properly empowered the consenting authority. Consent in itself is therefore not enough; the source of the consent is of great importance. In the words of the court, “the appellants should have checked the source of the consent before executing the deeds and parting with their money.”

A question arises here whether the Governor can be compelled to give Consent? It is regrettable that the answer is in the negative. In R v. Ministry of Land and Survey, Ex Parte Bank of the North, where an order of mandamus was applied to compel the Minister to give consent, Reed Ag. SPJ stated that: Since the order of mandamus does not lie to compel the exercise of a discretionary power conferred by a statute, it will not lie to compel the Minister to give his consent … if the applications have no other remedy, that is unfortunate for them but the absence of other remedies would not enable the court to grant an order of mandamus to compel the exercise of a discretionary power.

Similarly, In Majiyagbe v. A.G. &Ors , the court maintained that the affected party cannot compel the Governor or the Local Government as the head of the family or the community to grant consent. Consequently, the Governor may not be compelled by an order of mandamus to give his consent. Thus in spite of the short-term remedial measures that have been devised by equity and by the courts, the issue of Governor’s consent as enshrined in the Land Use Act has posed the greatest threat to landed security transactions in Nigeria. iii Revocation and the Problem of Compensation

Under the Land Use Act, the right of occupancy may be revoked where the
government wants to use the land for public purposes , or for extraction of building materials or for overriding public interest. The injudicious administration of the Land Use Act, particularly the revocation power has led to the great voices in the wilderness calling for the reformation of the Act. The right of occupancy may be revoked before ever the mortgagee would have the opportunity of realizing his security or exercising his power of sale or foreclosure of the mortgaged property; considering the fact that the legal date of redemption may still be subsisting and unexpired at the time of revocation. The compensation provision under the Act is grossly inadequate and can be described as unjust.

This is because under the Land Tenure Law, compensation was paid for the value of the inconvenience caused by the disturbance, and disputes were allowed to be referred to the High Court. The Public Lands Acquisition Decree also provided for compensation to be paid for the land and the unexhausted improvements thereon. Curiously, the Land Use Act promulgated much later provided that compensation is payable only on unexhausted improvements on land and no value and compensation is attached to the land itself. More agonizing is the fact that the victim of revocation is allocated to an alternative land without consulting him or taking his preference into consideration as there is no provision to this effect under the Act. The jurisdiction of the court has also been ousted to inquire into any question concerning or pertaining to the amount or adequacy of any compensation paid or to be paid under the Act. In other words what the Governor decides to pay as compensation is not a debatable issue. ivRestrictive Definition of Holder

Another major upsetting provision under the Act as it affects mortgage transactions is the definition given to a “holder” of a right of occupancy. A “holder” in relation to a right of occupancy means, “a person entitled to a right of occupancy.” Section 50(1) of the Act defines “holder” thus: A person entitled to a Right of Occupancy and includes any person to whom it has been validly assigned or has validly passed on the death of the holder but does not include any person to whom it has been sold or transferred without a valid assignment nor a mortgage, sub-lessee or sub-underlessee.

Under Section 29 of the Land Use Act, the holder of a right of occupancy is entitled to compensation at the date of revocation for the value of his unexhausted improvement on the land . The unpalatable effect of this is that although the mortgagee may have been preserving his interest in the mortgage security, the right of occupancy and improvements there on; although he may even be ensuring periodic payment of stipulated rents, once the Right of Occupancy is revoked, his security is gone and cannot attach automatically to the mortgagor’s interest in any changed form.

So, whereas, the mortgagor may be entitled to compensation for the value of his unexhausted improvements on the land, the mortgagee cannot lay claim to such compensation money. Moreover, a mortgage is a form of conveyance and therefore disposes of, transfers or passes all the estate, right, title, interest, claim and demand which the conveyancing parties respectively have power to convey in, to or on the same land. Flowing from the foregoing, it is clear therefore, that the conveyance of land would also operate as assignment of the right to receive compensation therefrom. The Supreme Court endorsed this view long ago in Atunrase v. Federal Commissioner for Works and Housing where the issue was a claim for compensation money under the Public Lands Acquisition Act. The original owner to whom compensation was payable for compulsory acquisition had previously conveyed the land to A who paid him the agreed purchase price and in whose favour a conveyance was also executed.

The Law Lords, considering the effects of Section 63(1) of the Conveyancing Act 1881, were unanimous in holding that the conveyance by the original owner/vendor passed all his estates and interests to the purchaser and this necessarily includes receiving the compensation money . Thus, it is submitted that the mortgagee should be subrogated to the position of the mortgagor in equity for the purpose of receiving compensation for unexhausted improvements in respect of the revoked Right of Occupancy, so that his rights having transmuted into the compensation money, he becomes entitled to it. Persuasion for this view may be found in Rex v. Middlesex where land subject to mortgage was taken compulsorily by a Railway Company under an Act of parliament. Rowlatt, J. stated thus: It certainly is a startling proposition that the mortgagees who have precisely the same land in their hands as security should be in a worse position than their mortgagors, and should be unable to demand all the compensation which their mortgagors could have demanded in respect of the mortgaged property

5. The Implications of the Problems on the Nigerian economy It was thought that the laudable objectives of the Act would lead to the provision of a uniform land tenure system in the country, make land easily and cheaply available to all Nigerians and the government for developmental purposes, protect the inalienable rights of every Nigerian to partake of the factors of production and check the practice of land speculators, whereby some wealthy individuals indulged in shoddy but lucrative trade in land. However events unfolding in subsequent years betrayed these aspirations of its provisions. Land has become painfully unaffordable to the suffering masses. Private sector participation in Housing, Agriculture and Industrialization cannot be accomplished with the unqualified limitation in the quantum of parcel of land to access, and the rigidity of the consent provisions. General implementation of the Act has undermined its laudable objectives, and the Governor’s powers to make Regulations under the Act have been grossly abused to the detriment of Nigerians.

