Creation of Mortgages in Nigeria: A Plain-English Guide for All Three Jurisdictions

What Is a Mortgage and Why Does Jurisdiction Matter?

A mortgage is a transaction in which a borrower (the mortgagor) uses his land or interest in land as security for a loan from a lender (the mortgagee). The mortgagor gives the mortgagee certain rights over the property — but keeps the right to get everything back once the loan is repaid. That right to reclaim the property is called the equity of redemption.

Here is the most important thing every Bar Finals student must know: how a legal mortgage is created in Nigeria depends entirely on which state the property is located in. Nigeria operates three distinct mortgage jurisdictions, each with its own governing statute and permitted methods. Get the jurisdiction wrong in an exam — or in practice — and you have made a fundamental error.

The three jurisdictions are:

• CA States (Conveyancing Act 1881): States carved from the old Northern and Eastern regions — Kaduna, Kano, Kogi, Niger, Plateau, Borno, Benue, Adamawa, Taraba, Nassarawa, Yobe, Gombe, Bauchi, Sokoto, Kebbi, Zamfara, Jigawa, Anambra, Enugu, Abia, Imo, Ebonyi, Cross River, Akwa Ibom, Rivers, Bayelsa, and the FCT Abuja.
• PCL States (Property and Conveyancing Law 1959): States of the old Western and Mid-Western regions — Ekiti, Ondo, Oyo, Osun, Ogun, Edo, and Delta.
• Lagos State (Mortgage and Property Law 2010, as amended 2015): Lagos stands alone with its own modern, comprehensive statute.

The Land Use Act Overlay — Applies Everywhere

Before diving into jurisdiction-specific rules, understand this foundational rule that cuts across all three jurisdictions: Section 22 of the Land Use Act 1978 provides that a holder of a statutory right of occupancy shall not alienate that right (whether by assignment, mortgage, sub-lease, transfer, or otherwise) without the prior consent of the Governor of the State.

Section 26 LUA provides the consequence: any transaction purporting to alienate a right of occupancy without the Governor's consent is void and of no effect whatsoever. Not voidable — void. The land does not pass. The mortgage does not exist.

This was authoritatively decided by the Supreme Court in the landmark case of Savannah Bank (Nig.) Ltd v. Ajilo (1989) 1 NWLR (Pt. 97) 305 SC. Lagos Island Bank (later Savannah Bank) granted a loan to Mr. Ajilo, secured by a mortgage over his property. The bank did not obtain the Governor's consent before executing the mortgage. The Supreme Court held the mortgage was void ab initio — no interest in the land passed to the bank. The bank's entire security was worthless.

This case is the reason Governor's consent is listed as part of perfection of a mortgage instrument (GSR: Governor's Consent, Stamping, Registration). It is not a formality — it is a condition precedent to the validity of the entire transaction.

Creating a Legal Mortgage in CA States

In CA states, a legal mortgage over a leasehold interest (including a Certificate of Occupancy) can be created by any of the following methods:

Method 1: Assignment of the Unexpired Residue

The mortgagor transfers (assigns) the entire unexpired residue of his leasehold interest to the mortgagee, subject to a proviso for cesser upon redemption — meaning the interest reverts to the mortgagor automatically when the loan is fully repaid.

What the mortgagee gets: Full legal title — he steps into the mortgagor's shoes entirely, subject only to the right of redemption. The mortgagee holds the original title documents. Because there is privity of estate between the mortgagee and the head lessor (the Governor, as grantor of the C of O), restrictive covenants in the head lease bind the mortgagee.

Advantage: No reversionary interest remains in the mortgagor, so if the mortgagor defaults, the mortgagee can easily sell and pass clean title to a buyer without going to court. No remedial devices (power of attorney or trust declaration) are needed.

Disadvantage: The mortgagee is bound by all covenants (including onerous ones like obligation to pay rates and taxes) in the head lease. The mortgagor cannot create successive legal mortgages by assignment since he has parted with his entire title.

