.         THE RULE ONCE A MORTGAGE ALWAYS A MORTGAGE

                                                AND                                

               MORTGAGE OF MATRIMONIAL HOME IN TANZANIA.

                                                               BY

                              MWAKISIKI MWAKISIKI E

                                                                                              

MORTGAGE OF MATRIMONIAL HOME

It’s the requirement of the law that the mortgage of matrimonial home to be valid by obtaining the consent of both spouses regarding the mortgage of their matrimonial home and the law imposes conditions when a matrimonial home is subject to a mortgage.  This is evident under section 114(1)(a) and (b)  where its stated that the mortgage of matrimonial will only be valid if any document used to grant the mortgage is signed by the mortgagor and the spouse(s) living in that matrimonial home or there is evidence that both or all of them have assented. The same position is reflected under Land Form No 42 (2005) Land Regulations on Mortgage of a matrimonial home. Also the same position is reflected under section 59 of the law of marriage Act  where a Matrimonial home is presumed to be under ownership of couple neither of parties can alienate one self without the consent of the other. 

Also section 114(2)  require the mortgagee to take reasonable steps to ascertain whether the applicant has a spouse(s) and wether they  has consented otherwise he will not be able to exercise his remedies and such reasonable steps are provide under Regulation 4(1) , where among other things if the applicant states that he or she is not married and the mortgagee has reason to believe that, the statement might be incorrect, the mortgagee may require that applicant to produce an affidavit to the effect that the applicant is not married.

Further, the law under Regulation 5 (2) and 5(3)  impose the duty to mortgagee to ensure that the consent given by spouses is genuine and such duty will only be discharged to the part of mortgagee if for example he has ensured that both spouses have received independent advice regarding the term and conditions of the mortgage they have applied for.

Section 8(2) of mortgage Financing (Special Provisions) , impose the responsibility of the mortgagor to disclose that he has a spouse or not and upon such disclosure the mortgagee shall be under the responsibility to take reasonable steps to verify whether the applicant for a mortgage has or does not have a spouse.

In the light of the above arguments and provision of the law  my advice to Aldin who really wants the loan though the Bank wants a spousal consent and he is claiming he is separated from his wife a couple of four years ago is as follows:-

Firstly, Adlin must know that he is only separated from his wife and  he is not divorced and therefore his wife rights for a matrimonial home he wants to Mortgage are still intact as the law of Marriage Act recognizes that spouses maybe separated either by a Court decree or by family arrangements and its upon a person petition for a decree of divorce as per section 99 of the law of marriage Act . However Aldin must bear in his mind that separation is not divorce and during separation there is no distribution of matrimonial assets meaning that his wife’s interest, if any, in the matrimonial home that he wants to mortgage are still intact even though they are not residing under one roof, therefore her consent is of paramount importance unless otherwise the transaction without her consent will be null and void.  Therefore Aldin must remember that unless he is divorced, there is no legal way to go around this unless he locate his wife and obtain her consent for him to mortgage the property. Spousal consent is stressed under the Land Act as per section 114 which requires financial institutions to demand spousal consent prior to taking matrimonial property as security in order to protect the interest of the other spouse.

In the case of Zakaria Barie Bura v Theresa Maria John Mubiru  was a case involving a house jointly owned by the spouses. In an action by the wife for a declaration that the sale of the house by the husband without her consent was void, the court held that the husband had no power to sell the house because it was jointly owned by the two spouses. Similarly in Mtumwa Rashid v Abdallah Iddi and Salum Omari  the Court of Appeal held the sale of a matrimonial home jointly owned without the knowledge and consent of the other spouse void.

