Notes on
Formalities and Documentation: Mortgage Deed in Ghana and Africa
Introduction
The mortgage deed is a central document in the creation of a mortgage. It
outlines the rights and responsibilities of both the mortgagee (borrower) and
the mortgagee (lender), detailing the terms and conditions of the loan secured
against a property. In Ghana and many African countries, the mortgage deed
serves as the foundation for legally binding the borrower and lender to the
terms of the loan agreement and provides the legal framework for the
enforcement of the mortgage if the borrower defaults. The deed must comply with
the legal formalities stipulated by local laws to be valid, and its contents
must meet specific requirements to ensure its enforceability.
Key Legal
Framework for Mortgage Deeds in Ghana
Legal
Basis of Mortgage Deeds in Ghana
In Ghana, mortgage deeds are governed primarily by the Land
Act, 2020 (Act 1036), the Borrowers and Lenders Act,
2020 (Act 1052), and the Companies Act, 2019 (Act 992) for
corporate entities. These laws stipulate the creation, registration, and
enforcement of mortgages, ensuring that mortgage deeds are executed in a
legally recognized manner.
The Land Title Registration Act, 1986
(PNDCL 152) and the Land Registry Act, 1962 (Act 122) also provide the
legal framework for registering mortgage deeds. These laws govern whether the
property is under the Land Title Registration system or the Deeds
Registration system, impacting the way the mortgage deed is processed
and registered.
Types
of Mortgage Deeds in Ghana
Legal Mortgage: This is a formal mortgage that
involves the transfer of legal title to the lender as collateral for the
loan. It is subject to detailed registration with the Lands Commission.
Equitable Mortgage: In this
type of mortgage, the borrower offers the property as collateral without
transferring full ownership, and registration may not always be
necessary. It’s commonly used when the borrower does not wish to part
with the title deed but offers the property’s value as security.
Formalities
and Requirements for Mortgage Deeds in Ghana
Written
Agreement
A mortgage deed must be a written document signed by both the mortgagor
and the mortgagee. It cannot be a verbal agreement, as the written
document serves as the legal evidence of the transaction. The document
must detail the following:
The parties involved: full
names, addresses, and other identifying details of the borrower and the
lender.
The loan amount: The total amount of money being
borrowed and secured against the property.
The property description: A
detailed description of the property being mortgaged, including its
location, size, and boundaries. In some cases, a surveyor’s report or
valuation document may be required.
Terms and conditions: the
repayment schedule, interest rate, penalties for default, and any other
conditions related to the loan.
Covenants: Both parties must agree to
certain promises or covenants, such as the borrower’s agreement to
maintain the property and pay taxes or the lender’s agreement to release
the mortgage upon full repayment.
Signatures
and Witnessing
The mortgage deed must be signed by both the
mortgagor and the mortgagee, and in some cases, the spouse of the
mortgagor (if applicable) must also sign to give consent.
Witnesses: Depending on the jurisdiction,
independent witnesses may be required to verify the authenticity of the
signatures. This can be particularly important in cases where disputes
may arise in the future.
Notarization
and Legal Authentication
While notarization is not always mandatory, it adds an extra layer of
authenticity to the mortgage deed. Notarizing the deed ensures that the
signatures and the parties’ consent are verified by a legal professional,
and it can make the document easier to enforce in case of disputes.
Stamp
Duty
In Ghana, a mortgage deed is subject to stamp duty under the Stamp
Duty Act, 2005 (Act 689). The stamp duty is a form of
taxation that validates the mortgage deed and is typically paid at the
time of registration. The amount of stamp duty depends on the value of the
property being mortgaged.
Content
and Clauses of a Mortgage Deed
Recitals
The recitals provide background information and context for the mortgage.
They explain the reasons for the mortgage, such as the borrower requiring
a loan and offering the property as security. The recitals also confirm
the identity of the parties and the type of transaction taking place.
Mortgage
Provisions
The main body of the mortgage deed contains the provisions outlining the
specific terms and conditions, including:
Principal loan amount: The sum
of money being borrowed.
