In Ghana, businesses can use land or buildings as security to get loans. However, there are laws that guide how this is done. These laws explain the steps for creating, registering, and enforcing mortgages, and they also spell out the rights and responsibilities of both the borrower and the lender.
Creation of Mortgages
A mortgage is a deal where a borrower promises their property to a lender as a guarantee for a loan. To make the mortgage legally effective, it must be registered at the Collateral Registry within 28 days after it is created. If the land is already registered, the mortgage must also be registered at the Lands Commission for it to be valid.
1 Collateral Registry
The Collateral Registry manages the online registration of security interests, like mortgages. This system helps make everything clear and allows lenders to check if there are any existing claims on the property before using it as security for a loan.
2. Priority of Mortgages
Registering a mortgage is important as a registered mortgage would take priority over an unregistered one. This means that when the borrower does not repay the loan, the lender who has a registered mortgage has higher rights to the property than lenders who did not register the mortgage.
3. Enforcement of Mortgages
The property remains the property of the borrower even when it is registered as a mortgage. However, where the borrower fails to repay the loan, the lender may enforce the mortgage without going to court. The lender must first give the borrower 30 days notice of his intention to enforce the security. He must also register a notice of the borrower’s default in paying the loan at the Collateral Registry.
After the 30-day period elapses, the lender will be granted a certificate by the Collateral Registry allowing him to enforce the security. With this, the lender may sell the property to recover the amount owed. In the event that the borrower fully pays the loan, he continues to retain ownership of the property.
4. Implications for Business Loans
For businesses seeking loans secured by mortgages, it is important to ensure that the mortgage is properly created and registered with the appropriate authorities. Lenders must also run a check through the Collateral Registry to confirm the status of the property being used as security to avoid potential legal disputes.