Discharge: Because the mortgagee holds the mortgagor's full legal title, discharge requires a Deed of Release or Re-assignment — a deed by which the mortgagee formally reconveys the property back to the mortgagor. A mere receipt of payment is not sufficient.

Method 2: Sub-Demise (at Least One Day Short)

The mortgagor grants the mortgagee a term of years less than his own term by at least one day, subject to a proviso for cesser on redemption. For example, if the mortgagor holds a 99-year C of O, he sub-demises 98 years and 364 days to the mortgagee.

Why one day less? If the sub-demise equals the full term, it operates as an assignment, not a sub-demise. The one-day gap preserves the mortgagor's reversionary interest.

Challenge in CA States — Interesse Termini: The doctrine of interesse termini at common law (not abolished by the CA) says you cannot create a term of years to begin at the end of another term over the same property. This historically made successive legal mortgages by sub-demise in CA states problematic. The current NLS position (2025) however is that successive legal mortgages can be created by sub-demise even in CA states.

Remedial Devices needed in CA sub-demise: Unlike Assignment, under a sub-demise the mortgagee has a reversionary interest but no automatic power of sale in case of default. Two remedial clauses may be inserted in the deed:

• Trust Declaration: The mortgagor is constituted a trustee of the property for the mortgagee as beneficiary. The mortgagee can remove the mortgagor as trustee, appoint himself, and sell as trustee.
• Irrevocable Power of Attorney: The mortgagor irrevocably authorises the mortgagee to sell the property on his behalf in the event of default. It is irrevocable because it is given for valuable consideration (the loan). See Ihekwoaba v. ACB Ltd.

Discharge: A sub-demise mortgage in CA states is discharged by a Deed of Release — the mortgagee releases his sub-term and the mortgagor's full title is restored.

Method 3: Statutory Mortgage/Charge

Under Section 26(1) of the Conveyancing Act, the parties may adopt the prescribed form in Part 1 of the Third Schedule to the Act to create a statutory mortgage. This method is rarely used in practice.

Key distinction for CA states: Note that Charge by Deed expressed to be by way of Legal Mortgage — which is available in PCL and Lagos — is NOT available in CA states. This is a favourite exam trap.

Creating a Legal Mortgage in PCL States

In PCL states, the critical rule is that assignment of the unexpired residue as a method of creating a legal mortgage is PROHIBITED under the Property and Conveyancing Law 1959. Any instrument that purports to create a legal mortgage by assignment in a PCL state will automatically be construed and take effect as a sub-demise under Sections 109 and 110 PCL. This point is tested directly in Bar Finals.

Method 1: Sub-Demise — Section 109 PCL

The mortgagor grants the mortgagee a term of years absolute, less at least one day than the term vested in the mortgagor, subject to a proviso for cesser on redemption. This is the same as in CA states except that in PCL states, the doctrine of interesse termini has been expressly abolished by Section 163 PCL — so successive legal mortgages by sub-demise are clearly permitted.

Advantage over CA sub-demise: Section 112 PCL expressly grants the mortgagee of a sub-demise the statutory power of sale — no remedial devices are needed. Where the mortgagor defaults, the mortgagee may sell the property (including the mortgagor's reversionary interest) to recover the loan.

Discharge: By a Deed of Release. (Although a Statutory Receipt under Section 115 PCL is available for charge mortgages, the Deed of Release remains the more advisable instrument even in PCL states.)

Method 2: Charge by Deed Expressed to be by Way of Legal Mortgage — Section 110 PCL

This is the most commercially popular method in PCL states. The mortgagor does not transfer any interest in the land — he simply charges his property as security. The charge deed must:

• Be made by deed (not just writing)
• Expressly state that it is "by way of a legal mortgage"

Although no legal interest is technically transferred, the mortgagee under Section 110(1) PCL enjoys all the powers and privileges of a legal mortgagee, including the power of sale.

