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Full Project – A CRITIQUE OF THE EFFECT OF LAND USE ACT ON LEGAL MORTGAGES IN NIGERIAN FINANCIAL INSTITUTIONS

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ABSTRACT

This thesis is captioned ‘A Critique of the Effect of Land Use Act on Legal Mortgages in Nigerian Financial Institutions.’ It brought to the fore the hindrance the consent provision has brought into mortgage transactions. The doctrinal research methodology was used which involved case law and statutory provisions founded on basic principles of law using the primary and secondary method of data collection and analysis all culminating in the basic findings that; the concept of legal mortgages was well developed under the existing law (e.g. Property and Conveyancing Law) prior to the promulgation of the Land Use Act. The consent provision in the LUA merely introduced unnecessary controversy which has hindered effective trade and commerce. The researcher examined mortgage as a concept and determined the effect of consent as contained in section 22 of LUA on mortgages. Findings showed that the consent provision has had a suffocating effect on mortgage transactions thereby hindering trade and commerce. This equally had negative effect on development.
The consent provision merely introduced needless controversy into mortgage transactions since there was no defect in the existing old statutes remedied, the LUA having saved existing laws on mortgages. A holistic amendment was recommended to expunge the Land Use Act from the Constitution for easy amendment, removing the consent provision from the LUA. Once an individual has secured a valid legal title to land, he should be allowed the free will to deal with such land within the subsisting tenure contained therein provided such transactions shall be registered at the appropriate land registry to detect encumbrances. In the unlikely event of the LUA not been amended, the researcher recommended equitable mortgage between the mortgagor and mortgagee to enhance smooth business relationships.

Certification …………………………………………………………….iii
Dedication ……………………………………………………………..iv
Acknowledgements ……………………………………………………….v
Table of Contents ……………………………………………………….vi
Table of Cases .………………………………………………………… ix
List of Abbreviations …………………………………………………..xxii
Table of Statutes …………………………………………………………xxv
Abstract ………………………………………………………………..xxix

Chapter One ……………………………………………………………… 1
Introduction .…………………………………………………………….. 1
1.1 Background to the Study ……………………………………… 1
1.2 Statement of the Problem …………………………………….. 6
1.3 Research Questions …………………………………………… 15
1.4 Chapter Analysis ……………………………………………… 15
1.5 Justification/Significance of the Study ……………………….. 16
1.6 Aim and Objectives of the Study ………………..…………….17
1.7 Research Methodology ……………………………………….. 17
1.8 Literature Review ………………………………………………19
1.9 Scope and Limitation of the Study ………………………. 26
1.10 Expected Contribution to Knowledge …………………….26

Chapter Two:
Conceptual Clarification and Foundation for Mortgages …………… 28
2.1 Introduction …………………….……………………………….28
2.2 Definitions and Legal Concepts of Land …..…………………….28
2.3 Land Tenure ………………………………….……………… 40
2.4 What is Consent ……………………………………………… 42
2.5 Modes of Securing Credit ……..……………………………..43
2.6 A Pledge …………………………………………………….. 44
2.7 A Lien …………………….………………………………….. 51
2.8 Conditional Sale ………………………………………………56
2.9 Bank-Customer Relationship ……………………………….. 58
2.10 Mortgage and Mortgage Loan ……………………………….. 67
2.11 Security ………………………………………………………. 78
2.12 Guarantee and Surety I Mortgages ………………………….. 79
2.13 Auction and Auction Sale …………………………………… 82
2.14 Auctioneer’s Law ………………………………………….. 96
2.15 Duty of an Auctioneer ………………………………………. 97
2.16 Revocation and Compensation ……………………………. 102
2.17 What is Trust and Certificate of Occupancy
Under the Land Use Act LFN 2004 ………………………… 114

Chapter Three:
Evolution of Land Ownership and Methods of Acquiring
Property under the Land Use Act Cap L5 LFN 2004..………………. 119
3.1 Introduction …………………………………………………….119
3.2 Evolution of Land Ownership in Nigeria …………………….. 119
3.3 The Application of the Principle of
Quicquid Plantatur Solo Solo Cedit ………………………….. 124
3.4 Modes of Acquisition of Title to Land …………….……….. 128
3.5 Land Tenure Systems and Administration ………….……….. 132
3.6 Land Tenure Systems in Ghana …………………….……….. 134
3.7 Kenya Land Tenure Systems ……………………….……….. 138
3.8 Land Tenure Systems in the Benin Kingdom ………..……… 143
3.9 Documentation in Customary Land transactions …………….. 147
3.10 The Policy of Dualism in Land Tenure System ……………… 148
3.11 The Nature of Statutory Right/ Certificate of Occupancy ………………………………….. 150
3.12 What does Consent Stand for? ………………………………. 156
3.13 Revocation and Compensation …………….………………… 160
3.14 Constitutionality of the Land Use Act ………………………. 172
3.15 Proof of Title to Land ………………………………………… 176

Chapter Four
Creation of Mortgages under the Extant Laws ………..……………181
4.1 Introduction …………………………………………… ………… 181
4.2 Creation of Legal Mortgages ……………………………………….181
4.3 Mortgages of Choses in Action and Chattels ……………………… 188
4.4 Mortgages under the Land Use Act ………………………………. 190
4.5 Refusal of Governor or Local Government to Grant Consent ………200
4.6 Requirements for Mortgage Loan ………………………………… 202
4.7 Disadvantages of a Mortgage under the Land Use Act 2004……… 203

Chapter Five
Mortgage Institutions, Banking Relationships and Credits ………. 206
5.1 Introduction …………………………………………….…… 206
5.2 Statutory Regulation of Mortgage Institutions …..…………. 211
5.3 Mortgage Loan ………………………………………………214

