Land Use Act and Mortgage of land in Nigeria, Part Two

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Mortgage of land in Nigeria under the Land Use Act is inexhaustible.

One of the silent complications in creating a mortgage under the land use Act is the fact that there is no certainty as to the nature of interest which an individual owns in land.



  • Problems Associated With Mortgage Under the Act.
  • Recommendations
  • Conclusion


Problems Associated with Mortgage under the Land Use Act.
  • The Nature of Interest in Land:

The issue of right of occupancy as hinted in the previous part of this writeup (Land Use Act and Mortgage of land in Nigeria. pt.1) is the crux of the matter here. The right of occupancy is quite distinct from every type or nature of interest known to man in the history of property law. When one thinks of it as lease, Lord Templeton laid down the hallmark in Street v. Mountford[1] that for a lease to be valid there must be exclusive possession at a rent and for a term. But a holder of right of occupancy under the Act does not enjoy exclusive possession against the Governor. The Governor or any public officer authorized by him has unfettered access to and can freely enter upon and inspect the land comprised in any statutory right of occupancy or any improvements effected thereon for inspection at any reasonable hours in the day time. With regards to licence, though the Governor can easily revoke based on need to use property for public purpose or other reasons, the right of occupancy is not a licence because, unlike a licence, it is alienable, transferable and transmissible.[2] In the case of a freehold, the right of occupancy does not confer indefinite term of years in the ownership of land. Rather, it is for a determinable period.

Also, considering the analysis made on the nature of certificate of occupancy, a Certificate of Occupancy may be set aside if it turns out that the holder had no right to the land;[3] or in favour of a pre-1978 conveyance or deemed grantee of Right of Occupancy under section 34 of the Act.[4]Thus a Certificate of Occupancy issued pursuant to the Act only gives the right to use and occupy land, it neither confers nor is it necessarily an evidence of title. The horror and hellish implication of this is that where the Certificate of Occupancy is set aside for any reason, the mortgagee who has accepted it as security realizes he has burnt his own fingers.[5] The certificate he is holding automatically becomes “a piece of paper having no value”.[6] This perhaps should serve as a clarion call to current and prospective mortgagees to ensure the certificates are preceded by a right of occupancy.

  • The Governor’s Consent

Another pronounced problem in the mortgage transaction under the regime of the Land Use Act is the requirement of governor’s consent. It is doubtful if there is any step in the mortgage transaction process that gives mortgagees as much nightmare as obtaining consent[7]. Firstly, the requirements for obtaining the consent varies from state to state.[8] Secondly, there have been the issue of who should obtain the consent and thirdly at what stage of the transaction the consent should be sought and what is the implication of not obtaining the consent at a particular stage.

A  huge quantity of judicial ink have been spilled in regards  to these issues. By section 22 (1) of the Act, the Governor’s consent must be “first had and obtained.” Thus in Savannah Bank (Nig.) Ltd. v. Ajilo & Ors,[9] the Plaintiff executed a deed of mortgage dated 5th September, 1980 in favour of the 1st Defendant. Upon default by the Plaintiffs, the 1st Defendant sought to sell the property involved by advertising the Auction sale. The Plaintiffs sued for declaration that the Deed of Mortgage was void and also that  the Auction Notice was void. The grounds of the action were that: The property involved was situate in an urban area in Lagos; the property was already vested in the 2nd Plaintiff before the Land Use Act 1978 came into force; by Section 22 of the Land Use Act, the consent of the Governor of Lagos State ought to have been first sought and obtained before the execution of the Deed of Mortgage and also the Public Auction; and as no consent was sought as aforesaid, both the Deed of Mortgage and the Auction Notice were void. The Supreme Court held that consent must be obtained prior to the mortgage; any failure by a holder under Sections 34(2) or 36(2) of the Act to comply with the provisions of Section 22 would attract the full rigor of section 26 of the Act and render a transaction or an instrument arising out of it void. However, this was an obiter dictum as the stage of obtaining consent was really not an issue before the court. In subsequent cases, the Supreme Court and Court of Appeal have been of the view that consent may be applied for at any time after a concluded transaction.[10] Thus in Awojugbagbe Light Industries Ltd. v. Chinukwe,[11] the Supreme Court held that ‘there is nothing unlawful in entering into or execution of a document of transfer before the Governor’s consent is obtained as this procedure is expressly covered by section 22(2) of the Act. The legal consequence that arises[12] is that no interest in land passes under the agreement until the necessary consent is obtained. Such an agreement so executed becomes ‘inchoate’ until the consent of the Governor is obtained after which it can be said to be complete and fully effective.[13] In fact, Ogundare JSC noted that in practice, it is on the body of the deed of assignment that the governor endorses the consent.[14] Where the consent is not obtained at all, the necessary implication is that the transaction will be rendered null and void under section 26 of the Act. Although, a mortgagee in such case should earn an equitable interest as the transaction becomes an equitable mortgage.

