Remedies available to a Mortgagee under ITPA

Remedy of foreclosure;
Remedy of judicial sale;
Remedy of statutory power of sale;
Remedy of appointment of a receiver;
Other remedies which can be resulted to include that of a right to consolidation
Right to take possession of property in question and
A right to institute civil proceedings on the footing of a personal covenant duly executed by the mortgagor.

The exercise of these remedies under the ITPA are closely regulated with very clear cut procedures prescribed and any departure from such procedures as laid down would of necessity vitiate the process and render it liable for challenge at the option of the offended party.

The essence of foreclosure is that the mortgagee on the strength of a court order is enabled to absolutely debar the mortgagor from exercising his right to redeem the property so that a successful order of foreclosure operates to extinguish the mortgagors right to redeem the property subject matter of the transaction.  There is the procedure which one must go through before this particular remedy accrues.  Two stages are involved
There must be an application for an order of foreclosure nisi and this order gives the mortgagor time within which to repay the debt owed and essentially allows him to exercise his right of redemption;
An application for foreclosure order absolute so that where one is completely unable to comply with the terms of the foreclosure order nisi it becomes open for the mortgagee to move back to the court and make the interim order absolute with the result that the mortgage property will have been foreclosed and the mortgagor permanently debarred from exercising his right to redeem.

 One cannot invoke those procedures, except when the following conditions are in place
(a)    The mortgage debt has become due and payable and that a decree has not been made and that the right of foreclosure is not expressly excluded from the mortgage instrument, that is there is no agreement in the mortgage instrument to the contrary in which case it would be open for the mortgage to approach the court and avail himself of this particular relief.

Foreclosure is rather harsh and that is because of the very draconian nature that it assumes.  It deprives a mortgagor of his most fundamental right to redeem and courts are reluctant to give mortgages orders of this nature.  The courts tend to frown upon requests for an order of foreclosure because of its far reaching implications on the owner.

Judicial Sale requires the blessing of the court if it is to be validly exercised.  What is involved is not the exclusion of the mortgagor from exercising his right to redeem and instead what is sought is for the courts to give the green light for the security to be realised. S. 67 ITPA provides for this particular remedy.   If and when the mortgagee opts for this arrangement, it must be as an alternative to the order of foreclosure as one cannot go for both, as the court grants the order, every creditor would be paid what is owing and due to them based on the priorities that each of them may have.  A very complex procedure is provided for under S. 69 of ITPA which has to be complied with before the court can issue such an order.  It is a preferable form of remedy from the one of foreclosure especially where the property is worth more than the mortgage debt.

Statutory power of sale does not require the blessing of the court and is available to the mortgagor independent of a court order provided the mortgagor complies fully with all the procedures laid down under the Act.  The remedy accrues after the contractual date of redemption has passed or after a specified event has occurred which has the effect of rendering the money due unpayable immediately. It may accrue where the mortgage instrument was executed after the commencement of the ITPA amendment Act 1959 or where the power has been extended to a pre 1959 mortgage transaction in line with the provisions of Section 69 of the ITPA.  Similarly it may arise where power of sale is not expressly excluded under the mortgage instrument and finally it will accrue where the borrower has signed the mortgage instrument and has had his signature duly attested as by law required and there is a certificate by an advocate certifying that he has explained to the borrower the full effect of Section 49 of the Act and the borrower understood the same as required by Section 69 (4) (a) of that Act.

What this really seeks to instil in parties engaging in mortgage transactions is that it must be a conscious process with all risks and obligations being understood and appreciated by the party that is most vulnerable i.e. the mortgagor and at the point where the transaction is completed he is left under no illusions as to what will happen if there is non-compliance.

Before this right can accrue, the following conditions must be satisfied

In terms of procedure, this is elaborate and non compliance would render the exercise of this power liable for challenge at the option of the mortgagor.  The procedure is that the lender has to give statutory notice required under the Act.  The property must be disposed of by way of public auction having been advertised in preferably mass circulating dailies so that everyone knows about it.  If public auction is not viable, the mortgagee may approach the court for an order allowing him to dispose of the property by way of private treaty or contract that of course requires you to make a proper case.

In the carrying out of such an exercise the lender has a wide discretion but having said that it is subject to certain conditions i.e. must act in good faith, exercise reasonable care to realise the best price in the market that is available at that time and turn over any surplus amount that may be realised from the proceeds and in his exercise of this power of sale he must give due regard to the interests of the borrower in all respects.

The courts have nevertheless observed that in the exercise of his statutory power of sale, the lender is not acting as the borrower’s agent or his trustee and all that is required is that he acts in good faith and gets the best price for the property and give any surplus to the borrower whose interests he must have at heart.


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