Chapter Six
Mortgages and Legal Recovery ……………………..………………225
6.1 Introduction …………………………………………………225
6.2 Mortgage or Borrowing by Corporations ………………….. 228
6.3 Legal Right to Redeem and Equity of Redemption ……….. 240
6.4 Rights of a mortgagor ………………………………………247
6.5 Rights of a Mortgagee ……………………………………. 248
6.6 Auction Sale of Security by Mortgagee ………………..… 284
6.7 Injunction to Restrain a Mortgagee from Selling a

Mortgage Security………………………………………… 298
6.8 Sale of Security by Mortgagor …………………………… 304
6.9 Protection of Mortgage Security …………………………. 306
6.10 Protection of an Innocent Purchaser ……………………… 308
6.11 Discharge of Mortgages …….……………………………. 309
6.12 Perfection of a Valid Legal Mortgage ……………………. 312
Chapter Seven
Summary, Conclusion and Recommendations ………………..… 315
7.1 Summary of Finding/Summary Conclusion ……..………. 315
7.2 Recommendations ………………………………………… 320
7.3 Contribution to Knowledge …………………………….… 321
7.4 Recommendation for further Studies …………………….. 321
Bibliography ……………………………………………………….. 323

CHAPTER ONE

INTRODUCTION
1.11 Background to the Study
The Land Use Act1 is a revolutionary legislation which swept away all freehold and vested same in the Governor of a State.2 When the Act came into effect on the 29th May 1978, it nevertheless took very many people by surprise as they were confronted with the legal realities of losing their previous freehold grip over land. However, the effectiveness of this novel legal reality is still a subject of controversy.
The Land Use Act provides that, “it shall be lawful for the Governor of a State to grant a statutory right of occupancy in respect of land whether or not such land is in an urban area to any person for all purposes”3 while “it shall be lawful for the Local Government Council to grant a Customary right of occupancy to any person or organization for the use of land in the Local Government Area for agricultural, residential and other purposes.”4
One of the most effective aspects of the Land Use Act is its direct impact on commercial financial activities under which it is stipulated that a certificate of occupancy is required to deal with landed property and that the consent of the Governor must be obtained
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1. Laws of the Federation of Nigeria Cap L5 2004.
2. The Land Use Act was based on four objectives namely; to remove the bitter controversies, resulting at times in the loss of lives and limbs which land is known to be generating; to streamline and simplify the management and ownership of land in the Country; to assist the citizen irrespective of his social status to realize his ambition and aspiration of owing the place where he and his family will live a secure and peaceful live; to enable the government to bring under control the use to which land can be put in all parts of the Country and thus facilitate planning and zoning programs for particular uses. With this objective, Section 1 of Land Use Act provides that “subject to the provisions of this Act, all land 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 provisions of the Act.”
3. Section 5 (1) and (2) Land Use Act Cap L5 Laws of the Federation of Nigeria 2004.
4. Section 6 (1) Subsection (a) Land Use Act Cap L5 Laws of the Federation of Nigeria 2004.
before an individual can assign, mortgage, transfer possession of his landed property5 and financial institutions seem to have dogmatically adhered to this tenet.
Mortgage is an avenue through which certain financial demands, and by extension, creation of wealth can be met. With modern economic development and radical advancement in technology, it becomes imperative to source for funds to meet the challenges posed by rapid industrial advancement.
Hardly can business and commerce develop without capital to fund required projects and trade. Individuals, corporate institutions, property investors etc. will ultimately require fund from financial institutions to meet desired needs. These financial institutions do not readily finance a project for a deserving customer without entering into any form of agreement in the form of contract. Besides entering into an agreement, security is required to ensure that the funds borrowed are secure or at least there is something to fall back on by the lender in the event of default on the part of the customer. This elevates the creditor to the status of a secured creditor, giving him something out of which he is entitled to have his debt paid in preference to an unsecured creditor.6
Securing a debt may be in the form of a pledge, a lien, a conditional sale, a charge or a mortgage.
A Mortgage is a contract for the conveyance of interest in land or assignment of chattels as a security for the payment of a debt, or the discharge of some other obligation for
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5. Section 21 Land Use Act provides that “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 however (a) without the consent of the governor in case where it is to be sold by order of court (b) in other cases without the approval of the appriopriate local government.
part thereof to be alienated by assignment, mortgage, transfer of possession, sublease or otherwise however (a) without the consent of the Governor in cases where the property is to be sold …” (b) in other cases without the approval of the appropriate local government.
6. Chianu, Emeka, Law of Securities for Banks Advances (Mortgage of Land), (Benin: Ambit Press 2007). Page 1.
which it is given and the debt being a thing independent for which the mortgage exists
to secure, remains demandable whatever may happen to the security.7 This definition implies that even if the lender has nothing to fall back on or the security is destroyed, the debt remained demandable. But once the debt is repaid the agreement becomes void and no longer binding. A mortgage is a conveyance of title to property that is given as security for the payment of a debt or the performance of a duty that will become void upon payment or performance according to the stipulated terms.8 In a mortgage transaction there must be a time lapse to ascertain when the mortgagor falls into default.
A mortgage is essentially a proprietary security the substance of which is a right vested in the mortgagee and entitles the latter by virtue of this title to have the rents and profits applied to satisfy his debt and if necessary pay himself off by realizing his security through sale or foreclosure.9 Where a mortgagee exercises his right of entering into possession and collection of rents and profits, the mortgagee is bound to give full account of such collections.
Mortgage transaction has throughout history, been a collection of contradictions and Maitland described it as “one long suppressio veri and suggestio falsi”10 meaning suppression of the truth is equivalent to suggestion of what is false. This is as a result of the disputes that have always arisen between the mortgagor and the mortgagee leading to various interpretations by the law Courts.
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7. Egwummuo, J. N., Principles and Practice of Land Law. (Enugu: Okechukwu Communications 1999). PP 230- 231.
8. Bryan A. Garner, Editor in Chief, Black’s Law Dictionary, (17th Ed.) (USA: West Group St. Paul
MINN 1999). P 933.
9. Smith, I. O., The Law of Real Property in Nigeria. (Lagos: Sambak Graphic Reproduction Ltd. 1995). P 148.
10. Mudsley R. H. and Burn E. H., Land Law: Cases and Materials, 3rd Ed. (Butterworth) London.
Pp 582-583.
Obtaining a mortgage has long been a pursuit that has inspired mixed emotions from hope to fear amid triumphant feelings of achieving the seemingly universal dream—and all the confusion and stress that entails. Theories and practices of the mortgage market have evolved with the ever-changing face of home loans. The history is fraught with booms and busts that have seen rapid expansion and success for individuals and families entering the market as well as recessions and depressions of devastating consequences.
Nevertheless, the mortgage is a widely used form of money lending because, in most cases, the property remains with the debtor in the good faith that the debt will be paid with interest.11 In other words, the mortgage is meant to be a beneficial arrangement for both parties. However, a mortgagee may choose to take over possession before the ink is dry on the mortgage agreement, but by convention most mortgagees leaves the security in possession of the mortgagor.
In Pharmatek Ind. Projects Ltd V. Trade Bank (Nig.) Plc.,12 Nweze JCA gave a lucid definition of a mortgage thus;
a mortgage is a conveyance of a legal or equitable interest in property as a security for the payment of debt or the discharge of some other obligations for which it is given. It is subject to the condition that the title shall be re-conveyed if the mortgage debt is liquidated. The borrower who conveys the property is called the mortgagor. The lender who obtains interest in the property is called the mortgagee. The debt for which the security is created is called the mortgage debt. The substance of a mortgage of land is a right of property vested in the mortgagee. By virtue of this title the latter, namely, the mortgagee, is entitled to have the rents and profits applied to
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11. May John, Home Mortgages. www.randomhistory.com 17/12/2016
12. [2009] All FWLR (Part 495) at 1679 Page 1705
satisfy his debt, and upon default by the mortgagor to liquidate the loan, to enforce the security by sale or foreclosure.
The researcher in his view defines a mortgage as a transaction between two or three persons whether natural or artificial where the mortgagor uses his property as a security to obtain money from a mortgagee with the understanding that upon liquidation of the principal sum including interest, the property/security reverts back to the mortgagor through a release or some other method as per the terms of the transaction or an enabling law. Though a mortgage transaction is usually between a mortgagor and a mortgagee, a third person comes in form of a guarantor who uses his property to secure the loan for the mortgagor.
The Land Use Act did not abrogate the existing law regulating mortgages in Nigeria,13 but requires that there must be a certificate of occupancy 14 while the consent of the Governor must be sought and obtained.15 It thus renders null and void any transaction or instrument which purports to confer on or vest in any person any interest or right over land unless in accordance with the Act.16 This has generated so much controversy than the law makers themselves anticipated.
The existing law on mortgages can be found in the Property and Conveyancing Law 17 in
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13. Section 48 Land Use Act provides that “all existing law relating to the registration of title to, or interest in, land or the transfer of title to or any interest in land shall have effect subject to such modifications (whether by way of addition, alteration or omission) as will bring those laws into conformity with this Act or its general intendment.”
14. Ibid foot note 5.
15. Section 22 Land Use Act which provides that a holder of a statutory right of occupancy shall not alienate his right of occupancy or any part thereof by assignment, mortgage, transfer of possession, sublease or otherwise without the consent of the Governor first had and obtained.
Sub section (2) provides that the Governor when giving his consent to an assignment, mortgage or sublease may require the holder of a statutory right of occupancy to summit an instrument executed in evidence of the assignment, mortgage or sublease and the holder shall when so required deliver the said instrument to the Governor in order that the consent given by the Governor under the Act may be signified by endorsement thereon.
16. Section 26 Land Use Act Cap L5 Laws of the Federation of Nigeria 2004.
17. Property and Conveyancing Law (PCL) Cap 129, Laws of Western Region, 1959 now applicable to Edo State, Delta State, Ekiti State, Ogun State, Ondo State, Osun, Oyo and parts of Lagos State.
the South Western States including the old Mid-Western Region now Edo and Delta States, with the exception of parts of Lagos which is governed by the Registration of Titles Law18 and other parts of the Country which uses the Conveyancing Act19 which is a statute of general application.

