Like in other commonwealth countries, the power of sale in Nigeria is exercised either by a court order or a power of sale clause under a Mortgage Deed. An equitable Mortgagee's power of sale by a Court order involves sale under the supervision of Court. On the other hand, where a mortgage was created by deed with a power of sale or a deed of trust clause, a legal Mortgagee may exercise his power of sale without an order of court once the power has arisen and is exercisable.
However, the right of the Mortgagee to exercise the power of sale may be in jeopardy where the Mortgagee is not aware of the real legal nature of the mortgaged property. This is because a Mortgagee cannot transfer a better title to a third party other than that of the Mortgagor. For instance, a Certificate of Statutory Right of Occupancy issued in the name of the Mortgagor does not conclusively mean that the Mortgagor has title or interest in the mortgaged property. The Certificate only raises a rebuttable presumption of right of occupancy over the mortgaged property which may be set aside if a third party shows evidence of a better title. It is therefore in the Mortgagee's best interest to thoroughly investigate and ascertain the Mortgagor's title at the preliminary stage of a mortgage transaction.
Again, the cumbersome process of perfection of title in Nigeria may defeat the right of legal Mortgagee right to exercise his power of sale. Since the responsibility to obtain consent to transfer interest in the mortgaged property lies on the Mortgagor, some dubious Mortgagors may intentionally neglect to obtain the requisite consent, thereby making the mortgage void, prima facie. To avoid this pitfall, the Mortgagee must ensure that the Mortgagor obtains the consent of the Governor or at least takes concrete steps towards obtaining same before crediting the Mortgagor's account with the loan sum.
Though, the Mortgagee's right to exercise the power of sale cannot be impeached even though the sale is disadvantageous to the Mortgagor, the Mortgagee may expose himself to damages if the price of sale is so low or the procedure for sale of the mortgage property does not conform with the relevant law or the Court Order. This also applies in cases of unfair dealing with the mortgaged property or collusion with the third party purchaser resulting in gross undervalue. The law expects both equitable and legal Mortgagee to act bona fide when exercising their power of sale.
Lastly, the slow process of adjudication of cases is also a cog in the wheel of exercising the power of sale. Upon foreclosure, most Mortgagors commence legal proceedings to unduly prevent the legal Mortgagee from exercising his power of sale. Also, it is not uncommon for the Mortgagor's Solicitor to file all sorts of preliminary objections and interlocutory applications to prevent an equitable Mortgagee who approaches the court to enforce his power of sale from exercising same. These delays can be managed if all the conditions and legal requirements for exercising the power of sale upon default of the Mortgagor to repay the loan were clearly spelt out prior to advancing the loan.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