Key advantages:

• Governor's prior consent may not be strictly required because no estate is being conveyed — only a nominal interest and an encumbrance are created.
• Can be used to create a mortgage over mixed properties (two or more different properties securing one loan) — this is the only method that allows this.
• Can be used where the head lease contains a covenant against assignment or subletting, since no interest passes to the mortgagee.
• Simple to create — see Samuel v. Jawah.

Discharge: By a Statutory Receipt under Section 115 PCL — a receipt endorsing the repayment operates as a discharge. However, practitioners note this is not ideal because a Statutory Receipt is not a registrable instrument. The mortgage will continue to show as an undischarged encumbrance on the register until an explanation is given to anyone searching title. A Deed of Release is therefore preferable in practice.

Method 3: Statutory Mortgage — Section 137 PCL (Forms 1 or 4)

The parties may use the prescribed forms in the Fourth Schedule to the PCL to create a statutory mortgage or charge. This method is rarely used.

Creating a Legal Mortgage in Lagos — MPL 2010

The Mortgage and Property Law 2010 (MPL), as amended in 2015, repealed the Conveyancing Act in Lagos. It applies to the entire Lagos State. Crucially, the MPL distinguishes the method of mortgage creation based on the nature of the mortgagor's interest:

Where the Title is a Right of Occupancy — Section 15 MPL

• Demise for a term of years absolute — the mortgagor grants the mortgagee a lease (demise) out of his C of O.
• Charge by Deed expressed to be by way of Statutory Mortgage — using Form 1 in the Second Schedule to the MPL (see Section 4 MPL).

Where the Title is Leasehold — Section 16 MPL

• Sub-demise for a term of years absolute less one day
• Charge by Deed expressed to be by way of Legal Mortgage

Registration in Lagos: A mortgage in Lagos must be registered under the Land Registration Law 2015 at the Lagos State Lands Registry. Section 53 MPL also provides for registration with the Lagos State Mortgage Board. Section 20(1) MPL gives the mortgagee of a sub-demise in Lagos the statutory power of sale — no remedial devices needed.

Equitable Mortgages — Uniform Across All Jurisdictions

Equitable mortgages are created the same way in CA and PCL states. Methods of creating an equitable mortgage:

1. Deposit of title deeds with a clear intention they are held as security. See Olofintuyi v. Barclays Bank DCO (1965). Two legal consequences follow: (a) an implied agreement to execute a legal mortgage, and (b) part performance.
2. Agreement to create a legal mortgage — equity treats it as done (Walsh v. Lonsdale rule).
3. Mortgage of an equitable interest — e.g., a beneficiary's interest under a trust.
4. Defective legal mortgage — a purported legal mortgage not properly perfected subsists as an equitable mortgage.
5. Equitable charge of the mortgagor's property.

Governor's consent for equitable mortgages: Not mandatory for creation — only becomes relevant on enforcement or conversion to a legal mortgage.

Summary: Methods of Discharge

• CA States — Assignment mortgage: Deed of Release / Re-assignment (reconveyance of the full title back to the mortgagor).
• CA States — Sub-demise mortgage: Deed of Release (releasing the sub-term granted to mortgagee).
• PCL States — Sub-demise: Deed of Release.
• PCL States — Charge by Deed (S.110 PCL): Statutory Receipt (Section 115 PCL) — but Deed of Release preferred in practice.
• Lagos (MPL): Deed of Release registered at the Lagos State Lands Registry.