1.12 Statement of the Problem
The Land Use Act as contained in the legislation and implemented stands as a two edged sword. The LUA is a laudable legislation as it has afforded government the opportunity to acquire land for development whether Federal or State Government.
However, the LUA is bedeviled by so many controversies.
The LUA introduced a new dimension to mortgages as banks and other institutions insist that an intending mortgagor must produce a certificate of occupancy duly signed by the Governor of a State or his delegate as a preliminary step to obtaining a loan facility from the Bank. One major change the Land Use Act strives to achieve is that by the words of the statute, it swept away all existing interest held as freehold or fee simple which before the LUA gave unlimited term of years to Land owners. This is why Banks will not accept anything other than a statutory right of occupancy evidenced by a certificate of occupancy from an intending mortgagor.
The Property and Conveyancing Law provides that “a mortgage of an estate in fee simple shall only be capable of being effected at law either by a demise for a term of years absolute, subject to a provision for cesser on redemption, or by a charge
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18. Registration of Titles Law, Lagos State Cap R4 2003.
19. Conveyancing Act 1881 which is a Statute of general application.
expressed to be by way of legal mortgage”20 and a first mortgage shall take a term of
three thousand years from the date of the mortgage.21 Under the Land Use Act, a certificate of occupancy issued by a State has a maximum life span of Ninety-Nine years (this duration may differ in some cases) though the duration is unspecified in the Act. This implies that where a mortgage is created therein, its period can only be for the unexpired residue. A mortgage created under the LUA can only be for the period unexpired residue no matter how large or small such period might be. This implies that if the unexpired residue is for five years, an intending mortgagor must stay a day lesser from such term of unexpired residue.
The Land Use Act provides that where reference is made to a conveyance of fee simple in creating a mortgage in the existing law, an assignment of a right of occupancy is substituted and where the Property and Conveyancing Law requires that a mortgage of Land can only be effected by the demise of fee simple, where the estate is freehold or by sub-demise where the estate is leasehold, a sub-grant or sub-undergrant would be substituted respectively.22
It confers a borrowed title on an existing holder of a statutory right of occupancy evidenced by a certificate of occupancy otherwise known as C of O. it must be founded on an existing root of title otherwise it can be impeached where there is a superior title rooted in customary law. The reality of the provision of the Act which swept away
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20. Section 108 (1) Property and Conveyancing Law (PCL) Cap 129, Laws of Western Region 1959 now applicable to Edo State, Delta State, Ekiti State, Ogun State, Ondo State, Oyo State and parts of Lagos State.
21. Section 108 (2) Property and Conveyancing Law(PCL) Cap 129, Laws of Western Region 1959 now applicable to Edo State, Delta State, Ekiti State, Ogun State, Ondo State, Oyo State and parts of Lagos State. Sub section (a) provides that a first or only mortgage shall take a term of three thousand years from the date of the mortgage.
22. Ibid foot note 9. P 148.
existing rights are obviously in doubt since a statutory certificate of occupancy itself
can only be founded on an existing legal right otherwise it becomes a worthless piece of paper when challenged in a Court of competent jurisdiction.23 The existing legal right referred to here can be traced to customary law on which such title must be rooted. In Ogunleye V. Oni24 the supreme court held:
… this is the weakness of a certificate of occupancy issued in such a case. It is never associated with title. Thus, where as in this case, a certificate of occupancy has been granted to one of the claimants who has not proved a better title, then it has been granted against the letter and spirit of the Land Use Act.
In Ogunola V. Eiyekole25 the Court questioned whether;
…having declared that the Appellants are entitled to customary right of occupancy, can section 6(1) of the Land Use Act be invoked to grant the same piece of land to the Respondents without revocation of the customary right of occupancy of the appellant? And the Court held; I don’t think it can be done…
The controversy generated by the Land Use Act on mortgages assumed a frightening dimension as mortgagors seek to impeach an entire mortgage transaction on the ground that no consent of the Governor was sought and obtained. The case of
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23. Ekpu, A.O.O., “The Pernicious Wars for Land: What Hope for Armistice,” Inaugural Lecture of Ambrose Alli University, Ekpoma, Thursday 28th February 2013. P 30.
See Oluhunde V. Adeyoju [2000] 10 NWLR (Part 676) 562; Iguh JSC held: “a certificate of statutory or customary right of occupancy issued under the Land Use Act, 1978 cannot be said to be conclusive evidence of any right, interest or valid title to land in favour of the grantee. It is at best only a prima facie evidence of such right, interest or title without more and may in appropriate cases be effectively challenged and rendered invalid, null and void.
See also Madu V. Madu [2008] All FWLR (Part 414) 1604 at 623 where it was held that a certificate of occupancy raises a presumption that at the time it was issued, there was not in existence a customary owner whose title has not been revoked … if it is proved that another person had a better title to the land before the issuance of a certificate of occupancy in which case the certificate of occupancy will stand revoked by the Court.
24. [1990] 2 NWLR (Pt. 135) 745. See also Oluhunde V. Adeyoju [2000] 10 NWLR (Part 676) 562.
25. [1990] 2 NWLR (Part 146) at 642.
Savannah Bank of Nigeria Ltd V. Ajilo26 is one of the earliest cases that brought deep awareness to many. The Respondents who were Plaintiffs at the High Court of Lagos State by a deed of mortgage secured a loan facility from the 1st Appellant Bank and when the Respondents defaulted, the 2nd Appellant was appointed to auction the property located at No. 1, Oyekanmi Street off Itire Road, Mushin, Lagos used as collateral for the loan. The Respondents contended that since the consent of the Governor was not obtained the transaction was void. The issue for determination was whether a person, who is a deemed grantee27 of a right of occupancy requires the consent of the Governor before he can transfer, mortgage, or otherwise dispose of his interest in the right of occupancy pursuant to the consent provision. The Court in declaring the transaction null and void for lack of consent held:
“that both actual and deemed grants being grants, the deemed grants being regarded by the law as if made by the governor also become subject to legal controls as if granted by the governor.”
In Awojugbagbe Light Industries Ltd V. Chinukwe28 the Appellant sought to void a mortgage transaction on the ground of lack of consent prior to the granting of the loan. The reality of the transaction as found by the Court was that the Appellant was granted the loan in 1979 and immediately thereafter started to use the facility. The consent was given on the 12th day of September 1985 while the deed was dated 10th day of October 1985. On the face of the exhibits before the Court, the Supreme Court affirmed the decision of the lower Courts which held;
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26. [1989] 2 NWLR (Part 97) 305.
27. Section 34 Land Use Act, Cap L5 Laws of the Federation of Nigeria 2004.
28. [1995] SCNJ 162
“the Governor’s consent having been given before the mortgage deed is dated is in my Judgment valid and lawful by virtue of section 22 of the Land Use Act 1978” which states as follows; ‘it shall not be lawful for the holder of a statutory right of occupancy granted by the government to alienate his right of occupancy or any part thereof by assignment, mortgage, transfer of possession, sublease or otherwise however without the consent of the Governor first had and obtained.’
