Section 22: Rules.

Schedules ACT Supplement to the Sierra Leone Gazette Vol. CXL, No. 26 dated 11th June, 2009 S IGNED this 4th day of June, 2009 DR. ERNEST BAI KOROMA, President. LS Interpretation. PART I–PRELIMINARY 1. In this Act, unless the context otherwise requires – “Annual Percentage Rate (APR)” means the total cost of credit that the borrower pays, expressed as a simple annual percentage; “Banking Institution” or “Bank” means a financial institution licensed by the Bank of Sierra Leone under the Banking Act, 2000 to carry on the business of banking; “Borrower” means a person who has taken a loan under this Act and includes any person from time to time deriving title through the original Borrower; “Certified Valuer” means a member in good standing of the Sierra Leone Institution of Engineers; “default” means failure to perform or breach of such terms, conditions, covenants or obligation in the mortgage Agreement; “Demand Note” means a notice to the Mortgagor demanding arrears due; “dwelling house” means a building that is used mainly for residential purposes; “Good Faith Estimate” means a good faith estimate of all anticipated costs that will be borne by the Mortgagor in a mortgage transaction; “loan” includes any credit or other financing granted by a Banking Institution or Non-Banking Financial Institution under this Act; “mortgage” means 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; “Mortgage Agreement” means an agreement in writing between a Mortgagor and a Mortgagee granting the Mortgagee a charge over the mortgaged property as security for the loan and setting forth the terms and condition of the loan; “Mortgagor” means a person who in consideration for a loan granted to him or to a third party or for the performance of an obligation secures the repayment of the loan or the performance of the obligation under this Act with an immovable property and includes any person from time to time deriving title through the original Mortgagor or entitled to redeem a mortgage according to his interest in the mortgaged property; “Mortgagee” or “Lender” means an institution that grants loans for the purposes specified in section 2 of this Act and includes any person from time to time deriving title through the original Mortgagee; “Non-Banking Financial Institution” means a financial institution, licensed by the Bank of Sierra Leone under the Other Financial Services Act, 2001; “purchaser” means a purchaser in good faith for valuable consideration and includes a lessee or Mortgagee who acquires an interest for valuable consideration; “reasonable force” means only that minimum amount of force necessary to evict the Mortgagor or any other person occupying the mortgaged property or force that is reasonable and without undue or excessive violence; 2 3 Act No. 11 of 2000. (Act No. 7 of 2001) “unauthorized purpose” means any purpose other than the purpose stated in section 2. PART II – GENERAL PROVISIONS 2. (1) This Act applies to all Banking Institutions and Non- Banking Financial Institutions engaged in the business of– (a) providing mortgage financing for the construction and purchase of dwelling houses by individuals and institutions including the financing of the completion of uncompleted houses and extensions and renovations or improvements to dwelling houses for ownership, sale or rental; (b) financing the construction of dwelling houses by organizations engaged in the business of building dwelling houses for sale or rental as well as for the financing of fixtures and chattels relating to dwelling houses; or (c) providing loans, advances or bonds and other guarantees to individuals for a specified purpose agreed between the Borrower and the Lender provided the repayment of the loans, advances or bonds and other guarantees is secured by a legal mortgage. . 3. (1) Except where otherwise provided, this Act shall apply only to home finance mortgages created after the commencement of this Act. (2) Nothing contained in this Act shall affect the validity, rights or obligations of parties to any home mortgage finance created before the commencement of this Act. 4. (1) This Act shall be in addition to the Conveyancing and Law of Property Act 1881and shall not, except as otherwise provided in this Act, derogate from the provisions of the Conveyancing and Law of Property Act 1881. (2) Where there is a conflict or inconsistency between the Conveyancing and Law of Property Act 1881 and this Act, the provisions of this Act shall prevail in so far as the particular mortgage falls within the scope of this Act. PART III – EFFECT OF A MORTGAGE 5. (1) Where a financial institution grants a loan under this Act security for the loan shall include a mortgage over the property in respect of which the loan is granted; and (2) Unless otherwise agreed by the Mortagee or the Lender, the title deeds, documents of title or mortgage deeds relating to the property, duly stamped and registered shall be deposited with the financial institution unless the financial institution in its absolute discretion decides otherwise or demands another security in place of the title documents. 