Potential housing developers encounter numerous constraints. Applicants for certificate of occupancy have to provide completed application forms, non-refundable prescribed fees, current three years tax clearance certificate, land site / survey plan; agreement of sales of land which must be duly stamped and registered; an affidavit by the Vendor and customary Right of Occupancy in the case of non-urban designated lands. In case the developer has partially or fully developed the land, a valuation certificate is required before granting the Certificate of Occupancy. These procedures are too cumbersome. Going through all these protective rigmarole stages before a Certificate of Occupancy can be granted has made it impossible for the problems of access to land rights on equal basis to be solved. There is also undue delay in the issuing of Certificates of Occupancy due to the deliberate efforts of some unscrupulous ministry officials who may want to be bribed before processing the forms of applicants.

The great discrepancies between the number of applicants for allocation of plots for all uses and those eventually approved and issued certificate of occupancy to date are manifestations that the implementation of the obvious revolutionary lofty objectives for which the Act was promulgated, are faulty. This has slowed down or reduced the rate of housing development. It is a truism that no development is allowed without a clear title to the land vested by the granting of Certificate of Occupancy. There have also been instances where land has been used as a potent weapon to fight political opponents. In some cases there have been deliberate refusals to process a political opponent’s application. These delays led many who would have invested in housing development purposefully, to divert their resources to other profitable ventures. The requirement for Governor’s consent for land transactions in every state has posed the greatest obstacle to use of landed property as collateral. The Governor also imposes other conditions for grant of the consent which varies from State to State. Even when all conditions have been met by an applicant for consent, the file can stay on the Governor’s table or office for more than three years for no justifiable reason.

6. Conclusion
This paper has examined in detail the use and effectiveness of mortgage of land as security for in Nigeria. The problems in the pre-Act land laws and tenure necessitated the promulgation of the Land Use Act in 1978. The pre-Act land tenure policies were not satisfactory because of their attendant problems, such as insecurity of title, land litigations, fragmentation of holdings, difficulty in acquisition and alienation of land, etc. All these contributed to housing problems, slum development and general lack of infrastructural developments in Nigeria.

With the Act in place, these various pre-Act land laws and land tenure policies were largely done away with, but the principles of those pre-Act laws which are inconformity with the spirit and general intendment of the Act are preserved. An analysis of judicial opinions as well as the writers’ views done in this study has shown that the Act by its policy objectives has improved land tenure and administration in Nigeria. The Act has unified land policy, ensured equitable redistribution of land among the citizens without discrimination on ground of state origin and facilitated both governments and private industrialists’ quick access to land needed for developments. Notwithstanding the foregoing positive impacts of the Act, this paper has figured out the inherent problems in the Act as it concerns mortgage transactions. It has been discovered that there are gaps between the expectations and the achievements of the Act.

For instance, vesting of all lands in the state in the Governor has made acquisition of land more difficult especially for the individuals. Moreover, compensations payable under the Act are grossly inadequate. The Right of Occupancy is uncertain and the certificate evidencing it leaves a lot to be desired. Furthermore, the consent provisions under the Act with the rigorous processes and delay usually experienced in obtaining it has stagnated mortgage transactions in the country, and thus has become a clog in the wheel of economic development. One of the issues that call for concern is the true nature of the Right of Occupancy created by the Act. It is of interest to the mortgagee who accepts the right as security to know the interest he acquires by accepting the Right of Occupancy. Accordingly, there is need for clarity on the meaning of a Right of Occupancy, especially as this is the ultimate right which an individual can have in land and therefore the highest land right which a secured creditor can encumber. It is therefore suggested that the Right of Occupancy should include a right to the use of the land and the improvements thereon. Section 9 of the Act provides that the Governor, when granting a statutory Right of Occupancy shall issue a Certificate of Occupancy as evidence of a Right of Occupancy.

The fact that the Certificate of Occupancy is merely evidence, rather than proof, of the Right makes it unattractive to mortgages as a document of title, and the corollary that it is liable to be set aside in favour of a proven prior better right, makes it all the more illusory as a security. In spite of sections 9, 34(3), 34(9) and 36(3) of the Act which require the governor to be satisfied that the applicant is entitled to a Right of Occupancy in the land before issuing a Certificate of Occupancy, there is usually no thorough investigation of the claim of the applicant. As such, it is possible that the applicant may make false claims to the Right so as to obtain a Certificate. It is therefore recommended that there should be a system of verifying the applicant’s claim, say, enquiries from the occupiers of adjoining lands and obtaining legally admissible title documents where such exist. In this way, by the time the application is advertised all the ground work would have been done and the effect of the advertisement would be to fix the public with notice of the application, with the result that when there is no objection and a certificate is issued, it would be proof rather than mere evidence of a Right of Occupancy to the land.