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With regards to who should obtain the consent, the Holder[15] (mortgagor or Guarantor) is undoubtedly the person expected to obtain the consent. However, such holder who fails to obtain the consent ends up being the one attempting to challenge the validity of the transaction on the basis of failure to obtain the consent. In other words, relying on his own illegality as he sheds crocodile tears.[16] The rule of exturpi causa non oritur actio meaning that ‘no action arises out of a wrongful consideration’ is to be applied. In Adedeji v. National Bank,[17] the mortgage transaction was without the Governor’s consent. The mortgagor defaulted and in an attempt to prevent the enforcement of security he contended that the transaction was void. This contention was dismissed by the court as it was his duty to obtain the consent in question. In the words of Akpata JCA, (as he then was) “apart from the principle of law involved, it is morally despicable for a person who has benefitted from an agreement to turn round and say that the agreement is null and void.” While this is no doubt a sound decision, the matter is not quite settled on the application of the maxim as the court refused to apply it in subsequent cases. In U.B.N. PLC. v. Ayodare & Sons (Nig.) Ltd,[18] Oguntade, JSC in abiding by the decision in Savannah Bank’s case stated as follows:

I am satisfied that the two courts below were right in following the decision in Savannah Bank (Nig.) Ltd. v. Ajilo in view of the fact that this court had directly adverted its mind to the state of the law and judicial authorities on the equitable doctrine in the maxim exturpi causa non oritur actio. It may seem wrong that the Plaintiffs/Respondents who had procured exhibits 1 and D later turned round to rely on the supposed invalidity of the exhibits but the decision of this Court in Ajilo is still binding on this Court. I have not been called upon to consider overruling same. 

Bearing this in mind, it would be quite unsafe for a mortgagee to depend on the mortgagor for obtaining the consent. In practice, the holder of right of occupancy endorses letter of authority in favour of the mortgagee authorizing him to obtain the governor’s consent.

Another critical issue arising from the issue of consent is the ability of the governor to delegate the power to give consent. In Union Bank of Nig. PLC. v. Ayodare and Sons (Nig.) Ltd.[19] an Acting Chief Lands Officers signed the consent letter whereas the Governor had delegated the duty to the Commissioner for Lands. By a majority of 4:1, the Court applied the Agency principle of delegatus non potest delegare to annul the consent.[20] The case places a further burden on the secured creditor even where consent has been obtained, to make further inquiries to ensure that the “respective appropriate authority” properly empowered the consenting authority.[21] Consent in itself is therefore not enough; the source of the consent is of great importance. In the words of the court, “the appellants should have checked the source of the consent before executing the deeds and parting with their money.”[22]

Lastly in respect of consent, it originally seems that the governor cannot be compelled to give consent, this was stated in a pre-land use Act case of R v. Ministry of Land and Survey, Ex Parte Bank of the North,[23] where an order of mandamus was applied to compel the Minister to give consent under section 11 of Land and Native Right Ordinance of 1916, Reed Ag. SPJ stated that:

Since the order of mandamus does not lie to compel the exercise of a discretionary power conferred by a statute, it will not lie to compel the Minister to give his consent … if the applications have no other remedy, that is unfortunate for them but the absence of other remedies would not enable the court to grant an order of mandamus to compel the exercise of a discretionary power.

It is however warned in the case of Iwuyi v Federal Commissioner for Establishment[24] that where the exercise of a discretionary power is based upon satisfaction and fulfillment of a condition precedent by the beneficiary of such power, the exercise of the power may be refused only where the condition has not been satisfied.