Secondly, In obtaining his wife consent Aldin must ensure that his wife give the consent without undue influence or misrepresentation, in case Aldin induce his wife to secure her consent then in this regard, the wife may pray for the court’s assistance pleading undue influence of the husband or misrepresentation of the full implication of the transaction by the husband. The position is that a wife who has been induced to enter into a transaction by undue influence or misrepresentation of her husband, in certain cases, may be entitled to set aside that transaction against the wrongdoer husband. The case of Barclays Bank Plc v O’Brien and Another  illustrates the matter. In this case the husband charged the matrimonial home jointly owned as a guarantee for his liability for an overdraft to the bank. The wife signed the documents but was not advised of the legal nature of the charge created nor did she read the contract. In an action by the bank for the possession of the house, the court rejected the claim of general undue influence by the husband holding that the question of undue influence is determined from case to case.

Thirdly, since he wants that loan badly, and if it will be hard for him to secure his wife consent then there other options that are available to him, the other way around this is to locate another security like chattels or third party mortgages by other persons. The provision of section 113(2)  acknowledge the possibility of creating a third party mortgage and  section 2 of the same Act defines a third party mortgage to mean a mortgage which is created or subsists to secure the payment of a debt or the fulfilment of a condition by a person who is not the mortgagor, whether or not in conjunction with the mortgagor. Therefore a third party mortgage will be an alternative to Aldin if it will appear difficult for him to locate his wife and secure her consent.

Fourthly, Aldin must know that the law of Marriage recognizes that although a landed property maybe under the name of one spouse, the other spouse may have contributed to the acquisition, maintenance and or securing of that property although the interest(s) of the other spouse may not be registered as it was held in the case of Bi Hawa Muhamed vs. Ally Sefu , Matrimonial home is presumed to be under ownership of couple neither of parties can alienate one self without the consent of the other section 59 (1) law of marriage Act  the same position is reflected under Land Act Section 114  according to these provision if there is not such consent from the other part in case of creation of mortgage then the mortgage will be considered invalid in eyes of law. 

Fifthly, since the mortgagee (NMB Bank) require Aldin to show the consent of his wife though he is claiming to be separated from his wife a couple of four years ago, what Aldin is required to do is that, since he is claiming that he is not married and mortgagee is believing that his statement is not true then Aldin is required to produce affividavits to support his allegations as per Regulation 4(1)(c) , where it’s stated clearly that once an applicant states that he is not married and the mortgagee is for the reason that his statement is incorrect then the applicant is required to produce affidavits to support his claim. However Aldin must be careful to do not produce false information to the mortgagee in relation to the existence of spouse as he will be committing an offence and he will be liable to a fine of not less than one half of the value of the loan money or to imprisonment for a term of not less than twelve months as per section 8(4) of mortgage Financing (Special Provisions) .

Finally, since Aldin wants the loan that badly he may consider severance of interest in matrimonial home where for this purpose, severance of interest in the matrimonial home is used to describe the process in which a spouse deals with his or her interest in the house without the consent of the other. It however doubtful whether a spouse by severing his interest in the matrimonial home can deal with his or her interest in the house without infringing the conditions laid down under section 114 (1) of the Land Act, as amended in 2004 or section 159 (4) of the Land Act. In Thames Guaranty Ltd v Campbell and Others , a husband and wife jointly purchased a home but before registration of the transfer to them as joint tenants was complete the plaintiff company agreed with the husband by letter to grant him a loan secured on a charge of the land. The wife did not consent to the charging of the property and at the time of the agreement the company did not know and could not have known that the transfer of the property was to be to the husband and wife as joint tenants. The court stated the law regarding severance of the beneficial interest by the husband stating: “Mr Campbell (husband) did have power, without the wife’s concurrence, to sever the beneficial joint tenancy in the property and to dispose of his severed beneficial interest in such manner as he thought fit.”

Generally, under the presiding scenario it’s clear that Aldin must obtain his wife consent to secure a mortgage since the two are under separation and not divorced a thing that show there is subsistence of a marriage and therefore his wife interest on a matrimonial properties are still intact until they two are divorced.