The issue of who should obtain consent is a mirage as mortgagors turn round to seek impeachment of consent duly obtained on the ground that such consent was not given by the appropriate authority or that consent was not obtained at all. The decision of the courts hasn’t been encouraging as most transactions have often been declared null and void for lack of consent. This gives opportunity to some debtors to walk away freely. Our courts have departed from the judgment in ACB V. Oladipo28a that though a bill of sale is void, a debtor is liable for money had and received.
What then is the essence of consent? The researcher is of strong opinion that consent is unnecessary. An individual with a certificate of occupancy should be allowed the free will to deal or trade as such within the limit of the unexpired residue provided such transaction shall be registered at the appropriate land registry.
In Yaro V. Arewa Construction Ltd29 the Court held;
“it is after the mortgage has been executed that obtaining of the Governor’s consent
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28a. [1951] 13 WACA 285.
29. [2008] All FWLR (Part 400) at 603 pages 639 – 640.
falls due. It is normally after the parties have agreed that the deed of assignment is prepared and sent for Governor’s consent.”
In a mortgage transaction the holder of a statutory right of occupancy is certainly not prohibited by section 22(1) of the Land Use Act from entering into some form of negotiations which may end up with a written agreement for presentation to the Governor for his necessary consent or approval. This is because the Act does not prohibit a written agreement to transfer or alienate land and the onus of securing the consent of the Governor lies on the mortgagor.30
To appreciate a better understanding of mortgage under the Land Use Act, a brief discussion of the historical evolution of land development vis-a-vis land tenure system is imperative. The definition and concept of land will be very useful in this research work as it will assist to enhance a better understanding of the law and principles of mortgage. Land has been defined as an immovable and indestructible three-dimensional area consisting of a portion of the earth’s surface, the space above and below the surface and everything growing on or permanently affixed to it.30a
The position of the existing law from the first standpoint in the creation of mortgage is that it has been revolutionized. Whereas under the existing law like the Property and Conveyancing Law, a mortgage can be created in various ways namely; legal mortgage, charge and equitable mortgage, only legal mortgage can be created under
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30. Monkom V. Odili [2010] All FWLR (Part 536) at 542 Page 570.
30a. Op Cit. Black’s Law Dictionary. 17th Ed. P 881
the Land Use Act by virtue of the requirement of a statutory right of occupancy and consent. The consent provision renders null and void any transaction or 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 the Act.31 As a result of this provision and the plethora of cases arising there from, financial institutions no longer engage in mortgages unless there is a statutory certificate of occupancy as a prerequisite to any discussion. Such institutions also ensure that the Governor’s consent is obtained before disbursement of funds.
The second issue is whether it was necessary to introduce the consent provision into the Land Use Act in view of the fact that a mortgage transaction is inchoate without the consent of the Governor. A careful perusal of the consent provision would reveal the cumbersome nature a would be mortgagor has to go through to secure the consent of the Governor to mortgage his statutory right of occupancy. In Savannah Bank of Nigeria Ltd V. Ajilo32 Obaseki, J.S.C. held that:
the consent provision is bound to have a suffocating effect on the commercial life of the land and house owing class of society who use their properties to raise loans and advances from the banks. I have no doubt that it will take the whole working hours of a state Governor to sign consent papers without going half way if these clauses are to be implemented. These areas of the Land Use Act need urgent review to remove their problem nature.
It is obvious from the foregoing analysis that the consent provision is unnecessary.
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31. Section 26 Land Use Act Cap L5 Laws of the Federation of Nigeria 2004.
32. Supra
What does an individual who has been granted a statutory right of occupancy evidenced by a certificate of occupancy need consent for. What is required is registration at the appropriate land registry.
A third point worthy of note is whether the law courts clearly settled the legal controversy arising from the consent provision in the Land Use Act. A careful perusal of the decided cases and the present practical reality would attempt an answer to this poser. In Savannah Bank of Nigeria Ltd V. Ajilo33 where a mortgagee, who was a deemed grantee mortgaged his property without the consent of the Governor to the mortgage transaction, the court declared the mortgage transaction null and void. One issue that did not arise in this case was whether the Plaintiff/Respondent could seek to set aside the transaction for failure to obtain consent which was primarily his responsibility thereby benefiting from his own wrong. Unfortunately, this was not one of the issues for determination in the Ajilo’s case. In Awojugbagbe’s case34 the Governor gave his consent to the mortgage deed. The contention was that since the Governor gave his consent after the execution of the mortgage deed, it was null and void. Though the Supreme Court dismissed this contention, the Act nevertheless provides that the Governor when giving his consent to an assignment, mortgage or sublease, the holder shall when so required deliver the said instrument to the Governor in order that the consent given by the Governor may be signified by endorsement thereon.35 Had this provision been carefully considered in this case, so much energy
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33. Supra
34. Supra
35. Section 22(2) Land Use Act Cap L5 Laws of the Federation of Nigeria 2004.
would not have been dissipated by extending invitations to amici curae to assist the court to reach a decision. This led to the assumption that the plethora of cases cannot be said to have safely settled the issue of consent.
The fourth stand point is whether there was any defect in the existing law regulating mortgage which the Land Use Act sought to remedy. It must be noted that the Land Use Act sought to enhance uniformity of land holding nationwide and in its drive for this uniformity made attempt to ensure that individuals dealing with their leasehold properties had the permission of the Governor. This may have given rise to the requirement of consent. The Act however did not abrogate existing legislation regulating mortgages which go a long way to suggest that existing laws were not defective as such. The requirement of a statutory certificate of occupancy and the consent provisions no doubt had enormous effect or radically changed the face of mortgages in financial institutions. This led to un-seemingly legal tussles inflicting bitter pains on individuals and institutions. Had there been any defect in the existing law, the associated legal tussles would not have arisen.
There is therefore the need to expunge the consent provision from the Land Use Act to minimize ambiguity and litigation arising from the Act. It must be noted that since the Land Use Act is enshrined in the Constitution36 the process of amending such provision can only be in accordance with section 9 (2) of the constitution.
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36. Section 315 (5) (d) 1999 Constitution Federal Republic of Nigeria (as amended)