This will give the needed confidence in the Certificate of Occupancy as a useful document for mortgage transactions. The delay and heavy costs involved in obtaining consent are impediments to the creation of ‘immediate’ security interests. The delay in granting consent impedes the release of credit facilities resulting in loss of business opportunities. While the consent provisions may be required as a means of keeping record of land transactions, the procedure for granting it should remain purely administrative at minimum costs and within a specified time frame. It is also important that consent must not be unnecessarily withheld by the Governor. Where the Governor refuses to give consent, the question is whether he should or should not give reasons for his refusal. A provision should be made that in the event of the Governor refusing to give his consent to any landed security transaction, he should give his reasons(s) for the refusal as this will help check a refusal on political, non-legal grounds. The provision relating to revocation of a Right of Occupancy on grounds of overriding public interest needs to be made more transparent. Information and all the studies relating to the scope of the project for which the land is required should be scrutinized and available for further public debate by the Land Use and Allocation Committee, such that the Governor’s request can be rejected if it does not meet the condition for overriding public interest.

This will minimize the instances where a person’s Right of occupancy is revoked only to be given to another private person. It should also be provided that where the project sought to be embarked upon by the Governor is no longer undertaken, the land would revert to the original holders. This will also check the frequency of the instances where lands meant for public purpose is fenced round for years and later becomes one of a private person’s investments. Since compensation is generally paid to the holder of a right of occupancy, a mortgagee is expressly excluded under section 51 of the Act. The effect of this on existing security interest is disastrous, for the mortgagor who qualifies takes compensation in addition to the loan already granted him by the mortgagee while the mortgagee is left in the cold wind. Thus, it would be welcome if the Act is amended to provide for payment of compensation to the persons interested in order of priority. That way, the mortgagee will have a prior right to the compensation money.

In the absence of legislation, it is advisable the mortgagee ensures that a covenant is included in the mortgage deed to the effect that in the event of the Right of Occupancy being revoked the mortgage debt shall be secured additionally on any compensation payment due to the mortgagor in respect of the unexhausted improvements, or that the mortgagor shall hold such payment on trust for the mortgagee, to the extent of the mortgagee’s claim on the secured debt, or that the debt is additionally secured on any alternative land right which might be granted to the mortgagor in lieu of compensation. This way, the mortgagor would be compelled in equity to claim the compensation on behalf and for the benefit of the mortgagee in preference and priority to other subsequent secured and unsecured creditors. This would be the best option as there is certainly no way the mortgagor can claim the compensation money and retain it for himself when he is accountable to the mortgagee.

Abstract
The mortgage of land as security is undoubtedly a nightmare to banks, corporate organizations, individuals and other financial institutions in contemporary times because of the multifarious problems posed by the Land Use Act at both the time of creation and the enforcement of landed security. Since the radical title to land has been vested in the Governor with the power to revoke a Right of Occupancy for overriding public interest, the security in the hands of the lender may vanish overnight as a result of the revocation. This article examines the various areas where the Land Use Act has had its impact on mortgage of land as security in Nigeria. It analyzes the hurdles that impede the use of land as security for mortgages. Suggestions are proffered in this paper to the Government policy makers, land administrators and other researchers in this area of the law with the aim of addressing the perceived lapses in the law.

MORTGAGE OF LAND AS SECURITY UNDER THE LAND USE ACT 1978

BY

DOROTHY E. NELSON**

1. Introduction

Land is the very basis of commercial and industrial enterprise in Nigeria. It is the most important factor of production in industry as well as agriculture. Its usefulness and importance cuts across all forms of businesses and professions: Businessmen require land for buildings, factories and warehouses; Professionals in practices such as law, medicine, etc, need land to locate their offices, chambers, clinics, etc. Indeed, every citizen in Nigeria and all over the world needs a piece of land to use for one purpose or the other. Accordingly, everyone stands in some relation to the land either as occupier, holder, tenant, licensee, pledgee or mortgagee. In this way, land law impinges upon a vast area of social orderings and expectations, exerting a fundamental influence on the life-styles of the people. Every person requires land for his support, preservation and self-actualization within the general ideals of the society. Land is the foundation of shelter, food and employment.

Man lives on land during his life and upon his demise, his remains are kept in it permanently. It is as a result of this great value embedded in land that man craves its use as the subject matter of mortgage transactions. Mortgage transactions and the taking of land as security dates back to ancient history. In early Nigeria, pledges were encouraged rather than outright sales as land was held to belong to the community or family rather than the individual. This went on smoothly as the indigenous people had their indigenous ways of resolving their issues, until the promulgation of the Land Use Act 1978, which overhauled mortgage transactions in a tremendous manner.

2. Application of the Land Use Act to Land Use and Management in Nigeria The Act sets out in its section 1 to assert the state ownership of land. Hence the power of control and management over land in Nigeria is conferred on the government. Section 1 of the Act provides thus: Subject to the provision of this Act, all lands comprised in the territory of each state in the Federation are hereby vested in the Governor of that state and such land shall be held in trust and administered for the use and common benefit of all Nigerians in accordance with the provision of this Act.