THE RULE ONE A MORTGAGE ALWAYS A MORTGAGE

The rule once a mortgage always a mortgage denotes that once a transaction is categorised as a mortgage any provision that is inconsistent with the mortgagor’s right to have a reconveyance of the property upon payment of the mortgage sum and fulfiling certain conditions is invalid. Any attempt to prevent a reconveyance is said to be a “clog on the equity of redemption”.   Therefore the mortgagor cannot be prevented from redeeming the property free from all conditions or stipulations in the mortgage and there should not be terms to give advantage to the mortgagee in addition to the security. Any advantage must cease when the mortgage is redeemed. 

Section 128  stipulate that any provision in the mortgage deed which prevent redemption is repugnant and therefore void, hence, ‘Once a mortgage always a mortgage.’ One cannot turn the transaction into something else or there must be no clog or fetter on the equity of redemption. 

Lord Lindley In Samuel v. Jarrah Timber and Wood Paving Corporation  provided a profound meaning of the rule and argue that the doctrine means that no contract between a mortgagor and a mortgagee made at the time of the mortgage and as part of the mortgage transaction, or, in other words, as one of the terms of the loan, can be valid if it prevents the mortgagor from getting back his property on paying off what is due on his security. Any bargain which has that effect is invalid, and is inconsistent with the transaction being a mortgage. 

The common law stand on mortgages that if by the due date the mortgagor has not been able to redeem his or her land, that is repay the loan advanced together with the interest on the loan, the security goes to the mortgagee. Not only this but also the mortgagor will remain liable for the (usual) that is usury rate of interest, and principal sum. However it has been checked with equity and therefore non-repayment of the loan and the interest thereon does not automatically lead to conveyance of property to the mortgagee. 

Equity position is similar to the provisions set up in Section 57 to 62 of Land registration Act  These statutory provisions have been translated as meaning “once a mortgage always a mortgage” that is the mortgagor should be given every chance to redeem his or her land.  Similarly the provision of section 116 of Land Act  emphasize that a mortgage shall have effect as a security only and shall not operate as transfer of any interests or rights in the land from the mortgagor to the  mortgage.

The basic principle is that a “mortgage cannot be made irredeemable”. Equity will not allow any provisions or devices that allow this to occur. The long established rule is that a mortgagee cannot as part of the mortgage transaction take an option to purchase the mortgaged property as this would give the mortgagee the “power to extinguish the equity of redemption”. The rule will only be applied where the right to acquire the equity of redemption is granted as part and parcel of the mortgage transaction. 

Generally, from the rule once a mortgage always a mortgage the following principles can be deduced:-

The mortgage must not be irredeemable,  This principle is provided for under paragraph (a) of section 121 (1) . The provision states in effect that any agreement or provision in the mortgage instrument or otherwise which purports to deprive the mortgagor of the right to redeem shall be void. The provision simply stresses the well established principle, once a mortgage always a mortgage. It facilitates the possibility of the mortgagor redeeming the mortgaged land at any time after the contractual date despite the stipulations in the mortgage instrument which vest an absolute interest of the mortgaged land in the mortgagee on default. 

The application of the principle was amply clarified in Samuel v Jarrah Timber and wood paving cooperation . The House of Lords after concluding that the transaction was a mortgage with an option to purchase stated once it was established that a transaction was a mortgage transaction, the mortgagee would have the mortgagee’s rights and the mortgagor, his rights. The court clarified the application of the doctrine “once a mortgage, always a mortgage”. It stated the doctrine meant that no contract between a mortgagor and mortgagee made at the time of the mortgage and as part of the mortgage transaction, or, in other words, as one of the terms of the loan, could be valid if it prevented the mortgagor from getting back his property on paying off what was due on security. Any bargain which had that effect was invalid, and was inconsistent with the transaction being a mortgage.