13. Research Questions
This research work will attempt to provide an answer to the following research
questions;
What is the essence of consent as contained in the LUA and is it still necessary to retain it in our legislation?
Shouldn’t the constitution be amended to expunge the LUA to pave way for easy amendment?
Was there any defect in the existing law which the LUA sought to remedy?
In the event there is no amendment to the LUA, is there an alternative for both mortgagor and mortgagee to harmonize their position on mortgages.?

1.4 Chapter Analysis
Flowing from the above question, this research work will be subdivided into seven chapters.
Chapter one is a compendious outlook of the research work which is the registration of title/seminar as presented to the Faculty of Law.
Chapter two will examine ‘conceptual clarification and foundation for mortgages.’ These clarifications will include definitions of terms and concepts found in the research work. An attempt will be made to provide a concise definition of land, land tenure, consent, pledge, lien, conditional sale etc.
Chapter three will seek to discuss ‘evolution of land ownership and methods of acquiring property under the Land Use Act. Land tenure system in some African countries and Benin kingdom, nature of statutory right of occupancy, constitutionality of the LUA, etc. will be discussed. The nature of statutory/certificate of occupancy will be examined as well as the constitutionality of the LUA.
Chapter four will discuss the creation of mortgages under the extant laws. Mortgages of choses in action will be examined. Attention will be devoted to the discussion of the fundamental changes introduced into mortgage by the consent provision in the Land Use Act.
Chapter five will examine mortgage institutions, a bank/customer relationship. An attempt will be made to provide an understanding of mortgage loan. The theoretical rationalization of the different types of mortgages will be examined.
Chapter six will discuss in detail, ‘mortgages and legal recovery’, mortgage or borrowing by corporations, legal right to redeem and equity of redemption. It will also seek to examine the right of both the mortgagor and mortgagee.
Chapter seven will make a finding draw a conclusion and make adequate recommendations.

