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lOMoARcPSD|15266749Law of Mortgages detailed with case law
Bachelor of Laws (Makerere University)
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Mortgages
Source of the Law:
Article 26(1) of the 1995 Constitution creates a right of ownership of property and by
necessary implication a right to use or commercially benefiting from such propertyproperty. This
includes mortgaging of such property.
The Mortgage Act 8 2009 is the principal legislation regulating both equitable and legal
mortgages in Uganda.
The Act repeals the then mortgage Act Cap 229 and consolidates the provisions that govern
creation enforcement and discharge of mortgages as well as the right and obligations of the
parties to a mortgage agreement.
Read:
● Preamble of the Mortgage Act 8 2009
An Act to consolidate the law relating to mortgages; to repeal and replace the Mortgage Act; to
provide for the creation of mortgages; for the duties of mortgagors and mortgagees regarding
mortgages; for mortgages of matrimonial homes; to make mortgages take effect only as
security; to provide for priority, tacking, consolidation and variation of mortgages; to provide for
suits by mortgagors; the discharge of mortgages; covenants, conditions implied in every
mortgage; the remedies of mortgagors and mortgagees in respect of mortgages; for the power
of court in respect of mortgages; and for related matters.
● Wamono Shem v Equity Bank Uganda Ltd MA 600 2012 (Emma)
Brief facts of the case
The applicant claimed to be the spouse of the second respondent who avers to have donated
powers of attorney to AM (U) Ltd referred to as the principal debtor who had applied for
and was offered a loan facility of Uganda shillings 100,000,000/= by the first
respondent. The power of attorney were to enable AM (U) Ltd to pledge the suit
property as security for a loan from the first respondent. The loan facility was secured
by a mortgage of property comprised in Kibuga block 29 plot 1682 land at Kanjokya
registered in the second respondents names and the mortgage deed was executed
between the second respondent (mortgagor) and A.M. (U) Ltd (the principal
debtor) on the one hand and the first respondent. The first respondent carried out the
requisite due diligence and investigated whether the second respondent was at the
material time married or not. The second respondent was not married at the time the
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mortgage deed was executed and swore a statutory declaration to that effect. The
second respondent further gave her approval and consent to the first respondent to
appoint a receiver to enter into possession, collect by demand or action all the income
or arrears and to exercise its powers of sale under the mortgage by private treaty in
respect of the suit property.
The second respondent when asked to disclose her marital status declared that she
was not married to anyone and that the mortgaged land was not matrimonial property.
In breach of the terms of the mortgage deed between the parties, the principal debtor or
the second respondent did not service the loan as the instalments fell due as a result of
which the first respondent demanded full payment of the amounts outstanding on the
loan. Notice of default was duly served upon the principal debtor and the second
respondent notifying them of the default and demanding that they pay the outstanding
amount of Uganda shillings 104,603,912/=. After expiry of the notice of default, a notice
of sale was served upon the principal debtor and the second respondent notifying them
of the intended sale of the suit property. The property was advertised for sale.
The second respondent on the other hand filed an affidavit in reply in which she avers
that she was still married to the applicant under a customary marriage regime
contracted on 30 January 2006 at the time she obtained a credit facility from the first
respondent. That the property the subject of the application is indeed family property
she mortgaged without the consent of her husband.
Issues raised
Whether the mortgage was obtained in an unlawful manner in as much as the security is family
land and there was no spousal consent to mortgage the property.
Whether the recovery process of the loan is unlawful inasmuch as section 19 of the Mortgage
Act had not been complied with.
Whether the application could be allowed on grounds of being just.
Held
Regarding repealing of the old Act
Justice Amadrama started by quoting the Mortgage Act 8 2009 stating that,
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“the particular requirement under section 5 which puts the duty on the mortgagee to take
reasonable steps to ascertain whether an intending mortgagor is married and whether or not the
property to be mortgaged is a matrimonial home, is inapplicable. This is because the mortgage
offer relied upon by both parties is dated 17th March 2011. Secondly the power of attorney
annexure "B" to the affidavit in reply was executed on 15 March 2011. The so called “declaration
as to marital status” which was witnessed by an advocate is dated 17th of March 2011. It is
apparent that the transaction complained about occurred before the coming into force of the
Mortgage Act 2009. According to statutory instrument 2011 number 44 namely the
Mortgage Act, 2009 (Commencement) Instrument, 2011 the Minister of Lands, Housing
and Urban Development exercising powers under section 1 of the Mortgage Act 2009
appointed the 2nd day of September 2011 as the date on which the Act come into force.
Consequently any duties and obligations at the time of execution of the mortgage in
question were made under the Mortgage Act cap 229. Under that Act, a mortgage means
any mortgage, charge, debenture, loan agreement or other encumbrance, whether legal or
equitable which constitutes a charge on an estate or interest in Uganda or partly in Uganda and
partially elsewhere and which is registered under the Act. Section 115 of the Registration of
Titles Act (RTA), cap 230, permits a proprietor of any land under the operation of the RTA to
mortgage his or her land by signing a mortgage in the form of the 11th schedule to the Act.”
Regarding spousal consent
Justice Amadrama relying on section 5 of the Mortgage Act 8 2009 stated that:
“Section 5 (2) (a) provides that an intending mortgagee shall take reasonable
steps to ascertain whether an intending mortgagor is married and whether or not
the property to be mortgaged is a matrimonial home. Secondly in (b) an intending
mortgagor shall make full disclosure to the intending mortgagee as to his or her
marital status and whether or not the property to be mortgaged comprises the
matrimonial home. Lastly section 5 (3) of the Mortgage Act provides that the
mortgagee shall be deemed to have discharged the duty under subsection 2 if the
mortgagee obtains a marriage certificate issued in accordance with the laws of
Uganda, and in the absence of it, a statutory declaration from the spouse or
spouses of the mortgagor as proof of marriage.”
“The duty to take reasonable steps by investigating whether the intending
mortgagor is married or not is not satisfied merely by obtaining a statutory
declaration from the intending mortgagor. As to what reasonable steps are would
depend on the circumstances of the parties. For instance, would it not be
sufficient to investigate from the locality of the property whether it was
matrimonial property and whether the mortgagor is married?”
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