The implication of the foregoing provision is that the erstwhile owners are divested of their ownership of land whether occupied or unoccupied. Thus by virtue of section 1 of the Land Use Act the concept of radical title to land existing in the owner prior to the Act has been abolished and substituted with the limited title in the form of a Right of Occupancy. By section 5 of the Act, the governor is empowered to grant statutory right of occupancy to any person for all purposes, and any such grant by the governor operates to extinguish all existing rights to the use and occupation of the land From Sections 21-23, the act firmly established the Governor’s supervision and control over all land in the state such that no transaction would take place in property without his consent having first been sought and obtained The effect of this is that individuals, communities and families who hitherto had the freedom to do as they pleased with respect to their portions of land were stopped in their tracks.

All of a sudden they now held the land at the mercy of the Governor. However, by the combined effects of Sections 34, 35, 36 And 51(1) Paragraphs 3 And 15 Of Act, the rights of any person or community using or occupying land in accordance with customary law are preserved though in a limited form of a Right of Occupancy under the Act. Also, the devolution of right under customary law upon death of the holder of a Right of Occupancy is preserved subject to section 24 of the Act, thereby sustaining the concept of family property.

3.Mortgage of Land
Mortgage of land entails transfer or conveyance of title or interest in land by a debtor or a third party to the creditor as an assurance for repayment of debt or discharge of any obligation. It is a transaction whereby, as security for a loan of money, the borrower transfers to the lender an interest in some property of the borrower on the condition that the lender’s interest in the property will be terminated on repayment of the loan. By the operation of the Land Use Act, fee simple estate does not exist anymore. In its place now is a Right of Occupancy.

4. Problems of mortgage of land as security under the Land Use Act i Uncertainty of Title
In the place of the allodial title formerly held, the Act confers on any person or group of persons the ‘Right of Occupancy.’ The Land Use Act does not define a ‘Right of Occupancy’; but its precursor, the Land Tenure Law (of Northern Nigeria), defines it as “a title to the use and occupation of land” This right can be statutory or customary; expressly granted or deemed granted. The Right of Occupancy created by the Land Use Act to replace the fee simple, fee tail and entailed interest, which is a right that a person can mortgage, pledge, charge or transfer for security, has been a source of extensive academic and judicial debates. Apart from other problems in the Act, the problem has always been on the nature of the Right of Occupancy- whether it is a lease, a license, an absolute right or a new species of right. Lord Templeton laid down the hallmark in Street v. Mountford that for a lease to be valid there must be exclusive possession at a rent and for a term. But a holder of right of occupancy under the Act does not enjoy exclusive possession against the Governor.

The Governor or any public officer authorized by him has unfettered access to and can freely enter upon and inspect the land comprised in any statutory right of occupancy or any improvements effected thereon for inspection at any reasonable hours in the day time. Also, despite the easy revocability and the lack of prospective certainty of duration which are characteristics of a license, the right of occupancy is not a license because, unlike a license, it is alienable, transferable and transmissible. The right of occupancy has also been thought of as a freehold; but it is not a freehold because, as already stated above, the Right holder has no exclusive right to possession, and in the case of the granted statutory right, it is not indefinite in duration but rather it is for a term of years certain and is subject to the payment of rent to the Landlord (Governor).

This made The Privy Council in Premchand Nathu and Co. Ltd. v. The LandOfficer to hold that the Right of Occupancy is a right sui generis and that the intention of the lawmakers in introducing the Right of Occupancy system was to establish an entirely new interest in land. Pursuant to the Right of occupancy the Act introduced the issuance of a certificate of Occupancy by the Governor of a state. Section 9(1) (a)-(c) of the Land Use Act provides as follows: 9(1) It shall be lawful for the Governor – (a)When granting a statutory Right of Occupancy to any person; or (b) When any person is in occupation of land under a customary Right of Occupancy and applied in the prescribed manner; or (c) When any person is entitled to a statutory Right of Occupancy, to issue a Certificate of Occupancy under his hand in evidence of such Right of Occupancy.

It should be noted that a certificate of occupancy is merely an evidence of a Right of Occupancy and does not on its own confer a title or interest in land. The Act has not provided any conclusive means of proving ones entitlement to a Right of Occupancy. The certificate raises a rebuttable presumptive right of occupancy . In Aziv. Registered Trustees of The Evangelical Churches, the court held that the issuance of Certificate of Occupancy in respect of any land would not validate defects, if any in the title of the holder; thus, the court summed it up by saying that a Certificate of Occupancy granted to one of the claimants who had not proved a better title, was invalid. This means that a Certificate of Occupancy may be set aside if it turns out that the holder had no right to the land , or in favour of a pre-1978 conveyance or in favour of a deemed grantee of Right of Occupancy under section 34 of the Act.