1.5 Justification/Significance for the study
The significance and/or justification of this study is to do a critique of the effect of Land Use Act on legal mortgages in Nigerian financial institutions. Mortgages as simple as the word may seem has developed over the centuries with its attendant controversies resulting to legal tussles. Mortgage is assumed to have a particular form yet it is fraught and surrounded by a fog of obscurity and unreality in which it is very difficult to see clearly. The LUA has however added more salt to injury with its intervention in mortgage transactions with the consent provision while not abrogating existing legislation regulating mortgages. There is no doubt that books and literature works have been done on mortgages but it has become imperative to do further study on the research topic in view of the unnecessary interference of the LUA.

1.6 Aim and Objectives of the Study
The overall aim of this study is to carry out a Critique of the Effect of Land Use Act on Legal Mortgages in Nigerian Financial Institutions.
The specific objectives of the study are as follows:
a. To examine the concept of creation of mortgages under the existing law and under the Land Use Act.
b. To examine the consent provision as a fundamental requirement in the Land Use Act.
c. To examine the controversy created by the consent provision in the Land Use Act.
d. To examine whether the Courts have clearly settled the issue of the consent provision in section 22 of the Land Use Act.
e. To examine whether there was any defect in the existing law which the Land Use Act seeks to remedy.
f. To examine various methods of securing credit.
g. To examine other laws affecting mortgages in Nigeria.
h. To examine whether there can be any alternative to the creation of legal mortgages.

1.7 Research Methodology
This research work was based on the above stated objective is devoid of any degree of specific precision which is mostly a feature of legal research. The method that will be adopted in this work is mainly doctrinal which involves case law and statutory provisions as the research has been founded around basic principles of law requiring further analysis. The various methods will include the following;
a. Location of the Study
The research work examines mortgages in Commercial Banks also known as Money Deposit Banks in Nigeria.
b. Research Design-Materials/Instrumentation
This review will provide definition to basic concepts and analysis of principles.
The main sources of information for this research work are primary and secondary data.
Primary Sources: The research method will be based on references from textbooks, law reports, journals, articles and periodicals. The research will also be based on modern information technology – the internet services.
Secondary Sources: The researcher will visit Ambrose Alli University library, University of Benin library and University of Lagos library for research materials.
c. Data Collection and Analysis
Findings emanating from all the above will be collated to form the research work which will eventually culminate in the presentation and defence of this dissertation.

