The power to use land as security for a loan is also called creation of a mortgage.
A mortgage includes any charge or lien over land or any estate or interest in land in Uganda for securing the payment of an existing or future or a contingent debt or other money or money’s worth or the performance of an obligation and includes a second or subsequent mortgage or a third party mortgage and a sub mortgage.
Any person who owns land under any form of tenure may mortgage his or her interest in the land or a part of it to secure payment of any debt or money’s worth or the fulfillment of a condition.
Did you know that you can use land as security for 2 loans as long as the value of the land is adequate to cover both loans?
The mortgage or mortgages are legally binding whether the transaction is registered or not.
In Uganda Formal Mortgages are registered by the registrar of Titles at the Ministry of Land Zonal Office.
Informal mortgage means a written and witnessed undertaking, the clear intention of which is to charge the mortgager’s land with the repayment of money or money’s worth obtained from the mortgagee and includes an equitable mortgage and a mortgage on unregistered customary land.
In Uganda, the following documents be used to prove land ownership types for purposes of creating mortgages;
Customary land title
Mailo land title
Freehold land title
Leasehold Land title
Any other document which may be agreed upon evidencing a right to an interest in land
Both the mortgagee ( the party receiving the land as security/the party in whose favor the mortgage is created) and the mortgagor (owner of the land or 3rd party who has mortgaged the land or interest in the land have a duty to;
a) act honestly and in good faith
b) disclose all relevant information relating to the creation of the mortgage
A party that Withholds/refuses/neglects or fails to disclose information relevant to the mortgage which information is in his or her possession commits an offense and is liable on conviction to a fine or imprisonment or both.