From the dictum of His lordship, Nnameka-Agu J.S.C , it can be inferred that a Certificate of Occupancy issued pursuant to the Act only gives the right to use and occupy land, it neither confers nor is it necessarily an evidence of title. Unlike a conveyance which is the means whereby a right in land arises, a certificate of occupancy confers no interest in land. The horror and hellish implication of this is that where the Certificate of Occupancy is set aside for any reason, the mortgagee who has accepted it as security realizes he has burnt his own fingers. The certificate he is holding automatically becomes “a piece of paper having no value” Thus, where it is shown that another person has a better right to the grant, the court will if asked to do so set aside the grant. In Ogunleye v. Oni, the Supreme Court held that a certificate of occupancy issued pursuant to the Land Use Act only gives right to use and occupy land and never conferred title. iiRequirement of Consent and its Attendant Problems

It is doubtful if there is any step in the mortgage transaction process that gives mortgagees as much nightmare as obtaining consent. It is worse when one considers that each state in the federation has its own conditions and procedures for obtaining consent. Few, if any, of these can be said to be founded on the Act. Each Lands Officer fashions what he deems suitable. Thus, an appraisal of the hardship caused by the consent provisions is pertinent. Sections 21 and 22 provide as follows: S.21. 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 military Governor in cases where the property is to be 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 approval of the appropriate Local Government. S.22 It shall not be lawful for the holder of a statutory right of occupancy granted by the Military Governor to alienate his right of occupancy or any part thereof by assignment, mortgage, transfer of possession, sublease or otherwise howsoever without the consent of the Military Governor first had and obtained.

The judicial construction of this section has burdened Nigerian judges like no other statutory provision in the area of real property. By section 22(1) the Governor’s consent must be “first had and obtained.” Thus in Savannah Bank (Nig.) Ltd. v. Ajilo , the Plaintiff executed a deed of mortgage dated 5th September, 1980 in favour of the 1st Defendant. Upon default by the Plaintiffs, the 1st Defendant sought to sell the property involved by advertising the Auction sale. The Plaintiffs sued for declaration that the Deed of Mortgage was void and also that the Auction Notice was void. The grounds of the action were that -The property involved was situate in an urban area in Lagos; The property was already vested in the 2nd Plaintiff before the Land Use Act 1978 came into force; By Section 22 of the Land use Act, the consent of the Governor of Lagos State ought to have been first sought and obtained before the execution of the Deed of Mortgage and also the Public Auction; and As no consent was sought as aforesaid both the Deed of Mortgage and the Auction Notice were void.

The Supreme Court held that consent must be obtained prior to the mortgage; any failure by a holder under Sections 34(2) or 36(2) of the Act to comply with the provisions of Section 22 would attract the full rigor of section 26 of the Act and render
a transaction or an instrument arising out of it void. However, this was an obiter dictum as the stage of obtaining consent was really not an issue before the court. In subsequent cases, the Supreme Court and Court of Appeal have been of the view that consent may be applied for at any time after a concluded transaction. Thus in Awojugbagbe Light Industries Ltd. v. Chinukwe, the Supreme Court held that ‘there is nothing unlawful in entering into or execution of a document of transfer before the Governor’s consent is obtained as this procedure is expressly covered by section 22(2) of the Act.

The legal consequence that arises is that no interest in land passes under the agreement until the necessary consent is obtained. Such an agreement so executed becomes inchoate until the consent of the Governor is obtained after which it can be said to be complete and fully effective.’ Where the consent is not obtained at all, it appears that the transaction will be rendered null and void under section 26 of the Act. Section 26 provides thus:

Any transaction or any instrument which purports to confer on or vest in any person any interest or right over land other than in accordance with the provisions of this Act shall be null and void.

The position of the statute seems to be very clear that it is the duty of the ‘holder’ to obtain the requisite consent before alienation. But in practice there exist situations where the holder who ought to have obtained such consent would turn around seeking to avoid the transaction on the basis of lack of consent, shedding what has been described as ‘The Crocodile tears’ as in Savannah Bank v Ajilo’. The Courts have by judicial activism given the statute a human face. Instead of nullifying transactions outrightly on the basis of lack of consent, the courts have sought to know whose duty it was to obtain the consent. The one question the courts have asked has been: was it the mortgagor’s duty to have obtained the consent? The answer has 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 the transaction void under the Land Tenure Law. The Court held that the defendant would not be allowed to take advantage of his own wrong and avoid the transaction.

The dictum of Kayode-Eso JSC in Oil Field Supply Centre Ltd v. Johnson is also in point here. The Learned Justice observed that “certainly equity will not permit the company to benefit from their own illegality” Similarly, in Adedeji v. National Bank, the mortgage transaction was without the Governor’s consent. Mr. Adedeji defaulted and in an attempt to prevent the enforcement of security he contended that the transaction was void. This contention was dismissed by the court as it was his duty to obtain the consent in question. In the words of Akpata JCA, “Apart from the principle of law involved, it is morally despicable for a person who has benefitted from an agreement to turn round and say that the agreement is null and void” These decisions are in line with the maxim ex turpi causa non oritur actio, meaning that no action arises out of a wrongful consideration. However, in Savannah Bank v. Ajilo , the Supreme Court considered the wordings of section26 and took the view that it was undesirable to invoke the maxim ex turpi causa non oritur actio.

The court said at page 324: Although the first Plaintiff/Respondent by the tenor 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 actio.