1.8 Literature Review
As earlier noted, mortgage is as old as recorded history whether the indigenous mortgage which is a pledge or the English mortgage. But the concept of mortgage is full of confusion and so termed suppression veri and suggestion falsi37 meaning suppression of the truth is a suggestion of what is false. This has been the face of ‘mortgage’ till date. A simple term tinted with so much confusion.
In Nigeria mortgage has not fared better but a subject of controversy. Apart from the associated insincerity, recent legislation seems to have worsen the situation.
Land is the most valuable asset to mortgagees and several attempt have been made to provide an acceptable definition of land. The definitional concept of land has evolved with different understanding by various scholars. Perhaps the controversy still rages as to what actually constitutes land and the extent it can be owned by a holder at any given point in time.
Land has been defined as an immovable and indestructible three-dimensional area consisting of a portion of the earth’s surface, the space above and below the surface and everything growing on or permanently affixed to it.38 In its legal significance, land is not restricted to the earth’s surface, but extends below and above the surface. Nor is it confined to solids, but may encompass within its bounds such things as gases and liquids. A definition of Land along the lines of a mass of physical matter occupying space also is not sufficient, for an owner of land may remove part or all of that physical matter, as by digging up and carrying away the soil, but would nevertheless retain as
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37. Edward I. Sykes, Suppressio Veri and Suggestio falsi. e.books.google.com.ng P 80. 15/12/2016
38. Bryan A. Garner, Editor in Chief. Black’s Law Dictionary. (17th Ed.) (USA: West Group, St. Paul, MINN 1999). Page 881.
part of his land the space that remains. Ultimately as a juristic concept, land is simply an area of three dimensional space, its position being identified by natural or imaginary points located by reference to the earth’s surface. Land is not the fixed contents of that space, although, as we shall see the owner of that space, may well own those fixed contents. Land is immovable, as distinct from chattels, which are moveable; it is also, in its legal significance, indestructible. The contents of the space may be physically severed, destroyed or consumed but the space itself and so the land remains immutable.39
An earlier definition has posited land; as the material of the earth, whatever may be the ingredients of which it is composed, whether soil, rock or other substance, and includes free or occupied space for an indefinite distance upwards as well as downwards, subject to limitations upon the use of airspace imposed and rights in the use of airspace granted by law.40 It can thus safely be said that land can be owned to the soil beneath and up to the sky. If this is the position, why should an aircraft fly over my building without my permission? These are area where the various statute intervenes and limit the right of ownership of land.
The LUA provides that all lands in a State are vested in the Governor in trust for the citizens as beneficiary. An individual in need of land applies to the Governor who grants a statutory right of occupancy41 evidenced by a certificate of occupancy.42 Such
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39. Op. Cit. Black’s Law Dictionary. Quoting Peter Butt, Land Law. (2nd Ed.) (Sydney: Law
Book Company of Australasia 1988). P 881
40. Egwummuo J. N., Principles and Practice of Land Law. (Enugu: Okechukwu Communications
1999). P 39.
41. Section 5 sub section 1 Land Use Act Cap L5 LFN 2004.
42. Section 9 sub section 1 and 2 Land Use Act Cap L5 LFN 2004.
50
is the nature of the trust vested in the Governor and the nature of such trust has been argued by eminent scholars. Trust under the Land Use Act is very fundamental to an understanding of how the LUA functions. A proper understanding of the LUA begins with appreciating the meaning and nature of the trust created under the LUA. The operative word ‘vest’ meant divesting of communities, families and individuals of their previously held freehold title/fee simple to that of leasehold interest of their various lands whether occupied or unoccupied. Thus a new pattern of land ownership evolved with the enactment of the Act. However, the Act vests in the Governor no more than administrative powers over land in urban area, he is only a trustee and does not become the beneficial owner. Another noticeable innovation introduced by the Land Use Act is that it divests any claimant of radical title and limits the claim to a right of occupancy.43 There is a sustained disagreement in both judicial and academic circles as to the nature of the trust created by section 1 and in some cases even the fact of a trust being created thereby has been questioned. Scholars argue that the nature of the trust created in favour of all Nigerians is obscure, some are of the opinion that it must either be a strange trust or no trust at all while others are of the view that it is a true trust.44 The trust created by the Act is neither obscure, a no trust nor a true trust and that contrary to judicial opinion it is also neither a bare trust nor a legal trust but a trust of higher sense, legally recognized with its own peculiar duties.45 For a trust to be valid, it must involve specific property, reflect the settlor’s intent, and be created for a lawful purpose. A fiduciary
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43. Adole V. Gwar [2008] 5 MJSC 38 at 66.
44. Enefiok E Essien.: The Trust Created by the Nigerian Land Use Act 1978. University of Uyo Law Journal Vol.2. 1998.
45. Ibid. see Abioye V. Yakubu [1991] 5 NWLR (Pt. 190) 1 at 217.
relationship regarding property and subjecting the person with title to the property to equitable duties to deal with it for another’s benefit, the confidence placed in a trustee, together with the trustee’s obligations towards the property and the beneficiary.46 A trust involves three elements, namely; (i) a trustee who holds the trust property and is subject to equitable duties to deal with it for the benefit of another, (ii) a beneficiary to whom the trustee owes equitable duties to deal with the trust property for his benefit, (iii) trust property which is held by the trustee for the beneficiary.47 A trustee therefor is one who having legal title to property holds it in trust for the benefit of another and owes a fiduciary duty to that beneficiary.
Following the definition above, can the Governor be said to be a trustee in the real sense of the definitional analysis? Doubtful it stood. Can he be classified as a bare trustee which is a trustee of a passive trust with no duty other than to transfer the property to the beneficiary? Analyzing the words of the opening section, it is safer to ascribe a fiduciary relationship to the trusteeship vested in the Governor. A fiduciary is one who owes to another the duties of good faith, trust, confidence and candor while a fiduciary relationship is one in which one person is under a duty to act for the benefit of the other on matters within the scope of the relationship.48
The intendment of the Act vesting the power to administer the land comprised in each State for the benefit of all Nigerians in the Governor as trustee has been achieved since
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46. Bryan A Garner, Editor in Chief. Black’s Law Dictionary. (17th Ed.) (USA: West Group St. Paul MINN). P 1513
47. Ibid.
48. Op Cit. Black’s Law Dictionary (17th Ed.) P 1493.
there is indeed a defined existence of a trust. An argument has also been put forward for the view that the Land Use Act has not created a trust since at common law the word vest connotes an absolute right of ownership and the Nigerian Courts have also given it this meaning. It is inherently contradictory to say that the land is vested in the Governor (meaning that he has radical, allodial title) and at the same time say that he is a trustee of the land. This argument appears to be misplaced and one may perhaps say no more than that it is indeed usual that the trustee has the trust property vested in him. The reality is that the Governors holds the land in trust for the citizens comprised in each of the States in the Federation but the nature of this trust seems in the researcher’s view to be subsumed in the authorities of the Governors who in most cases undermine the intentions of the LUA and indiscriminately allocates lands to powerful individuals and corporation in complete disregard to the needs of most of their citizens. The nature of trust seems like something of a higher degree with abusive tendencies but no doubt the trust is one that ordinarily vest the property in the Governor for the benefit of the citizens.
Under the LUA, the interest of a citizen is no longer a freehold title, the LUA having divested the citizens of their existing interest and vested same in the Governor thus limiting title on land to a statutory right of occupancy.
What then is title? Title is the union of all elements (as ownership, possession and custody) constituting the legal right to control and dispose of property; the legal link between a person who owns property and the property itself; the legal evidence of a person’s ownership rights in property; an instrument such as a deed that constitute such evidence.49 A certificate of occupancy is an evidence of a statutory right of occupancy being the interest an individual can derive from land holding. Once a Governor grants an individual a statutory right of occupancy, the only document to evidence it, is a certificate of occupancy which can be defeated by a superior title.
The certificate of occupancy granted to cover a statutory right of occupancy does not stricto sensu qualify as a title from the definition above.
The drafting of the entire LUA has received wide criticisms. In the view of Omotola, he admitted the fact that;
if there be any award for bad drafting, the draftsman of the Land Use Act will easily win the first prize, for in my little experience of twenty years of continuous research, I cannot think of any statute which has produced so many ambiguity, contradictions, absurdities, invalidities and confusion as this Act has done.50
Obaseki, Eso and Ogundare opined that the Act has virtually confiscated all the undeveloped lands in Nigeria from its community and private owners to the Government. Obaseki said ‘it is an understatement to say that the Act abrogated the right of ownership before enjoyed by all Nigerian.’ He lamented that whatever the motive behind the promulgation of the Act might have been, it appears Government failed to consider the negative impact of the Act.
The LUA equally provides that a holder of a statutory right of occupancy shall not
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49. Ibid. P 1439.
50. Kolawole Aderemi Owolabi, Land Use Act: Why Does a Therapy Become a Pathology? University of Ibadan Law Journal Vol. 1. No. 1. October 2011. P 274.
mortgage his landed property without the consent of the Governor first had and obtained.51 Any mortgage without the consent of the Governor is null and void. This is the major effect of land Use Act on mortgages.
Before the promulgation of the LUA there was nothing like consent and a mortgage could not be held void for lack of consent. What is the benefit of consent? It merely helps the Government to collect mere revenue through the fees charged in the process. It doesn’t benefit the mortgagor who experiences long delay arising from bureaucratic bottlenecks and payment of exorbitant fees imposed by the State.
It benefits the mortgagor to the extent that he is liberty to move the court to declare the mortgage transaction void for lack of consent. In Savannah Bank of Nigeria Ltd V. Ajilo,52 a mortgage transaction was held void for lack of consent.
However, in Awojugbagbe Light Industries Ltd. V. Chinukwe53 where the consent was delayed for years after the release of the mortgage fund, the supreme court held the mortgage was valid.
This and other ambiguities contained in the LUA necessitated the call for a holistic amendment of the LUA in this research work. The posture of government presently is not disposed towards amending the LUA and so there is the need to proffer solution to this albatross called consent.
The researcher recommends equitable mortgage to the financial institutions in the face of the hardship faced in legal mortgage for which consent must be obtained.
Equitable mortgage does not require consent of the Governor and a court order is required to foreclose or sell in the event of the mortgagor falling into default.
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51. Section 22 Land Use Act Cap L5 LFN 2004.
52. [1989] 2 NWLR (97) at 305.
53. [1995] 4 SCNJ 162.