6. (1) A mortgage under this Act shall not be enforceable unless it is evidenced in writing and provides for the– (a) name and address of each Mortgagor and Mortgagee; (b) full description of mortgaged property; (c) names of persons whose consent is required if any; (d) date of creation of Mortgagor; (e) nature of Mortgagor’s interest in the mortgaged property; (f) the extent to which the Mortgagor’s interest is subject to the mortgage; (g) the nature of the charge created; in case of a floating charge the nature of the restriction on the power of the Mortgagor’s right to grant further charges ranking in priority or pari passu with the charge thereby created; 4 5 Scope of application. Application of Act . Application of Conveyancing, etc. Act. Security for loan. Mortgage evidenced in writing. (h) consideration stating the exact amount in words and figures unless the agreement provides for further advances; (i) acknowledgement of receipt of consideration by Mortgagor; (j) rights of redemption; (k) insurance of property; (l) interest on principal amount; (m) date on which payment is due; (n) terms and conditions of renewal; (o) covenants and conditions; (p) events of default; (q) signatures of parties; and (r) signatures of witnesses. (2) A mortgage agreement shall be sufficient and shall be enforcable with regard to form and expression, if it is in the form contained in the First Schedule or in similar form or using expressions to a similar effect. 7. (1) A Mortgagee under this Act shall, at least fourteen days before granting a loan to a Mortgagor, provide to the prospective Borrower in writing– (a) the estimated Annual Percentage Rate (APR); and (b) a good faith estimate of all the charges, fees and costs of the mortgage transaction. (2) The disclosures required under subsection (1), shall be in the form provided in the Second Schedule and shall be delivered to, and acknowledged in writing by the prospective Borrower. (3) The Mortgagee shall allow a minimum period of fourteen days from the date of offer of the loan to the day when the mortgage agreement is executed in order to enable a prospective Borrower to seek legal and financial advice on all the documents relating to the loan. (4) Any Mortgagee who makes inaccurate disclosures under subsection (1) or fails to comply with the provisions of this section shall be liable to the Mortgagor for the total of all of the following damages– (a) any actual damages a Mortgagor or Borrower sustained as a result of the violation; and (b) court costs and legal fees. (5) Without prejudice to subsection (4), a Mortgagee who fails to comply with the provisions of this section shall be liable to a fine not less than five million Leones. (6) A Mortgagee shall not be liable under subsection (4) and (5), if upon discovery of an error made in a disclosure required under subsection (1) he notifies the Mortgagor of the error and makes the necessary adjustments to the Mortgagor’s account within sixty days of discovery, so that the Mortgagor or Borrower pays no more than the lesser of the finance charge or the APR actually disclosed. (7) The Bank of Sierra Leone shall issue such notices as it considers necessary for the purpose of implementing the provisions of this section including guidelines relating to the determination of accuracy tolerance margins for the purposes of subsections (4) and (5). 6 7 Disclosure requirements. 8. Without prejudice to the provisions of section 14 of the Stamp Duty Act, and section 24 of the Registration of Instruments Act, a mortgage created under this Act shall not be void or avoided by reason that it has not been registered or stamped and shall be valid as between the parties to the mortgage: Provided any interest in the mortgaged property acquired by a third party for valuable consideration and acting in good faith shall not be valid unless that third party registers his interest or the instrument creating the interest under the Stamp Duty Act and the Registration of Instruments Act. 9. (1) Where the Mortgagor fails to make an installment payment within fourteen days after the due date for such payment, the Mortgagee shall notify the Mortgagor in writing of this fact and demand urgent steps to be taken to remedy such default by the Mortgagor. (2) If no payment is made and the immediately following month’s installment also falls into arrears, the Mortgagee shall send to the Mortgagor a Demand Note for the immediate payment of the total amount that has fallen into arrears. (3) The notice required under subsection (1), and the Demand Note required under subsection (2) shall be delivered either– (a) by hand and a receipt acknowledged in writing by the Mortgagor; or (b) by leaving it for the Mortgagor with any person apparently over the age of eighteen years at such address and receipt acknowledged in writing by that person; or (c) by pasting the notice on a reasonably noticeable part of the mortgaged property; or (d) be sent by registered mail or by courier to the address provided by the Mortgagor. (4) Where registered mail or courier service is used the Demand Note shall be deemed to have been received by the Mortgagor at the time at which it would have been delivered in the ordinary course of post or the courier service. (5) If a settlement of the arrears is not made after the date of issue of the Demand Note and the Mortgagor does not make a satisfactory arrangement with the Mortgagee for the settlement of the amount outstanding, the Mortgagor shall be deemed to be in default as soon as the third succeeding month’s installment also falls into arrears. (6) Where the Mortgagor is a body corporate or a partnership, the notification required under subsection (1) and the Demand Note shall, when hand delivered, be delivered to the registered or principal place of business and acknowledged in writing by an officer of the company or partnership. 