In Onamade and Ors. v. A.C.B. the Supreme Court emphasized that no alienation of a statutory 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. Similarly, in International Textile Industries v. Aderemi the court held in accordance with savannah bank’s case that by virtue of section 22 of the 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, the transaction is null and void under section26 of the Act. Lastly, in U.B.N. PLC. v. Ayodare & Sons (Nig.) Ltd Oguntade, JSC in abiding by the decision in Savannah Bank’s case stated as follows: I am satisfied that the two courts below were right in following the decision in Savannah Bank (Nig.) Ltd. v. Ajilo in view of the fact that this court had directly adverted its mind to the state of the law and judicial authorities on the equitable doctrine in the maxim exturpi causa non oritur actio. It may seem wrong that the Plaintiffs/Respondents who had procured exhibits 1 and D later turned round to rely on the supposed invalidity of the exhibits but the decision of this Court in Ajilo is still binding on this Court. I have not been called upon to consider overruling same.

Section 22 obligates the Governor to sign in the transfer of a statutory right of occupancy, and under section 21 the Local Government Chairman is to sign where a customary Right of Occupancy is transferred. Section 45 of the Act provides that the Governor may delegate any of his powers to “the State Commissioner” presumably the one in charge of lands. The courts have been called upon to decide the value of a consent document that a person other than the Governor or Commissioner signed. In Union Bank of Nig. Plc. v. Orharghue, the Court of Appeal upheld a Commissioner of Lands’ writing to convey Governor’s consent even where there was no delegation; and in Nigerian Industrial and Development Bank v. Oladunmi Industries Ltd., a consent conveyed in a letter signed by an Acting Chief Lands Officer was upheld even though the Governor had delegated the authority to grant consent to the Permanent Secretary, Ministry of Lands. However, the consent question assumed an interesting twist in the Supreme Court decision in Union Bank of Nig. PLC. v. Ayodare and Sons (Nig.) Ltd. In that case, an Acting Chief Lands Officers signed the consent letter whereas the Governor had delegated the duty to the Commissioner for Lands. By a majority of 4-1, the Court applied the Agency principle of delegatus non potest delegare to annul the consent.

The case now places a further burden on the secured creditor even where consent has been obtained, to make further inquiries to ensure that the “respective appropriate authority” properly empowered the consenting authority. Consent in itself is therefore not enough; the source of the consent is of great importance. In the words of the court, “the appellants should have checked the source of the consent before executing the deeds and parting with their money.” A question arises here whether the Governor can be compelled to give Consent? It is regrettable that the answer is in the negative. In R v. Ministry of Land and Survey, Ex Parte Bank of the North, where an order of mandamus was applied to compel the Minister to give consent, Reed Ag. SPJ stated that: Since the order of mandamus does not lie to compel the exercise of a discretionary power conferred by a statute, it will not lie to compel the Minister to give his consent … if the applications have no other remedy, that is unfortunate for them but the absence of other remedies would not enable the court to grant an order of mandamus to compel the exercise of a discretionary power.

Similarly, In Majiyagbe v. A.G. &Ors , the court maintained that the affected party cannot compel the Governor or the Local Government as the head of the family or the community to grant consent. Consequently, the Governor may not be compelled by an order of mandamus to give his consent. Thus in spite of the short-term remedial measures that have been devised by equity and by the courts, the issue of Governor’s consent as enshrined in the Land Use Act has posed the greatest threat to landed security transactions in Nigeria. iii Revocation and the Problem of Compensation

Under the Land Use Act, the right of occupancy may be revoked where the government wants to use the land for public purposes , or for extraction of building materials or for overriding public interest. The injudicious administration of the Land Use Act, particularly the revocation power has led to the great voices in the wilderness calling for the reformation of the Act. The right of occupancy may be revoked before ever the mortgagee would have the opportunity of realizing his security or exercising his power of sale or foreclosure of the mortgaged property; considering the fact that the legal date of redemption may still be subsisting and unexpired at the time of revocation. The compensation provision under the Act is grossly inadequate and can be described as unjust.

This is because under the Land Tenure Law, compensation was paid for the value of the inconvenience caused by the disturbance, and disputes were allowed to be referred to the High Court. The Public Lands Acquisition Decree also provided for compensation to be paid for the land and the unexhausted improvements thereon. Curiously, the Land Use Act promulgated much later provided that compensation is payable only on unexhausted improvements on land and no value and compensation is attached to the land itself. More agonizing is the fact that the victim of revocation is allocated to an alternative land without consulting him or taking his preference into consideration as there is no provision to this effect under the Act. The jurisdiction of the court has also been ousted to inquire into any question concerning or pertaining to the amount or adequacy of any compensation paid or to be paid under the Act. In other words what the Governor decides to pay as compensation is not a debatable issue. ivRestrictive Definition of Holder

Another major upsetting provision under the Act as it affects mortgage transactions is the definition given to a “holder” of a right of occupancy. A “holder” in relation to a right of occupancy means, “a person entitled to a right of occupancy.” Section 50(1) of the Act defines “holder” thus: A person entitled to a Right of Occupancy and includes any person to whom it has been validly assigned or has validly passed on the death of the holder but does not include any person to whom it has been sold or transferred without a valid assignment nor a mortgage, sub-lessee or sub-underlessee.

Under Section 29 of the Land Use Act, the holder of a right of occupancy is entitled to compensation at the date of revocation for the value of his unexhausted improvement on the land . The unpalatable effect of this is that although the mortgagee may have been preserving his interest in the mortgage security, the right of occupancy and improvements there on; although he may even be ensuring periodic payment of stipulated rents, once the Right of Occupancy is revoked, his security is gone and cannot attach automatically to the mortgagor’s interest in any changed form. So, whereas, the mortgagor may be entitled to compensation for the value of his unexhausted improvements on the land, the mortgagee cannot lay claim to such compensation money.