1.9 Scope and Limitation of the Study.
This scope of this work is restricted to the research topic; ‘A Critique of the Effect of Land Use Act on Legal Mortgages in Nigerian Financial Institutions.’ This is to enable the researcher bring to understanding the issues involved in the research work.
However, this is not without limitations. The research is self-sponsored without financial assistance outside the financial pocket of the researcher. With the lean financial purse, the scope of the research could not be expanded to areas outside the shores of Nigeria except through the internet.
Most financial institutions were unwilling to open their mortgage books to the researcher obviously due to banker and customer confidentiality. Had they opened such books it would have helped to evaluate the performing and non-performing mortgage loans which would have helped to widen the scope of the study. First Bank for example could only assist through the general information posted on their website which was scarely insufficient for the research work.

1.10 Expected Contributions to knowledge
The expected Contributions to Knowledge are as follows:-
a. In the absence of outright repeal of the Land Use Act on consent as it affect mortgages, a major contribution to knowledge in this research work is that equitable mortgages should be encouraged by both mortgagors and mortgagees to enhance smooth mortgage transactions since this does not require consent.
b. Another contribution to knowledge in this research work is the recommendation to expunge the LUA from the constitution.
c. The study will create the necessary awareness in the creation of legal mortgages in Nigerian financial institutions.
d. The study will assist to suggest the necessary statutory review of the provisions of the Land Use Act affecting legal mortgages in Nigeria.
e. The study will suggest the amendments needed under the Land Use Act to
remove area of ambiguity thereby reducing litigation.

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Full Project – A CRITIQUE OF THE EFFECT OF LAND USE ACT ON LEGAL MORTGAGES IN NIGERIAN FINANCIAL INSTITUTIONS

Full Project – A CRITIQUE OF THE EFFECT OF LAND USE ACT ON LEGAL MORTGAGES IN NIGERIAN FINANCIAL INSTITUTIONS

ABSTRACT

TABLE OF CONTENTS

CHAPTER ONE

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Full Project – A CRITIQUE OF THE EFFECT OF LAND USE ACT ON LEGAL MORTGAGES IN NIGERIAN FINANCIAL INSTITUTIONS

ABSTRACT

TABLE OF CONTENTS

CHAPTER ONE

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