Notes on Creation of Mortgages: Legal Requirements
in Ghana and Africa
Introduction
A mortgage is a legal agreement where a borrower (mortgagor) secures a loan by
pledging property to a lender (mortgagee). In Ghana and across Africa, the
creation of mortgages is governed by statutory provisions, case law, and legal
principles aimed at ensuring the protection of both parties' rights. Mortgages
are critical in facilitating access to credit and investment opportunities,
particularly in real estate.
Legal Framework Governing Mortgages in Ghana
Governing
Legislation
Land
Act, 2020 (Act 1036): The primary legislation regulating land
transactions, including mortgages, in Ghana.
Borrowers
and Lenders Act, 2020 (Act 1052): Governs the relationship between borrowers and
lenders, ensuring transparency and fairness.
Companies
Act, 2019 (Act 992): Regulates corporate entities creating mortgages
over company property.
Requirements
for Creating a Mortgage
Written
Agreement: Mortgages
must be documented in writing as required by Section 1 of the Land Act,
2020.
Execution
by Parties: The
agreement must be signed by both the mortgagor and mortgagee. In the case
of corporate entities, the company seal or authorized signature must be
affixed.
Description
of the Property: The mortgaged property must be clearly described to
avoid disputes.
Registration: Mortgages
must be registered with the Lands Commission in Ghana to become valid and
enforceable against third parties.
Consideration: A valid
mortgage must be supported by consideration, often in the form of a loan
or financial facility provided by the mortgagee.
Types
of Mortgages Recognized in Ghana
Legal
Mortgage: Created
when the legal interest in the property is transferred to the mortgagee
as security.
Equitable
Mortgage: arises
where the mortgagor pledges documents of title as security without
transferring legal ownership.
Perfection
of Mortgages
Stamp
Duty: Payment
of stamp duty on the mortgage instrument is mandatory.
Land
Title Registration: Registration under the Land Title Registry or Deeds
Registry ensures the mortgage's priority and enforceability.
Rights
and Obligations
Mortgagor: Right to
redeem the property upon repayment of the loan.
Mortgagee: Right to
foreclose or sell the property in case of default, subject to legal
procedures.
Mortgages in Africa: General Perspective
Regional
Legal Systems
Common
Law Jurisdictions (e.g., Nigeria, Kenya): Mortgage laws align with
principles similar to those in Ghana, requiring formal agreements,
registration, and compliance with property laws.
Civil
Law Jurisdictions (e.g., Francophone Africa): Mortgages are governed
by the OHADA Uniform Act on Secured Transactions, emphasizing notarial
acts and public registration.
Key
Legal Requirements Across Africa
Formalities: A
mortgage must be documented in writing, specifying the terms, property
description, and repayment conditions.
Registration: Legal
frameworks in most African countries mandate registration at appropriate
land registries for enforceability.
Consent
and Authorization: Spousal consent or board resolution (for companies)
is often required to mortgage property.
Compliance
with Local Land Laws: Mortgaged property must meet eligibility
requirements under local land tenure systems.
Challenges
in Mortgage Creation
Inadequate
Land Records: Limited documentation of land titles can hinder the
creation and registration of mortgages.
High
Interest Rates: Borrowers often face challenges due to high
borrowing costs across the continent.
Limited
Access to Finance: Financial exclusion, particularly in rural areas,
reduces the use of mortgages as a financing tool.
Innovations
and Trends
Digital
Land Registries: Countries like Rwanda have introduced electronic
land registration to streamline the mortgage creation process.
Public-private
partnerships: collaborative efforts to provide affordable housing
and mortgage financing are gaining traction.
Conclusion
The creation of
mortgages in Ghana and Africa requires strict adherence to legal formalities to
ensure validity and enforceability. While Ghana's Land Act 2020 and related
legislation provide a robust framework, challenges such as land tenure
complexities and financial barriers remain prevalent across the continent.
Streamlining registration processes, digitizing land records, and enhancing
financial accessibility are critical for leveraging mortgages as a tool for
economic development.
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