  • Inalienability of Deemed Customary Right of Occupancy
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It must be borne in mind that there is an absolute bar on the holder of a deemed grant form alienation of land granted by the local government to transfer such land to any person. Section 36 provides that

(5)        No land to which this section applies shall be sub-divided or laid out in plots and no such land shall be transferred to any person by the person in whom the land was vested as aforesaid.

(6)        Any instrument purporting to transfer any land to which this section relates shall be void and of no effect whatsoever in law and every party to any such instrument shall be guilty of an offence and shall on conviction be liable to a fine N5,000 or to imprisonment for 1 year.

Going by the above, it is not just a prohibition, it is also a criminal act to alienate the land in this regard for mortgage transaction. The rationale behind this provision may be to keep a land with customary flavor such as customary tenancy and the likes. This notwithstanding, the court has sounded a warning to unsuspecting banks and borrowers to beware of the land they take as security for a mortgage:

Banks, persons and other institutions embarking on mortgage transactions over land in rural areas of Nigeria may end up burning their fingers in the process of plucking nuts out of fire for  others. In any case, the mortgage deed in their hands is not in law worth more than a love letter.

  • Compensation for Revocation of Land

The Land use Act has a provision for the revocation of land by the governor for reasons mentioned in section 28 of the Act  which is enveloped as overriding public interest. Of particular interest is that Overriding public interest in the case of a statutory right of occupancy means the alienation by the occupier by assignment, mortgage, transfer of possession, sublease, or otherwise of any right of occupancy or part thereof contrary to the provisions of the Act or of any regulations made thereunder. With regards to mortgage, we have mentioned above the procedure required for a valid transfer of land as a security for mortgage which the mortgagor usually fails to comply with. This is one more reason why the prospective mortgagee needs to be circumspect because if the transfer is not in accordance with the Act, he may lose the security and possibly lose his money.

Where the revocation is not on such ground but on other grounds, the compensation provision[25] under the Act is grossly inadequate and can agreeably be described as unjust.[26]  As the compensation is payable only on unexhausted improvements on land and no value and compensation is attached to the land itself making it unsafe to accept a bare land for security. When the compensation is to be paid eventually, it can only be paid to the holder of the right of occupancy of the land. Section 50(1) of the Act defines “holder” as:

A person entitled to a Right of Occupancy and includes any person to whom it has been validly assigned or has validly passed on the death of the holder but does not include any person to whom it has been sold or transferred without a valid assignment nor a mortgagee, sub-lessee or sub-underlessee.

The import of the above is that even where the mortgagee has been expending on the improvement of the land, the moment the property is revoked, the security is lost and the mortgagee looses out in totality.


Having noted series of problems with the use of land as security under the Land Use Act, it is pertinent to proffer how these problems can be ameliorated. This is in view of the fact that several calls have been made for a reform of the Land Use Act. The hope is that at the point of the reform, the following considerations will be made to cater to the issue of mortgage transaction under the Act:

  • Process of obtaining consent.

Presently, various states have devised means of obtaining the Governor’s consent and the processes come with differing complexities. The Act can specifically legislate on the process and requirements for the consent although leaving the fee open due to changes in economic changes. The Act should also stipulate the period within which consent must be given and if refused, there should be a communication of the  reason for refusal.

  • Statutory Clarification of the Status of the Right of Occupancy.

The uncertain nature of the title to land under the Act has also contributed to the proliferation of certificate of occupancy under the regime of Land Use Act which has led to a lot of mortgagees insisting on certificate of occupancy as a means of ascertaining the title to land rather than the right of occupancy. This can be quite hazardous for the mortgagee.

  • Abolition of the Restriction on the alienability of land in rural area.
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It seems that the concept of land holding is still retained with regards to lands in rural areas as the Act prohibits the transfer of land in rural areas. The purport of the provision is not easily ascertainable aside from the notion of the fact that it intends to preserve the customary land transactions such as customary tenancy and the likes. This notwithstanding, the implication of this is that a local farmer may not be able to use his land for mortgage in order to finance his farming. This no doubt has a negative implication and at this stage of commercial enterprise in the country, it is of no particular significance to retain the provision.

  • Recognition of Mortgagee for Compensation.