10. Upon the failure of performance of an act or acts secured by the mortgage to which this Act applies, the Mortgagee may do either or both of the following– (a) sue the Mortgagor or Borrower on any personal covenant to perform; (b) realise the Mortgagor’s security in the mortgaged property in any or all of the ways provided in this Act. 8 9 Default in payment. Remedies of Mortgagees on Default. Stamping and registration. Cap 274. Cap256. Cap 274. Cap256. 11. (1) Upon failure of performance of an act or acts secured by a mortgage to which this Act applies, the Mortgagee may appoint a receiver for the purposes of this section. (2) In the exercise of his right of appointment of receiver under subsection (1), the Mortgagee under a mortgage to which this Act applies, shall not be obliged to take any court proceedings. (3) A receiver appointed under subsection (1), may take possession of the mortgaged property in the manner stated in this section, and collect by demand or action in the name of the Mortgagor or the Mortgagee or otherwise, all income including arrears accruing from the mortgaged property, give valid receipts for all income collected and do any other act necessary or proper to manage the property including making reasonable repairs and improvements to the property to protect its value or to maintain or increase the income from the property. (4) A receiver appointed under subsection (1), shall be deemed to be the agent of the Mortgagee and the Mortgagee shall be responsible for the receiver’s acts or omissions. (5) A person paying money to the receiver shall not be concerned to enquire whether any event had happened to authorise the receiver to act. (6) The receiver may at any time be removed and a new one appointed by the Mortgagee in writing. (7) For the removal of doubt, the fact that a Mortgagee has taken possession of the mortgaged property shall not prevent him from appointing a receiver under this section in respect of that property. (8) A receiver shall be entitled to retain out of any money received by him for his remuneration, and in satisfaction of all costs, charges and expenses incurred by him as a receiver a commission at a rate not exceeding five per centum on the gross amount of all money received, as is specified in his appointment and where no rate is so specified then at the rate of two and a half per centum of that gross amount. (9) The receiver shall, if so directed in writing by the Mortgagee, insure the mortgaged property and any property of an insurable nature being part of the mortgage property, to the extent to which the Mortgagor ought to have insured against risks specified in the mortgage agreement. (10) A receiver appointed under subsection (1), shall apply all money received by him as follows— (a) in discharge of all rents, taxes, rates and other outgoings affecting the mortgaged property; (b) in payment of all annual sums or interest on all principal sums, due and having priority to the mortgage; (c) in payment of his commission and of the premium payable in accordance with the mortgage and cost of effecting necessary repairs; (d) in payment of all interest accruing in respect of any principal money due under the mortgage; (e) in or towards the discharge of any principal money due under the mortgage if so directed in writing by the Mortgagee, and shall pay the residue if any, or the moneys received by him to the person who but for the possession of the receiver would have been entitled to receive the income of which he is appointed receiver or who is otherwise entitled to the mortgaged property. 10 11 Appointment of receiver upon default. (11) Any person who obstructs a receiver in the discharge of his functions commits an offence and shall be liable on conviction to a fine not less than five million Leones or to imprisonment not exceeding six months or to both fine and imprisonment; and in the case of a continuing offence, to a further fine not exceeding five hundred thousand Leones for each day on which the offence continues. (12) Paragraph (iii) of subsection (1) of section 19 of the Conveyancing and Law of Property Act, 1881 shall not apply to any mortgage to which this Act applies. 