Lagos to protect mortgage in new property law, proposes foreclosure

By Tobi Adetunji. 

The Lagos State Government has moved to safeguard investments in the real estate sector and ensure its development as they began the process of incorporating the foreclosure clause into the Lagos State Mortgage and Property Law.

This is seen as part of the measures and regulations that will help attract both local and foreign investors into the sector.

According to a report from the News Agency of Nigeria (NAN), this disclosure was made by the Special Adviser to the Lagos State Governor on Housing, Mrs Toke Benson-Awoyinka, at a roundtable on the proposed amendment to the law recently in Lagos.

Foreclosure refers to the action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.

Benson-Awoyinka said that the Sanwo-Olu-led administration was also committed to ensuring the highest level of integrity in the sector adding that the state’s mortgage and property law aims to encourage growth in the real estate sector and regulate consumer loans for property realisation in the state.

Benson-Awoyinka disclosed that all relevant stakeholders in the sector, including finance and banking and private developers, had been engaged in discussions on several areas such as accessibility to long term finance, low-cost housing construction at improved quality, contract enforcement and the issue of foreclosure.

She said, “The areas of concentration include the speedy perfection of a mortgage title, Strata titles, sale by auction, remedy for wrongful sale, the introduction of provision for foreclosure, amongst others, which have been incorporated into the bill.

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 the mortgaged amount.’’

She said the state government is seeking 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.

Benson-Awoyinka said that the purpose of the amendment was not to take away the jurisdiction of the courts through the law but to create certainty in mortgage dealings and also to further protect the business environment for both public and private sectors of the economy.

The special adviser said the amendment was forward-looking, as it considered the possibility that mortgaged property, when foreclosed, might be sold at a price higher than the amount owed.

Benson-Awoyinka said the excess or surplus money accruing from the foreclosure sale in this instance, should be due to the mortgagor.
According to her, this provision is to protect the interest of the mortgagor in the foreclosure proceedings in court.
However, the Managing Director /Chief Executive Officer of the Nigeria Mortgage Refinance Company (NMRC), Mr Kehinde Ogundimu, disagrees with the provision which states that where mortgage property is sold at a higher price than the amount owed, the excess or surplus money accruing from the foreclosure sale shall be due the mortgagor,” he said.

According to him, the position of the company is that a foreclosure presupposes that the property has been vested in the mortgagee.

The proposed initiative by the Lagos State Government is seen as a catalyst for growth in the real estate sector in the state and ultimately restore the confidence of investors in the sector.

However, it is expected that in formulating the law, the state government should put in measures that will guide against abuse of the law by mortgagees and also protect the interests of the mortgagor.