The use of Landed property as security for loan by banks is important to the economy of every nation, underdeveloped, developed. This leads us to the need for mortgage transactions to secure loan from banks, for this reason landed property has been chosen as the security for loan in mortgage transactions for the purpose of this research work because of it’s value and the important role it plays in society.This research work has unveiled the concept of mortgage the problem of its practice in Nigeria, also the research has taken a look at the English law of real property and its execution strategies in England. It further takes a look at the Land Use Act in Nigeria which is the single law which defines land rights, obligations and specific conditions precedent for any alienation or encumbrance of land rights and how it affects the practicability of the law of mortgage of land property with the aid of decided cases.
1.1 Background to the Study
The Legal atmosphere in any given society affects business operation. Business strives well when business legislation are well defined and aimed at creating a favourable environment for business to thrive. These pieces of legislation will further national goals, stimulating the economy, conserving foreign exchange, enhancing competition among business entities, by prohibiting monopolistic tendencies and unfair method of competition by firms. It will also ensure that contracts are entered into and executed, with justice done to the parties and their right adequately protected.
In Nigeria, there is a plethora of business and commercial laws that govern different aspects of business environment for example, banking, insurance, capital market, etc. At this point, it is important to know what “law is”. For the purpose of this study, we shall adopt some definitions.
The definition by an eminent Nigerian jurist is that, “the law of a given society is the body of rules, which are recognized as obligatory by its members”1
1 Elias T. O (1956), Nature of African Customary Law, Routledge and Kegan Paul, p.55
It is therefore the entire body of principles, norms or regulation that governs human conduct, the observance of which can be enforced.
Also “law” is defined by Cicero 1959 as, “the highest reason implanted in nature, which commands what ought to be done and forbids the opposite . . .
what is right and that is also eternal, and does not begin or end with written statutes. ..”2
This means natural or moral laws which accord with our basic sense of justice of what is wrong and right in the state of nature, as opposed to or in contrast with legislative or man-made law.
Another definition is that, “law is a body of rules designed or formulated to guide human conduct or action which are enforced among members of a given state or society.”3
This refers to man-made law which exists to ensure legal order and due administration of justice in an organized society.
During the period of the state of nature, man and animals wondered about in the bush, forest, searching for food, a place to rest and eventually to lay head when it is night in order to sleep. Sleep at that time (state of nature) used to be at any place in the bush, like animals without shelter. This was prone to 2 Fitzgerad P.J. (1966), Salmond on Jurispruence. Twelfth Edition, Sweet & Maxwell, London, p. 643
3 Sanni A. O. (1991), Introduction to Nigerian Legal Method, Obafemi Awolowo University Press Ltd, Ile-Ife, Nigeria, p. 2
attack by animals, reptiles, birds and even stronger human beings. Later, the state was established or founded. This brought the nomadic lifestyle of the man of the state of nature to stagnation by way of shelter. By shelter, it means any enclosure used for resting or sleep built purposely by man for that purpose. This took the form of gathering of grass, sticks, and leaves. Later, with the advancement in technology of that time, mud, wood, stones were gathered to form enclosures and shelter . With further sophistication of technology, man developed skill to build houses, with wood, mud, stones, bricks, just like we have today, with all amenities for comfort and pleasure. Some people nowadays cannot have shelter without assistance from financial institution, though it is a right to have shelter in the Nigerian Constitution4.
This leads us to the need for mortgages as transaction to secure loan from banks with any given security. In the English law of real property44 mortgage is the process of transition from a title-theory to a lien-theory jurisdiction, and the differences between legal and equitable mortgages are still important. Until 1926 a legal mortgage of freehold land was created by conveyance of the fee simple, the mortgagor retaining a brief legal right to redeem and an indefinite equity of redemption. All second and subsequent mortgages of freeholds were therefore equitable. Legal mortgages of leaseholds were created by sub-demise.
However in Nigeria, The Mortgage Institution Act5 provides for the establishment of mortgage institution in the country. S. 7
4 S. 315 (5) Constitution of the Federal Republic of Nigeria 1999 (as amended) 2011, S. I Land Use Act, Vol. 7 1978 Cap. L 5, Laws of the Federation of Nigeria, 2004.
4.4. The modern law is contained in the Law of Property Act, 1925,
5 S. I (i) Mortgage Institution Act, Vol. 8, Cap. M19, Laws of the Federation of Nigeria, 2004.
(a) provides that, “a mortgage institution shall not grant a loan or advance for the building, improvement of extension of dividing houses unless adequate securities have been taken on an existing property in respect of which the loan or advance is being granted”
The Bank and Other Financial Institution Act6 also provides for the establishment of loan by banks as follows:
a bank shall not without the prior approval in writing grant any advance, loan, credit facilities against the securities of its own share or any unsecured advances, loan, or credit facilities unless in accordance with the bank rules and regulations and where any such rules and regulations require adequate securities such securities shall be provided or, as the case may require deposited with the bank.
The securities are of diverse kinds, among which are land and other real estates, ships, debentures on assets of a company, life insurance policies, stocks and shares. “The general principles underlying these diverse forms of security are the same, regardless of the different modes of effecting them, as well as the fact that in some instance, the legal rules applicable vary from one kind of security to another”7.
6 Banks and Other Financial Institution Act, Vol. 2, Cap. B3, Laws of the Federation of Nigeria, 2004.
7 and 8. Goldface-Irokalibe I. J (2007), Low of Banking in Nigeria, 1stEdition, Malt House Press Ltd. Lagos p. 95.
