The Lagos State government has convened a stakeholders forum to dissect the proposed amendment on the incorporation of Foreclosure Clause into the Lagos State Mortgage and Property Law.
The amendment Mortgage Bill presently at the State House of Assembly is being discussed with focus on some key areas which include the speedy perfection of mortgage title, Strata titles, sale by auction, remedy for wrongful sale, introduction of provision for foreclosure, amongst others.
Speaking at a roundtable discussion in Lagos, the Special Adviser to the Governor on Housing, Mrs Toke Benson-Awoyinka explained that the whole essence was to safeguard development of the Real Estate Sector in Lagos State.
She stressed that Lagos State Mortgage and Property Law was designed to encourage growth in Real Estate and regulate consumer loans for property realisation.
“The Law seeks to create conducive environment for accessible and affordable mortgage for the benefit of people of the State to acquire their own homes by paying a certain percentage of the cost of the unit and paying the balance over a period of years whilst residing in the property.
“We are all aware of the importance which the present administration in the State attaches to Real Estate Sector and the determination of the Lagos State Governor, Mr Babajide Sanwo-Olu to develop the sector through proper laid down regulations that would ensure that Local and International investors are attracted, and that the highest level of integrity is maintained in the real estate sector.
This vision is how to achieve professionalism and globally best practices at the Market.”
“All relevant stakeholders in the Real Estate Sector, as well as Finance and Banking sectors, including the private developers have been engaged in several discussions on accessibility to long term finance, low cost housing construction at improved quality, contract enforcement and issue of foreclosure,” she explained.
The Special Adviser said the state government remained committed towards ensuring the provision of affordable and descent accommodation for the citizens with a view to reduce the prevailing housing deficit across the State.
Seamless process
The Lagos State Commissioner for Justice, Moyosore Onigbanjo, SAN expressed optimism that the proposed amendment will make the sector seamless and unbundle some of the benefits of the lenders and the borrowers in the mortgage process.
Onigbanjo said that with the proposed amendment, Lagos State was trying to change the old order, the steps according to him will lead to revolution in the industry.
He explained that the State was now providing certainties in the law regarding the sale of the mortgage property and foreclosure.
The Attorney general of Lagos also explained that the right to foreclose mortgage property was a very sensitive one that requires effective mechanisms that ensure that all rights and interest of all parties are protected, hence the need for consistent consultation of the practitioners in the real estate sector.
According to him “Hitherto, foreclosure is available in Lagos State by virtue of case law and common law. But this amendment in section 39 codifies most of the case law development in order to give confidence to the mortgagee who has given out his money, that if there is a default you will be able to realize the security pledge without the undue stress that comes with the litigation.
“Stakeholders should look out of the pasage of the law, because once it is passed the legal redeem, concerning mortgages in Lagos State equity of redemption, foreclosure, sale of mortgage property will be more predictable, and it will be investor friendly and protect the vulnerable from abuse and the finance industry in the State will be better for it.”
Private sector
The CEO Nigeria Mortgage Refinance Company, Mr Kehinde Ogundimu who is the guest speaker at the occasion, emphasised the need for private sector involvement in the built sector.
Ogundimu said that Housing was a necessity and no effort should be spared in ensuring that it was available and affordable to the citizens, either through home ownership or rental.
According to him “What Government can do and is doing with the amendments is to provide the enabling legal environment or framework that will attract investors with patient capital into this sector.
“It has been demonstrated globally, even in Communist China, that there is a direct correlation between homeownership percentage and mortgage-to-gdp ratio.”
“Jurisdictions with Foreclosure Law have shorter pay-back-periods than Jurisdictions without Foreclosure Law. They also have lower mortgage interest rates because their risks are lower. It also have more responsible borrowers as well as engenders good credit behaviour and accelerates repayments thereby making people homeowners faster.”
He maintained that to make housing available and affordable, there was a need for enormous investments in real estate, and this cannot be done by government alone, without the private sector.
Defined limitations
The Chairman House Committee on Housing, Mr Rasheed Makinde said that the essence of brainstorming session was to find a robust way to doing business in real estate in Lagos.
Makinde mentioned that a lot of transactions go on between the public and the financial institutions and to ensure a seamless relationship among the parties, there must be a legislation which will define individual roles.
“Today, critical stakeholders from the Lawyers, financial managers, mortgagors have raised observations and suggestions on the bill and we have been able to identified the role and limitations of the lender and borrowers as well as the functions of the court so that none of the parties will take advantage of the other.
We are like an umpire on this and having listened to stakeholders on the proposed bill, we now have a more decisive responsibilities going forward,” Makinde said.
The proposed amendment Bill when signed to Law, will include sale by public auction, voluntary surrender of mortgaged property in lieu of foreclosure, and foreclosure in default of payment of mortgaged amount.
Highlights of the amended law
There is a new Section 23 in the proposed amendment which now provides for sale of a mortgaged property by public auction and the conditions under which the right of sale shall arise.
This is in line with the Auction Law, however, now expanded to protect all the parties involved and importantly, to prevent a situation where the property is undervalued such as to suggest fraud or collusion between the mortgagee, the auctioneer and the buyer.
A novel introduction into the Mortgage and Property Law is the right of foreclosure by the mortgagee under Section 39. The extant Law is silent on foreclosure, which is left entirely in the hands of the courts, this in practice, hampers the giving out of housing loans because of the uncertainty of recovery, The proposed amendment will take care of this issue and further create an enabling environment for mortgage transactions.
The purpose of the amendment in Section 39 is not to take away the jurisdiction of the courts through the Law, but to create certainty in mortgage dealings and to further protect the business environment for both public and private sectors of the economy.
The amendment is forward looking, as it considers the possibility that mortgaged property when foreclosed may be sold at a price higher than the amount owed. The excess or surplus money accruing from the foreclosure sale in this instance, shall be due to the mortgagor. This provision is to protect the interest of the mortgagor in the foreclosure proceedings in court.
Other important sections in the proposed Bill are Sections 40 and 58 of the Law. Both sections relate to voluntarily surrender of the mortgage property through signing a Deed in lieu of foreclosure and in a situation where legal or equitable Mortgagor can no longer locate the Mortgagee or the Mortgage institution is no longer a going concern, the court now have the power to issue a Discharge Order after fulfilling certain conditions which order can be registered as a release of the mortgage.
Confidence Okwuchi
