Introduction to Mortgages

Introduction:

This note will examine the concept of a mortgage, common terms used in mortgages, the two main characteristics of a mortgage, and the sources of law for mortgages in Ghana.

Meaning and Nature of a Mortgage:

Per Black’s Law Dictionary, a mortgage is:

1. A conveyance of title to property that is given as security for the payment of a debt or the performance of a duty and that will become void upon payment or performance according to the stipulated terms. - Also termed (archaically) dead pledge…
2. A lien against property that is granted to secure an obligation (such as a debt) and that is extinguished upon payment or performance according to stipulated terms…
3. An instrument (such as a deed or contract) specifying the terms of such a transaction…

In the case of Santley v Wilde (1899) 2 Ch 474, a mortgage was defined as follows:

A mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given . . . and the security is redeemable on the payment or discharge of such debt or obligation, any provision to the contrary notwithstanding.

In Section 1 of the Mortgages Act, 1972 N.R.C.D. 96, a mortgage is defined as

1. A contract charging immovable property as security for the due repayment of a debt and the interest accruing on the debt or for the performance of any other obligation for which it is given, in accordance with the terms of the contract.
2. A mortgage is an encumbrance on the property charged, and does not, except as provided by this Act, operate so as to change the ownership, right to possession or any other interest, whether present or future in the property charged.

Central to the above conceptions of a mortgage is the idea that property is charged as security for the performance of an obligation, such as an obligation to repay a debt.

However, it is essential to note that the statutory definition of a mortgage differs from the definitions in Black’s Law Dictionary and in Santley v. Wilde (supra) in two key respects:

1. Under NRCD 96, a mortgage is recognised as a mere contract that charges immovable property to secure an obligation, and not a conveyance. As a contract, the parties are generally at liberty to determine the terms of the contract, such as the date of performance of the obligation and interest payable, among others.
2. Under NRCD 96, the property that is charged is immovable property, not chattels or movable property.

These two distinctions were captured by Da Rocha and Lodoh in ‘Ghana Land Law and Conveyancing’ (2nd Edition) at 219 as follows:

Under the old law, that is, the pre-1973 law, a mortgage was defined as “a conveyance of land or an assignment of chattels as security for the payment of a debt or the discharge of some other obligation for which it is given,” per Lindley, MR in Santley v Wilde.

Section 1(1) of NRCD 96, however, defines a mortgage in Ghana as “a contract charging immovable property as security for the due repayment of a debt and any interest accruing thereon or for the performance of some other obligation for which it is given ...” Thus a mortgage in Ghana, after 1st January 1973, relates to immovable properties only, and it constitutes a charge on such properties. Section 1(2) of the Decree specifically provides that “a mortgage ... shall not, except as provided by the Decree, operate so as to change the ownership, right to possession, or other interest (whether present or future) in the property charged.” The mortgagor therefore remains the owner or a person who has a right to possession or other interest, of the property if he mortgages the property. Thus, if A creates a mortgage under the Decree, the ownership of the property, the subject-matter of the mortgage transaction, remains in A, and he is entitled to remain in possession of it.

The learned authors correctly identified that initially, a mortgage was understood as a form of conveyance. However, presently, it is merely an encumbrance on immovable property. This position was recently endorsed by the Supreme Court in the case of Agate Enterprise & Transport Services Limited v. Djan and Another (J4/47/2022) [2025] GHASC 24 (2 April 2025). In that case, the Court of Appeal had held that by law, a mortgagor could not transfer his title in a mortgage property during the subsistence of the mortgage. On appeal by the defendant, it was argued that per Section 1(2) of NRCD 96, a mortgage is only an encumbrance and does not operate so as to change ownership. Their lordships of the Supreme Court held that

Being only a charge on immovable property, a mortgagor may transfer his interest in the mortgaged property to a third-party subject only to the provisions of the Act or any other law.

They concluded that the Court of Appeal was wrong when it held that, by law, a mortgagor could not transfer his title in a mortgaged property during the subsistence of the mortgage.

Common Terms Used in Mortgages:

1. Mortgagor: This is the party who borrows and uses his property as security for the due repayment of the debt.
2. Mortgagee: This is the lender.
3. Mortgage debt: This is the debt for which security is provided.
4. Mortgaged property: This is the immovable property that is charged or encumbered as security for the performance of an obligation.

Two Main Characteristics of a Mortgage:

1. A Mortgage Is a Security for the Payment of a Debt or the Discharge of an Obligation:

If there is an agreement by which property is charged as security for the payment of a debt or the discharge of an obligation, the law will consider it a mortgage, irrespective of what the parties call the arrangement. The law looks at the substance rather than the form.

In Section 2 of NRCD 96, it is expressly provided that:

A mortgage of immovable property shall only be capable of being effected in accordance with the provisions of this Decree, and every transaction which is in substance a mortgage of immovable property, whether expressed as a mortgage, charge, pledge of title documents, outright conveyance, trust for sale on condition, lease, hire-purchase, conditional sale, sale with right of repurchase or in any other manner, shall be deemed to be a mortgage of immovable property and shall be governed by this Decree.

That is, once a transaction has the substance of a mortgage, namely, the charging of property as security for the payment of a debt or the discharge of an obligation, the label given to the transaction by the parties is immaterial. Whether it is described as a conveyance, lease, hire-purchase, or otherwise, the law will treat it as a mortgage.

Redemption or Redeemability:

Upon the payment of a debt or discharge of an obligation, a mortgagor has the right to recover the mortgaged property free from the mortgage.

Once the arrangement is held to be a mortgage, the mortgagor can always redeem the mortgaged property. According to Da Rocha and Lodoh (supra), at page 226,

The second characteristic is redeemability. In the words of Lord Machaghten “Redemption is of the very nature and essence of a mortgage as mortgages are regarded in equity.” A mortgage cannot therefore be made irredeemable, for this would be against the very nature of a mortgage.

Sources of Law for Mortgages in Ghana:

1. Mortgages Act, 1972 (N.R.C.D. 96):

This is

An Act to provide for the law relating to mortgages and for related matters.

It is the principal legislation governing mortgages in Ghana. In Section 2, it is provided that the act governs mortgages.

2. The Land Act, 2020 (Act 1036):

This is

AN ACT is to revise, harmonise and consolidate the laws on land to ensure sustainable land administration and management, effective and efficient land tenure and to provide for related matters.

Among others, it provides for the form and effect of a mortgage, when a mortgagor may need the consent of a mortgagee before transferring the mortgaged property, variation of mortgage, and discharge of mortgage.

3. Borrowers and Lenders Act, 2020 (Act 1052):

Act 1052 makes provisions on the priority of mortgages. It provides in Section 45 that:

A security interest in an immovable property in the form of a mortgage that is made effective against a third party under this Act has priority over any other mortgage subsequently registered under this Act, the Home Mortgage Finance Act, 2008 (Act 770), or the Mortgages Act, 1972 (N.R.C.D. 96).

Conclusion:

This note discussed the meaning of a mortgage and emphasised that it is not a conveyance but a charge on immovable property as security for the due repayment of a debt or the performance of an obligation. In subsequent notes, we will discuss the creation of different types of mortgages.