Mortgage transaction is a modern day transaction one instance where mortgage is used to secure a loan is either to start business or build a house.

According to I.O SMITH in PRATICAL APPROACH TO LAW OF REAL PROPERTY IN NIGERIA , Mortgage is a conveyance of property of both legal or equitable interest, in property to a lender upon a covenant by the lender that upon repayment of the loan, the conveyance become void or he would reconvey the interest to the borrower.it is the transfer of interest on a property by a borrower (also called the Mortgagor) to a lender (also called the Mortgagee) as an assurance of repayment of loan.

Mortgage is a transaction which is beneficial to both the mortgagor and the mortgagor .For a mortgagee, mortgage is a form of future investment as it gives him an assurance that their interest is secured and would not be affected when the mortgagor becomes insolvent. Thus they are secured creditor in case of bankruptcy and insolvency and their interest takes priority. For the Mortgagor, it provides him with loan to invest with and also low capital rate as the loan is a long term loan.

Mortgage is an important transaction which in most case involve Land. Transactions involving land is subject to provision of the Land Use Act 1978.pursuant to section 1 of the land use act provide that “subject to the provision of the Act, all lands comprised in the territory of each state in the federation are vested on the Governor of that state and such land shall be held in trust and administered for the use and common benefit of Nigerians.” Thus all lands within a state is under the care of the state Governor therefore any transaction on such lands needs Governor’s consent or approval including mortgage.

There are certain steps to be taken for a valid and enforceable mortgage transaction. Construing Section 21 and 22 of the Land Use Act, it show that no mortgage can be validly effected without the consent of the Governor is first heard and obtained. Section 26 of the Land Use Act provide the effect of not obtaining such consent as such mortgage is void (that is it will not give rise to any legal obligation).The question then is whose duty is it to obtain the Governor’s consent. A proper construction of Section 21 and 22 of the land use act depict that it is the duty of the mortgagor to obtain the Governor’s consent.

The requirement of Governor’s consent is critical and of great important to mortgage transaction .In SAVANNAH BANK V. AJILO (1989)1 NWLR Pt97 Pg 305, the respondent mortgaged his land which he acquired before the Land use act to secure a loan. Being a legal mortgage, the appellant who is the mortgagee decide to exercise his statutory power of sale when the mortgagor/respondent refuse to pay the loan. The respondent commence an action to stop the sale of the mortgaged property on the ground that the Governor’s consent was not obtain. The Supreme Court held that for both actual grant and deem grant the consent of the Governor is needed and failure to obtain such consent render the mortgage void (that is not enforceable by the court).

However in some cases the court has applied an equitable principle that” the provision of the statute should not be used as an engine of fraud” In NATIONAL BANK OF NIGERIA V. AYODEJI (1989)NWLR Pt 96 Pg 212, the court refuse to set aside the mortgage transaction for failure to obtain Governor consent as the respondent who was the mortgagor who has the responsibility to obtain such consent cannot rely on his own default to obtain the consent and thus escape liability. This position was followed in UGOCHUKWU V. CO-OPERATIVE AND COMMERCE BANK (NIG) LIMITED (1996)6 NWLR Pt456 Pg 524.

In UNION BANK OF NIGERIA AND ANOR V. AYODARA AND SONS (NIG) LTD (2007)13 NWLR Pt 1052 Pg 567, the respondent obtained a loan from the appellant and executed a deed of legal mortgage on his property. The consent of the Governor in respect of alienation of the property was communicated by the chief land officer for the permanent secretary who acted for the honorable commissioner of lands and housing to whom powers to give consent was delegated. When the respondent/mortgagor defaulted in payment, the appellant move to sale the property. The respondent challenge the sale of the property on the ground that the consent of the Governor was not duly obtained. The Supreme Court held that the chief land officer for the permanent secretary for the commissioner of land and housing was not the proper person to give consent as such power cannot be exercise by him. Thus non-conformity with Section 22 of the land use act render the mortgage transaction void.

However no Governor’s consent is required for re-conveyance or release by the mortgagee which mortgage was created with Governor’s consent. Also to convert an equitable mortgage into a legal mortgage, Governor’s consent is not need. Also where an equitable mortgage of the right had earlier been created with Governor’s consent, Governor’s consent is not necessary. This is contained in Section 22(1) (a)-(c) of the Land Use Act.

In conclusion, the court decision in UNION BANK OF NIGERIA V. AYODARA represent the current position of law as regards mortgage and Governor’s consent. Governor’s consent first heard and obtained is necessary for a valid mortgage transaction so as to create a binding obligations which the court can recognize and enforce.