Although a mortgagee can keep himself safe by making a provision for safe landing by inserting a trust declaration clause in the mortgage deed wherein the mortgagor would receive compensation and keep it in trust for the mortgagee, but to earn such compensation from a scrupulous mortgagor, he may still need to institute an action in court.  The law needs to be more empathetic with the position of the mortgagee, hence an amendment is required in the Act to the effect that where such land is developed or undeveloped and the interest of any person other than the Holder will be prejudiced by the revocation, the state shall take due consideration for such interest.


We have set out to consider the provisions of the Land Use Act 1978 in relation to the concept of mortgage of land. The efficiency or otherwise of the provisions have also been carefully addressed with the hope that the problems associated with mortgage transactions under the regime of the Land Use Act will be catered to.  Failure to do so would mean that the hazard of using land to do business in Nigeria would remain and would have a negative impact on the economy.



[1] [1985] 2 All E. R 289. Other authorities where lease was equated with right of occupancy include Ciroma v.

Suwa [1986] 1 NWLR (Pt. 19) at 756, Savannah Bank v. Ajilo [1989] 1 NWLR (Pt. 97) 305 at 328; I. Adeoye “The Nature of the Right of Occupancy Under the Land Use Act 1978” in J. Omotola (ed.) Issues in Nigerian Law (Lagos: University of Lagos Press, 1991) at p. 105.

[2] Sections 21, 22, 24 and 34 of the Act

[3] Adedeji v Williams [1989] I NWLR (Pt. 99) 811.

[4]  Sir Adetokunbo Ademola v. Amao & Ors (1982) CGSLR p. 273 reported in Omotola J. A. “Cases on the Land Use Act” p. 132. Cited in Nelson, D. N., Mortgage of Land as Security under the Land Use Act (2013) 11 Nig. J. R.. p.145

[5] Nelson, D. N., Mortgage of Land as Security under the Land Use Act (2013) 11 Nig. J. R.. p.145

[6] Per Belgore, JSC in Ogunleye v. Oni, supra.

[7] Op.cit. note 34. P.146

[8] Ibid. p.157

[9] (1987) 2 NWLR (pt.57) 421.

[10] “Consent includes an approval or concurrence to a transaction either before or after its execution”: City Property Development Ltd. v. A.G. Lagos State (1976) NSCC 43 57, Per Fatayi-Williams J.S.C; compare, Ogbo v. Adoga [1994] 3 NWLR (Pt. 333) 469, commented on by U. Osimiri, “PostLand Use Act 1978 Conveyancing: Ogbo v. Adoga Revisited”, (1995) 2 (1) Lawyers Bi-Annual 208. Cited in Nelson, D. N., Mortgage of Land as Security under the Land Use Act (2013) 11 Nig. J. R.. p.147.

[11] [1995] 4 NWLR (Pt. 390) 279

[12] This situation is under the rule of drafting said to be a ‘delivery in escrow’

[13]  At this stage, the transaction relates back to the date of the agreement.

[14] Iragunima v River State Housing & Property Development Authority (2003) 12 NWLR (pt.834) 427 at 440-441.

[15] Section 50 (1) of the Land Use Act.

[16] A.A Utuama: The Crocodile Tears in Savannah Bank v. Ajilo (1989) 2 GRBPL No. 7 p. 29; R.C. Okoli: ‘Crocodile Tears at the Supreme Court?’ 1989 2 GRBPL No. 7 p. 37. Cited in Nelson, D. N., Mortgage of Land as Security under the Land Use Act (2013) 11 Nig. J. R.. p.147.

[17] [1989] 1 NWLR 212

[18] [2007] 13 NWLR (Pt. 1052) 567

[19] Supra.

[20] Referenced in Nelson, D. N., Mortgage of Land as Security under the Land Use Act (2013) 11 Nig. J. R.. p.151

[21] ibid.

[22] At the Appeal court [2000] 9 WRN 101 at 109.

[23] (1963) NNLR 38.

[24] (1985)1 NWLR (pt.3) 497.

[25] Section 29 of the Land Use Act.

[26] Nelson, D. N., Mortgage of Land as Security under the Land Use Act (2013) 11 Nig. J. R. p.154



Written by:  Ganiyu Ajibola Bello. LL.B, BL. DRS. LL.M

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4 thoughts on “Land Use Act and Mortgage of land in Nigeria, Part Two

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