Moreover, a mortgage is a form of conveyance and therefore disposes of, transfers or passes all the estate, right, title, interest, claim and demand which the conveyancing parties respectively have power to convey in, to or on the same land. Flowing from the foregoing, it is clear therefore, that the conveyance of land would also operate as assignment of the right to receive compensation therefrom. The Supreme Court endorsed this view long ago in Atunrase v. Federal Commissioner for Works and Housing where the issue was a claim for compensation money under the Public Lands Acquisition Act. The original owner to whom compensation was payable for compulsory acquisition had previously conveyed the land to A who paid him the agreed purchase price and in whose favour a conveyance was also executed. The Law Lords, considering the effects of Section 63(1) of the Conveyancing Act 1881, were unanimous in holding that the conveyance by the original owner/vendor passed all his estates and interests to the purchaser and this necessarily includes receiving the compensation money .

Thus, it is submitted that the mortgagee should be subrogated to the position of the mortgagor in equity for the purpose of receiving compensation for unexhausted improvements in respect of the revoked Right of Occupancy, so that his rights having transmuted into the compensation money, he becomes entitled to it. Persuasion for this view may be found in Rex v. Middlesex where land subject to mortgage was taken compulsorily by a Railway Company under an Act of parliament. Rowlatt, J. stated thus: It certainly is a startling proposition that the mortgagees who have precisely the same land in their hands as security should be in a worse position than their mortgagors, and should be unable to demand all the compensation which their mortgagors could have demanded in respect of the mortgaged property

5. The Implications of the Problems on the Nigerian economy It was thought that the laudable objectives of the Act would lead to the provision of a uniform land tenure system in the country, make land easily and cheaply available to all Nigerians and the government for developmental purposes, protect the inalienable rights of every Nigerian to partake of the factors of production and check the practice of land speculators, whereby some wealthy individuals indulged in shoddy but lucrative trade in land. However events unfolding in subsequent years betrayed these aspirations of its provisions. Land has become painfully unaffordable to the suffering masses.

Private sector participation in Housing, Agriculture and Industrialization cannot be accomplished with the unqualified limitation in the quantum of parcel of land to access, and the rigidity of the consent provisions. General implementation of the Act has undermined its laudable objectives, and the Governor’s powers to make Regulations under the Act have been grossly abused to the detriment of Nigerians. Potential housing developers encounter numerous constraints. Applicants for certificate of occupancy have to provide completed application forms, non-refundable prescribed fees, current three years tax clearance certificate, land site / survey plan; agreement of sales of land which must be duly stamped and registered; an affidavit by the Vendor and customary Right of Occupancy in the case of non-urban designated lands. In case the developer has partially or fully developed the land, a valuation certificate is required before granting the Certificate of Occupancy.

These procedures are too cumbersome. Going through all these protective rigmarole stages before a Certificate of Occupancy can be granted has made it impossible for the problems of access to land rights on equal basis to be solved. There is also undue delay in the issuing of Certificates of Occupancy due to the deliberate efforts of some unscrupulous ministry officials who may want to be bribed before processing the forms of applicants. The great discrepancies between the number of applicants for allocation of plots for all uses and those eventually approved and issued certificate of occupancy to date are manifestations that the implementation of the obvious revolutionary lofty objectives for which the Act was promulgated, are faulty. This has slowed down or reduced the rate of housing development. It is a truism that no development is allowed without a clear title to the land vested by the granting of Certificate of Occupancy.

There have also been instances where land has been used as a potent weapon to fight political opponents. In some cases there have been deliberate refusals to process a political opponent’s application. These delays led many who would have invested in housing development purposefully, to divert their resources to other profitable ventures. The requirement for Governor’s consent for land transactions in every state has posed the greatest obstacle to use of landed property as collateral. The Governor also imposes other conditions for grant of the consent which varies from State to State. Even when all conditions have been met by an applicant for consent, the file can stay on the Governor’s table or office for more than three years for no justifiable reason.

6. Conclusion
This paper has examined in detail the use and effectiveness of mortgage of land as security for in Nigeria. The problems in the pre-Act land laws and tenure necessitated the promulgation of the Land Use Act in 1978. The pre-Act land tenure policies were not satisfactory because of their attendant problems, such as insecurity of title, land litigations, fragmentation of holdings, difficulty in acquisition and alienation of land, etc. All these contributed to housing problems, slum development and general lack of infrastructural developments in Nigeria.

With the Act in place, these various pre-Act land laws and land tenure policies were largely done away with, but the principles of those pre-Act laws which are inconformity with the spirit and general intendment of the Act are preserved. An analysis of judicial opinions as well as the writers’ views done in this study has shown that the Act by its policy objectives has improved land tenure and administration in Nigeria. The Act has unified land policy, ensured equitable redistribution of land among the citizens without discrimination on ground of state origin and facilitated both governments and private industrialists’ quick access to land needed for developments. Notwithstanding the foregoing positive impacts of the Act, this paper has figured out the inherent problems in the Act as it concerns mortgage transactions. It has been discovered that there are gaps between the expectations and the achievements of the Act. For instance, vesting of all lands in the state in the Governor has made acquisition of land more difficult especially for the individuals.