Landed property has been chosen as the security for loan for the purpose of this work for the following reasons. First, land is a more stable asset. Secondly, the value of land is more likely to appreciate than other assets. Thirdly, arguably, it is easier for the banks to enforce their security in the case of landed properties than other assets such as debentures, insurance securities, guarantees, stock and shares, charge over fixed deposit account, trust receipts, bill of sale, Letter of set off, trust deed8. Also physical control of the property is hardly necessary and its characteristic feature of immovability affords the creditor a reassuring grip on the security.
The banking industry is one of the major institutions involved in mortgage transactions and so there is need to ensure that it has the proper legal frame work for mortgage transactions to thrive. Alongside comes the Land Use Act, which is the single law that defines land rights, obligations and specific conditions precedent for any alienation or encumbrance of land rights in Nigeria.9 Inspite of this, title to land appears to be more insecure than the ever was.10 This research therefore seeks to examine English real property law in view of Mortgage Law and Practice of Mortgage in Nigeria. Nigeria The problems and proffer plausible solutions considering the importance of mortgage transactions to the development of any nation.
9. Smith, I. O (2003). The Land Use Act Twenty Five Years After Department of Private and Property Law. University of Lagos. Nigeria. Foler Prints p. 280.
10. Raime A. L “The Land Use Act 1978 A Blessing or Curse” Ikeja Bar Review, Vol. 1, Pt 1 & 2 p. 88.
Statement Of Problem
After 1925 in England, in accordance with the drafting principle of estate ownership, the mortgagor retains the fee simple and both freeholds and leaseholds are mortgaged alike. If the title is unregistered, the mortgage is by demise or by “charge by way of legal mortgage,” the latter having become the normal method; if the title is registered, the mortgage is by a “registered charge” which must be completed by entry on the register.11Therefore, all second and subsequent mortgages can now be legal. Legal mortgages of unregistered land become part of the chain of title thereto and will be abstracted, but it is not the practice to abstract discharged equitable mortgages. If the mortgagor’s title is registered under the Land Registration Act, 192512, the mortgage whether legal or equitable should be protected by entry on the register. Priority is assured by entry, though deposit of the Land Certificate may be an alternative method. When the mortgage is discharged the entry will be cancelled and cease to be part of the title. The remedies available to a legal and equitable mortgagee differ. A legal mortgagee is entitled to possession and may foreclose by order of the court, or sell out of court. The latter is the normal remedy.
11. Banks usually take an equitable mortgage in this form.
12. E.g., Four-Maids Ltd. v. Dudley Marshall (Properties) Ltd.  Ch. 317;
as to equitable mortgages see Barclays Bank Ld. v. Bird  Ch. 274, and 70 L.Q. Rv.
In Nigeria the enactment of the Land Use Act which was expected to function the English property law, has seriously eroded the relative security enjoyed by a creditor (the bank) in a mortgage transaction and The Land Use Act appears to hinder economic progress. This is because of the unwillingness and inability of banks and other financial institutions to give out loan on mortgage due to the fact that if a right of occupancy is revoked, a mortgagee has no right to the compensation payable, as the definition of “holder” or “occupier” in section 51 of the Land Use Act does not include a mortgagee. The Land Use Act has reduced considerable the efficacy of land as security for loan in a mortgage transaction and invariably it’s value and reliability. Also the uncertainties surrounding the enforcement of mortgage transactions has remained unsolved This is because of the consent requirement of section 22, which has been criticized for being responsible for the delay and cost which both mortgagor and mortgagee usually face in mortgage transaction. The uncertainties surrounding the enforcement of mortgage transactions has remained unsolved as default by mortgagor is a common practice due to the fact, that the laws on ground to protect mortgagees from defaulting mortgagors who breach their mortgage covenant and vice versa are ineffective.
Aim and Objectives of the Study
The fundamental aim of this research is to critically analyze and attempt to unravel the law and pratise of with mortgage in ngeria. Specifically the study seeks to:
i. To identify the provision of the Land Use Ac in Nigeria that has hindered the use of land as security for loan in mortgage transaction.
ii. To examine how the incident of default by mortgagors of their essential obligations is addressed under the real English property law and the law of mortgage in Nigeria also proffer plausible solutions that will make mortgage transactions more secure, favourable and rewarding.
iii. To identify hindrances to the enforcement of legal provision in mortgage transactions and examine the legal machinery and laws on ground and its inability and inadequacy to prevent, enforce and nip in the bud default by mortgagors to liquidate indebtedness.
The Scope of Study
The research work seeks to look at the practicability of the English law of real property in Nigeria and law affecting mortgage of landed property in Nigeria. This research also seeks to examine the hindrances, inadequacies and bottlenecks in mortgage transactions and the lack of a well defined legal framework.
This research used the doctrinal research method, which is library oriented. The materials used are primary documents such as legislations (legislative enactment), decision of superior courts of records (case law) and secondary documents such as discussions, analysis and criticisms made by legal luminaries in textbooks and periodicals, articles and journals.It also used the Empirical method, which is field oriented research through collection of facts and data through interview. This research was partly conducted in the Land registry in Kaduna State where some facts and data were collected from the principal estate officer (Deed) and deed registrar, bureau of lands, survey and country planning, Governors office, Kaduna.