Notes on Mortgage Rights and Obligations of Parties—Obligation to Account in Ghana and Africa
Introduction
The obligation
to account is a critical
duty imposed primarily on the lender (mortgagee) in a mortgage transaction. It
requires the lender to maintain accurate records of all financial dealings
related to the mortgage and to provide an account of the proceeds if the
mortgaged property is sold. This obligation ensures transparency, protects the
borrower (mortgagor) from financial exploitation, and facilitates fair
resolution in the event of disputes.
In Ghana and
across Africa, the obligation to account is governed by statutory laws, common
law principles, and the specific terms of the mortgage agreement.
Legal Basis in Ghana
In Ghana, the
obligation to account arises under the Mortgages Act, 1972 (NRCD 96), the Land Act,
2020 (Act 1036), and general
equitable principles. These laws mandate lenders to provide clear and accurate
accounts, particularly in situations where the lender takes possession of or
sells the mortgaged property.
1. Scope of the Obligation
The lender’s
obligation to account encompasses the following:
Accurate
recording of payments made by the borrower, including loan repayments and
interest.
Proper
documentation of expenses incurred in managing the mortgaged property.
Transparent
disclosure of proceeds from the sale of the property.
Refund of
any surplus proceeds to the borrower after loan recovery and deduction of
expenses.
2. When the Obligation is Triggered
The obligation to
account is triggered under the following circumstances:
Borrower’s
Request: A borrower
may request an account at any point to verify the status of their loan or
repayment progress.
Exercise
of Lender’s Remedies: When the lender exercises the right to take
possession or sell the property, they must provide a detailed account of
all proceeds and expenses.
Discharge
of Mortgage: At the end
of the mortgage term, the lender must provide an account showing that the
loan has been fully repaid and the mortgage discharged.
Legal Basis Across Africa
The obligation to
account is recognized in other African jurisdictions as well, with specific
provisions tailored to local contexts.
1. Nigeria
Under the Conveyancing Act of 1881 and relevant
Nigerian property laws, mortgagees are required to account for all dealings
related to the mortgaged property. This includes proceeds from sales, rental
income (if applicable), and expenses incurred. Borrowers can seek judicial
intervention if the lender fails to provide an account.
2. Kenya
The Land Act,
2012, in Kenya,
outlines the obligation of mortgagees to provide accounts, particularly in the
event of default and property sale. Courts in Kenya have consistently
emphasized the need for transparency in mortgage transactions.
3. South Africa
In South Africa,
the National
Credit Act and other
property laws impose a duty on lenders to provide regular statements of account
to borrowers. This ensures that borrowers are aware of their financial
obligations and the lender’s actions regarding the property.
Importance of the Obligation to Account
1. Protecting Borrowers
The obligation to
account prevents lenders from exploiting borrowers by charging excessive
interest, fees, or hidden costs. Borrowers have the right to challenge
discrepancies in the lender’s accounts.
2. Promoting Transparency
Transparency in
financial dealings fosters trust between lenders and borrowers. Accurate
accounting ensures that all parties are aware of their rights and
responsibilities.
3. Facilitating Dispute Resolution
Detailed accounts
serve as evidence in cases of disputes between lenders and borrowers. Courts
rely on these records to determine whether the lender has acted lawfully and in
good faith.
4. Ensuring Fair Distribution of Sale Proceeds
In cases where
the mortgaged property is sold, the obligation to account ensures that sale
proceeds are applied appropriately.
Repayment of
the outstanding loan amount.
Payment of
sale-related expenses.
Refund of
any surplus to the borrower.
Practical Aspects of Accounting
1. Record-Keeping
Lenders must
maintain comprehensive records of all transactions related to the mortgage,
including:
Loan
disbursement details.
Repayment
history, including dates and amounts.
Interest
calculations.
Expenses
incurred in managing or selling the property.
2. Periodic Statements
Borrowers are
entitled to periodic statements of account showing:
Outstanding
loan balance.
Interest and
fees charged.
Payments
received.
3. Audit and Oversight
In some African
countries, regulatory authorities oversee mortgage transactions to ensure
compliance with accounting obligations. This reduces the risk of fraud or
misconduct by lenders.
Challenges in Ghana and Africa
1. Lack of Standardized Practices
In some
jurisdictions, the absence of standardized accounting practices makes it
difficult to ensure uniform compliance among lenders.
2. Borrower Illiteracy
Low levels of
financial literacy among borrowers in parts of Africa limit their ability to
understand and verify the accounts provided by lenders.
3. Judicial Delays
Borrowers who
dispute a lender’s account often face delays in obtaining justice due to slow
judicial processes in many African countries.
4. Unregistered Properties
The prevalence of
unregistered or informally held properties complicates the accounting process,
as ownership and transaction records may be incomplete.
Remedies for Breach of the Obligation to Account
Borrowers in
Ghana and other African countries have legal remedies if a lender fails to
fulfill their obligation to account:
Demand
for Account: Borrowers
can formally request an account from the lender.
Legal
Action: Borrowers
may file a lawsuit seeking judicial intervention to compel the lender to
provide an account.
Compensation: Courts can
award damages to borrowers if the lender’s failure to account causes
financial loss.
Conclusion
The obligation
to account is a cornerstone
of mortgage law in Ghana and Africa, ensuring transparency, fairness, and
accountability in mortgage transactions. It protects borrowers from
exploitation, promotes trust between lenders and borrowers, and facilitates the
equitable resolution of disputes.
Lenders must
comply with their accounting obligations by maintaining accurate records,
providing periodic statements, and disclosing all financial dealings related to
the mortgage. Borrowers, on the other hand, should be proactive in monitoring
their accounts and seeking redress if discrepancies arise. The enforcement of
this obligation is vital for the development of a robust and fair mortgage
system across Africa.
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