Repayment schedule: This
includes the amount and frequency of payments to be made by the borrower.
Interest rate: The agreed-upon rate of interest
on the loan, whether fixed or variable.
Default clauses: These clauses specify what will
happen in the event of default, including late payment fees, interest on
overdue payments, and the right of the lender to foreclose on the
property.
Covenants
Covenants are promises made by both parties. The borrower may covenant to
maintain the property, pay property taxes, and ensure it is not sold
without the lender’s consent. The lender may covenant to allow the
borrower to retain possession of the property as long as they meet the
mortgage terms.
Events
of Default
The mortgage deed will outline the circumstances under which the mortgagee
(lender) can take action, including the foreclosure of the property.
Typical events of default include the failure to make timely payments,
breach of property maintenance obligations, or insolvency of the borrower.
Right
to Foreclose
The lender’s right to foreclose is a critical component of the mortgage
deed. It allows the lender to seize and sell the property if the borrower
defaults on the loan terms. The process for foreclosure is typically
outlined in detail, specifying the legal steps required to enforce the
lender’s rights.
Term
of the Mortgage
The deed will specify the duration of the mortgage, including when it is
to be fully repaid. Mortgages can be short-term (5-10 years) or long-term
(up to 30 years), depending on the loan agreement.
Registration
of Mortgage Deeds in Ghana
Deeds
Registration System
For properties registered under the deeds system, mortgage deeds must be
submitted to the Lands Commission for registration. The document is
recorded, but the system does not guarantee the validity of the title, and
it is up to the parties involved to ensure the property is properly
documented.
Land
Title Registration System
For properties under the Land Title Registration system,
mortgage deeds are registered with the Land Title Registry, which
guarantees the title of the property and creates a legal interest in the
mortgage. The mortgage is noted on the property’s title register,
providing protection to the lender and ensuring priority over other
claims.
Registration
Process
The mortgage deed must be submitted along with the property title
documents, proof of identity, and payment of relevant registration fees,
including stamp duty. The registration process provides public notice of
the mortgage and ensures the lender’s legal interest is protected.
Formalities
and Documentation of Mortgage Deeds in Africa
Common
Legal Frameworks Across Africa
While individual countries in Africa may have different legal systems, the
process of creating mortgage deeds is generally similar across the
continent. Countries like Nigeria, Kenya, and South Africa follow a
similar process for executing, notarizing, and registering mortgage deeds.
In Nigeria, the Land
Use Act governs land ownership and mortgages, and the
registration of mortgage deeds is done at the Land
Registry.
In Kenya, the Land
Registration Act, 2012, requires the mortgage deed to be
submitted for registration at the Land Registry to secure
the lender’s interest.
In South Africa, mortgages
are governed by the Deeds Registries Act, and the
mortgage deed must be registered with the Deeds Office.
Documentation
Requirements
Proof of Ownership: Similar
to Ghana, African countries require the mortgagee to provide evidence of
land ownership, which may include title deeds, land certificates, or
customary land agreements.
Spousal Consent: In countries with joint ownership
laws, the spouse must give consent before a mortgage can be created.
Valuation Reports: A
property valuation report is often required to determine the property’s
market value.
Notarization: Notarization is widely used
across Africa to authenticate mortgage deeds, particularly in countries
with civil law systems.
Challenges
in Documentation
Customary Land Ownership: In many
African countries, land ownership is still governed by customary law,
which often lacks formal documentation, making the creation of mortgage
deeds complex.
Bureaucratic Hurdles: The
process of registering mortgage deeds can be slow due to inefficient land
administration systems.
Awareness and Education: In rural
areas, there may be a lack of understanding regarding the importance of
formalizing mortgage agreements through deeds.
Conclusion
The mortgage deed is a vital document in
securing loans against property in Ghana and across Africa. While the
formalities and documentation required for creating mortgage deeds are broadly
similar, challenges such as land tenure issues, delays in registration, and the
complexity of customary land ownership remain significant obstacles.
Streamlining land registration processes, educating the public, and improving
access to legal resources will go a long way in facilitating secure and
efficient mortgage transactions across the continent.
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