Key Cases You Must Know

• Savannah Bank (Nig.) Ltd v. Ajilo (1989) 1 NWLR (Pt. 97) 305 SC — Governor's consent is a condition precedent; mortgage without it is void.
• Awojugbagbe Light Industries Ltd v. Chinukwe (1993) 3 NWLR (Pt. 283) 520 — S. 22 LUA applies to all alienations including mortgage; assignment in PCL states for mortgage automatically treated as sub-demise.
• Olofintuyi v. Barclays Bank DCO (1965) — deposit of title deeds with intention to use as security creates an equitable mortgage.
• Kreglinger v. New Patagonia Meat & Cold Storage Co [1914] AC 25 — "once a mortgage, always a mortgage"; any clog on the equity of redemption is void.
• Ihekwoaba v. ACB Ltd — irrevocable power of attorney as remedial device in mortgage deed is valid; given for valuable consideration.
• Okonkwo v. CCB Plc — duties of a mortgagee exercising power of sale; must obtain true market value.
• S.O.N. Okafor and Sons Ltd v. Nigeria Housing Development Society (1972) — mechanics of sub-demise mortgages; one-day shorter term requirement confirmed.
• Samuel v. Jawah — simplicity and utility of charge by deed expressed to be by way of legal mortgage.

2017 Bar Finals Question 2 — Senator Uwaifo Kelechi

Senator Uwaifo Kelechi, a wealthy businessman, approaches Zenith Bank Plc for a loan facility of ₦300 million. He offers three properties as security:

1. A property in Awka, Anambra State (CA jurisdiction)
2. A property in Asaba, Delta State (PCL jurisdiction)
3. A property in Jabi, Abuja (CA jurisdiction — FCT operates under CA + LUA)

The bank's solicitor, Barrister Chiamaka, also happens to be the Senator's personal lawyer and is asked to handle both the bank's and the Senator's documentation.

Issue 1: Dual Representation — Rule 17 RPC

The bank's interest (maximum security, strict covenants) and the Senator's interest (minimum encumbrances, best terms) are inherently in conflict. Under Rule 17 RPC, acting for clients with conflicting interests without full disclosure and informed consent is prohibited. Barrister Chiamaka should act for only one party (preferably the bank) and advise the Senator to seek independent legal advice.

Issue 2: Method of Mortgage per Jurisdiction

Awka (CA): Assignment of unexpired residue OR sub-demise (with remedial devices). Charge by deed NOT available. Anambra State Governor's consent required.

Asaba (PCL): Sub-demise (S.109 PCL — no remedial devices needed, statutory power of sale) OR charge by deed expressed as legal mortgage (S.110 PCL). Assignment PROHIBITED. Delta State Governor's consent required.

Jabi, Abuja (CA + LUA): Same methods as CA states. FCT Minister's consent required (Governor's functions exercised by the FCT Minister).

Issue 3: Equitable Mortgage by Deposit of Title Deeds

If the bank wants to release the loan immediately before perfection is complete, it may take the three Certificates of Occupancy as security by deposit — creating an equitable mortgage per Olofintuyi v. Barclays Bank DCO. The bank acquires an implied right to enforce a legal mortgage by specific performance.

Issue 4: Fees — Scale III

On a ₦300 million mortgage transaction over three properties, the applicable fees under the Legal Practitioners Remuneration Order are computed under Scale III. Where separate deeds are prepared per property (as required for assignment/sub-demise), the fee is computed per instrument. A charge by deed expressing to be a legal mortgage can theoretically cover all properties in one instrument (mixed properties — only this method allows that).

Practical Steps in a Mortgage Transaction

1. Negotiation: Agree on loan amount, interest rate, repayment terms, and security.
2. Investigation of title: Search at Lands Registry, CAC (if mortgagor is a company), court registry, and probate registry.
3. Search Report: Prepare a search report and covering letter advising the mortgagee on the state of the title.
4. Loan Agreement: Draft the commercial terms of the loan.
5. Draft Mortgage Deed: Select the correct method based on jurisdiction and nature of the mortgagor's title.
6. Perfection (GSR): Apply for Governor's Consent; stamp the instrument; register at the Lands Registry.
7. Discharge on Repayment: Execute and register the appropriate discharge instrument (Deed of Release, Re-assignment, or Statutory Receipt).