Q&A – 10 October 2011
Revocation of mortgaged property
I work in the legal department of a bank whereby we are in charge of creating mortgages over securities of borrowers. I have read in several newspapers recently that a number of properties have been revoked because of either non payment of land rent or not sticking to the development terms of the right of occupancy. Am I correct in saying that such revocations only apply to properties that are not mortgaged? What else should we do to secure our mortgage?
JI, Dar
As a banker you want to make sure that the mortgaged property is available for you in the event there is a default. In a mortgage, the bank is the mortgagee and usually the borrower is the mortgagor, unless of course there is a third party mortgage whereby the third party is the mortgagor. The law allows the president to revoke a right of occupancy even if it is mortgaged. There is no law to stop revocation if it is mortgaged. However there is a procedure that has to be followed.
First the commissioner for lands has to issue the occupier with a warning letter that he is in breach of conditions of right of occupancy. If the breach subsists, the commissioner will serve a notice to the occupier, informing him of the breach and the necessary steps to remedy the breach in a specified time. If the occupier does not honor the notice, the commissioner shall issue a notice to revoke the right of occupancy to the occupier and to all persons having interest in the said land. After 90 days of issuing of the notice, the commissioner shall recommend the president to revoke the right of occupancy. If the president concurs, the right of occupancy shall be revoked and the revocation shall be published in the gazette and in one or more newspapers circulating in the area where the land is located.
From the above you will note that as a mortgagee you should be notified about the breach- however many a times the notification never reaches or if it does, it is hopelessly late such that it is overtaken by events.
Common grounds for revocation are non payment of land rent and not adhering to the conditions as stipulated in the right of occupancy, for example using a residential plot for commercial activities.
As for the land rent, the issue can be easily sorted if you provide for it in the mortgage deed whereby you as the bank should be able to pay the land rent on behalf of the mortgagor to protect your interests as a mortgagee.
The breach of the conditions of the right of occupancy is much trickier. As a banker you ask yourself, how do I know that there is a breach?
What should I do to make sure that if there is a breach I know about it before I lend? We have noted that most banks don’t read the right of occupancies- the mere ‘brown cover’ of the right of occupancy and the fact that it is in a ‘prime’ area, excites the bank into lending which is very dangerous. We always recommend to the bank to make sure a physical survey report is made by a surveyor who confirms that there is no breach in the right of occupancy.
The short of the long is that a bank can be outrightly exposed if the mortgaged property is revoked. The bank may have a cause of action against the government and the borrower but it can be a long battle.
Our advice to banks before lending is as follows. First deal with reliable parties adopting the ‘know your customer’ framework. Second, make sure that for transactions over a certain amount, a surveyor is appointed in addition to a valuer, whereby the surveyor confirms that there is no breach of any of the conditions of the right of occupancy. Third, make sure that the mortgagor submits land rent receipts every year. Fourth, it is advisable to do adhoc searches of various properties that you have as security to make sure there is no abnormality.
Finally, and to reiterate what you as a banker perhaps do not want to hear, is that even if a property is mortgaged, it can be revoked leaving you exposed. Se beware.
Denied access to Court proceedings
A little daughter of my neighbor was raped by a person whom we all know and lives just down the street from where we reside. The case is now in Court and on the day of the hearing, I went to Court to observe the proceedings. Strangely the police denied me access claiming that the proceedings were not to be conducted in open Court. I was quite shocked as to the denial of entry which I know is my constitutional right. There has to be something very fishy about this. What is it? Why was I not allowed in Court?
OO, Dodoma
It is true that Court proceedings are supposed to be conducted in an open Court and any person can attend the sessions. The purpose of having open Court sessions is to ensure that justice is not only done but also seen to be done.
There are however some cases in which the proceedings should be “held in camera” (closed sessions) like crimes against morality i.e. rape, sodomy. Some matrimonial cases depending on the nature of the matter and all cases against persons of below 18 years of age are also held in camera.
The rationale of having the proceedings in camera is to protect the identity of the parties and maintain their dignity because the matters which are usually addressed in these cases are extremely private. It is also to enable the parties to fully express what transpired on the day of the incident. Our opinion is that due to the nature of the case and the age of the child, the said police was not abusing his powers but rather doing exactly what the law required of him.