There must not be a clog or fetter on the equity of redemption, A clog or fetter is a repugnant condition in a mortgage. It is a provision inserted to prevent redemption on payment of the debt or performance of the obligation for which the security was given. In its historical development, the relief based on the doctrine was afforded to the mortgagor by equity. Equity would afford the mortgagor the right to redeem on payment of the principal, interest and costs despite terms in the contract to the contrary. The doctrine is rooted in the same doctrine “once a mortgage always a mortgage”. It overrules and disregards clear terms of the contract.  The principle is provided for under paragraph (b) of section 121 (1) of the Land Act . As a result if the obligation under the mortgage is payment of a debt, the security is redeemable on the payment of the debt despite a clog or fetter in the mortgage. Similarly, if the obligation is performance of a condition, the mortgage is redeemable upon performance of that condition.

In the case of Santly V Wilde (1899) , Lord Lindley considered the nature of a mortgage and said: ‘The principle is this: a mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt, or the discharge of some other obligation for which it is given. This is the idea of a mortgage; and the security is redeemable on the payment or discharge of such debt or obligation, any provision to the contrary notwithstanding. That, in my opinion, is the law. Any provision inserted to prevent redemption on payment or performance of the debt or obligation for which the security was given is what is meant by a clog or fetter on the equity of redemption, and is therefore void. It follows from this that ‘once a mortgage always a mortgage, Lord Lindley MR said: ‘a clog or fetter is something which is inconsistent with the idea of security; a clog or fetter is in the nature of a repugnant condition.

There shall not be a collateral advantage which is unfair and unconscionable or inconsistent with the right of redemption, A collateral advantage has the effect of giving the mortgagee advantages, benefits or power over the mortgagor in addition to those ordinarily provided for in the mortgage. For a long time at common law, the mortgagee could not stipulate for a collateral advantage. But the position was altered and the established position is that collateral advantages may be stipulated by the mortgagee provided they are not unfair, or oppressive, or unconscionable or have the effect of clogging the right to redeem.  Stipulation for collateral advantages is provided for under paragraph (c) section 121 (1) of the Land Act , That paragraph provides that any provision in the mortgage instrument or otherwise which stipulates for a collateral advantage which is unfair and unconscionable and inconsistent with the right to discharge shall be void. The principles also laid down from section 68-71 of the Land Act  can also be taken into consideration. In Kreglinger vs New Patagonia Meat Co Ltd  it was stated that no rule of equity that precludes the mortgagee from creating collateral advantages but must cease on redemption. 

In Fairclough vs Swan Brewery Co Ltd  a clause to postpone the date of redemption of a mortgaged lease after the expiry of 20 years to 6 weeks was deemed to render the equitable right to redeem illusory and hence void unless there was a bargain between the two parties on equal footing even if it just postpone redemption for a considerable period.

The only way in which a person could override the equitable right to redeem is by obtaining a decree of foreclosure. This was an order of the court instigated by the mortgagee’s application to extinguish the equitable right to redeem. This had the effect of leaving the mortgagee with an absolute title to the property. However, if the property was more valuable than the debt owed, the court would order a sale of the property out of which the mortgagee would receive the money due to him and the balance will devolve to the mortgagor. 

Generally, the rule denotes that mortgage should remain as the security upon payment of sum of money or meeting certain condition sets in the mortgage and therefore it should not turn into deed or anything else and also it should not contain  terms that give advantage to mortgagee to take possession of the mortgaged property and bars the mortgagor from redeeming his property.

REFERENCE

BOOKS.

Mwaisondola, N.G. (2007). The modern law of mortgage in Tanzania. The role of land Act 1999. Birmingham University press: Birmingham

Thompson, M. (1995). Fundamental Principles of Law: Land Law.(1st ed). London: Sweet 

and Maxwell Ltd

Tenga, W.R (2008). Manual on Land Law and Conveyancing in Tanzania. University of Dar es salaam.

STATUTE.

Land Act as amended 2004

Law of marriage Act  [Cap 29 R.E 2002]

Land (Mortgage) Regulations [2005].

Land registration Act  [Cap 334 R.E 2002]

Land Act [Cap 113 RE 2002.]

Mortgage Financing Act (Special Provisions) of 2008.