Moreover, compensations payable under the Act are grossly inadequate. The Right of Occupancy is uncertain and the certificate evidencing it leaves a lot to be desired. Furthermore, the consent provisions under the Act with the rigorous processes and delay usually experienced in obtaining it has stagnated mortgage transactions in the country, and thus has become a clog in the wheel of economic development. One of the issues that call for concern is the true nature of the Right of Occupancy created by the Act. It is of interest to the mortgagee who accepts the right as security to know the interest he acquires by accepting the Right of Occupancy. Accordingly, there is need for clarity on the meaning of a Right of Occupancy, especially as this is the ultimate right which an individual can have in land and therefore the highest land right which a secured creditor can encumber. It is therefore suggested that the Right of Occupancy should include a right to the use of the land and the improvements thereon. Section 9 of the Act provides that the Governor, when granting a statutory Right of Occupancy shall issue a Certificate of Occupancy as evidence of a Right of Occupancy.

The fact that the Certificate of Occupancy is merely evidence, rather than proof, of the Right makes it unattractive to mortgages as a document of title, and the corollary that it is liable to be set aside in favour of a proven prior better right, makes it all the more illusory as a security. In spite of sections 9, 34(3), 34(9) and 36(3) of the Act which require the governor to be satisfied that the applicant is entitled to a Right of Occupancy in the land before issuing a Certificate of Occupancy, there is usually no thorough investigation of the claim of the applicant. As such, it is possible that the applicant may make false claims to the Right so as to obtain a Certificate. It is therefore recommended that there should be a system of verifying the applicant’s claim, say, enquiries from the occupiers of adjoining lands and obtaining legally admissible title documents where such exist. In this way, by the time the application is advertised all the ground work would have been done and the effect of the advertisement would be to fix the public with notice of the application, with the result that when there is no objection and a certificate is issued, it would be proof rather than mere evidence of a Right of Occupancy to the land.

This will give the needed confidence in the Certificate of Occupancy as a useful document for mortgage transactions. The delay and heavy costs involved in obtaining consent are impediments to the creation of ‘immediate’ security interests. The delay in granting consent impedes the release of credit facilities resulting in loss of business opportunities. While the consent provisions may be required as a means of keeping record of land transactions, the procedure for granting it should remain purely administrative at minimum costs and within a specified time frame. It is also important that consent must not be unnecessarily withheld by the Governor. Where the Governor refuses to give consent, the question is whether he should or should not give reasons for his refusal. A provision should be made that in the event of the Governor refusing to give his consent to any landed security transaction, he should give his reasons(s) for the refusal as this will help check a refusal on political, non-legal grounds.

The provision relating to revocation of a Right of Occupancy on grounds of overriding public interest needs to be made more transparent. Information and all the studies relating to the scope of the project for which the land is required should be scrutinized and available for further public debate by the Land Use and Allocation Committee, such that the Governor’s request can be rejected if it does not meet the condition for overriding public interest. This will minimize the instances where a person’s Right of occupancy is revoked only to be given to another private person. It should also be provided that where the project sought to be embarked upon by the Governor is no longer undertaken, the land would revert to the original holders. This will also check the frequency of the instances where lands meant for public purpose is fenced round for years and later becomes one of a private person’s investments. Since compensation is generally paid to the holder of a right of occupancy, a mortgagee is expressly excluded under section 51 of the Act.

The effect of this on existing security interest is disastrous, for the mortgagor who qualifies takes compensation in addition to the loan already granted him by the mortgagee while the mortgagee is left in the cold wind. Thus, it would be welcome if the Act is amended to provide for payment of compensation to the persons interested in order of priority. That way, the mortgagee will have a prior right to the compensation money. In the absence of legislation, it is advisable the mortgagee ensures that a covenant is included in the mortgage deed to the effect that in the event of the Right of Occupancy being revoked the mortgage debt shall be secured additionally on any compensation payment due to the mortgagor in respect of the unexhausted improvements, or that the mortgagor shall hold such payment on trust for the mortgagee, to the extent of the mortgagee’s claim on the secured debt, or that the debt is additionally secured on any alternative land right which might be granted to the mortgagor in lieu of compensation. This way, the mortgagor would be compelled in equity to claim the compensation on behalf and for the benefit of the mortgagee in preference and priority to other subsequent secured and unsecured creditors. This would be the best option as there is certainly no way the mortgagor can claim the compensation money and retain it for himself when he is accountable to the mortgagee.

Abstract

The mortgage of land as security is undoubtedly a nightmare to banks, corporate organizations, individuals and other financial institutions in contemporary times because of the multifarious problems posed by the Land Use Act at both the time of creation and the enforcement of landed security. Since the radical title to land has been vested in the Governor with the power to revoke a Right of Occupancy for overriding public interest, the security in the hands of the lender may vanish overnight as a result of the
revocation. This article examines the various areas where the Land Use Act has had its impact on mortgage of land as security in Nigeria. It analyzes the hurdles that impede the use of land as security for mortgages. Suggestions are proffered in this paper to the Government policy makers, land administrators and other researchers in this area of the law with the aim of addressing the perceived lapses in the law.


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