12. (1) Upon failure of performance of an act or acts secured by the mortgage, the Mortgagee shall be entitled, as against the Mortgagor and any person deriving an interest in the mortgaged property through him whose interest is subsequent to that of the Mortgagee, to possession of the mortgaged property. (2) In the exercise of his right of possession under this section the Mortgagee under a mortgage to which this Act applies shall make an ex-parte application to the High court for an order to take possession of the mortgage property. (3) An order made by the High court under section (2) shall be enforceable by writ of possession. 13. (1) Upon failure of performance of an act or acts secured by the mortgage the Mortgagee may sell or cause the mortgaged property to be sold. (2) In the exercise of his right of sale under this section the Mortgagee under a mortgage to which this Act applies shall not be required to take any court proceedings. (3) A sale of any mortgaged property under this section may be by public auction or private contract and shall be subject to such conditions as the Mortgagee may determine. (4) Where a sale is conducted by a public auction the Auctioneers Act, shall apply except that the auctioneer’s fees shall not exceed three per centum of the gross amount of the sale. (5) Except where a sale is conducted by public auction, a Mortgagee who wishes to exercise his power of sale under this section shall give fourteen days notice of the sale to the Mortgagor and every encumbrancer of whom he has notice. (6) A notice required under subsection 5 shall be deemed to be served on all such encumbrancers if published in a public local newspaper on the fourteenth and seventh day respectively preceding the date of sale. (7) Where a Mortgagee has in exercise of his power of sale under this section sold or caused to be sold the mortgaged property to another person the title of the purchaser shall not be defeated on the ground that — (a) no case has arisen to authorise the sale; or (b) the notice required under subsection (5) has not been given; or (c) the power of sale was otherwise improperly or irregularly exercised, but the Mortgagee shall be personally liable for any loss caused by that sale if the sale is carried out in violation of this Act. (8) Neither the Mortgagor nor any encumbrancer is precluded from purchasing the mortgaged property at a sale under this section subject to the conditions set forth in subsection (3) provided that a Mortgagee at whose instance the sale was made shall not have the right to purchase the mortgaged property except where the sale is carried out at a public auction or subject to the approval of the Mortgagor and all the encumbrancers of whom he has notice where the sale is carried out by private contract. (9) The Mortgagee exercising his right of sale under this section may convey to the purchaser the whole of the interest of the Mortgagor in the mortgaged property. 12 13 Mortgagee’s right to possession. Sale of mortgaged property upon default. (Cap 224) (10) The purchaser of the mortgaged property shall take title to the mortgaged property free of all interests to which the mortgage of the Mortgagee who requested the sale has priority, and free of that mortgage, but subject to all interests which have priority to that mortgage, and shall be entitled as against any person to all title documents relating exclusively to the mortgaged property other than those title documents held by a person with an interest having priority to the mortgage of the Mortgagee who requested the sale. (11) Without prejudice to section 14 of the Registration of Instruments Act– (a) a certificate of purchase executed by the Mortgagor, the auctioneer and the purchaser pursuant to an auction sale of the mortgaged property; or (b) where the sale is by private contract, a statutory declaration by a Mortgagee evidencing the fact of a mortgage, default by the Mortgagor under the terms and conditions of the mortgage and a sale of the mortgaged property pursuant to such default, shall be sufficient for the purposes of establishing the title of the purchaser to the mortgaged property and for registration under the Registration of Instruments Act. (12) The proceeds from a sale under this section shall be held in trust for distribution by the Mortgagee who caused the sale. (13) Proceeds from a sale under this section shall be distributed as follows: (a) in payment of all expenses properly incurred as incident to the sale or any prior attempted sale; (b) in payment of all sums secured by the mortgage or with the same priority as the mortgage; and (c) in payment in the order of priority of any encumbrances subsequent to that of the mortgagee who requested th sale and the render to the mortgaee or his succeesors in title. (14) For the removal of doubt it is hereby declared that a Mortgagee on whom a right of sale is conferred by this section shall not be deemed to be a trustee of the Mortgagor in respect of that right. 14. (1) Before the sale of the mortgaged property, the mortgaged property shall be valued by a Certified Valuer agreed upon by the parties and where the parties are unable to reach an agreement, the Mortgagee shall appoint the valuer. (2) Where there is a dispute over the valuation of the mortgaged property, the party disputing the valuation shall apply to the Sierra Leone Institute of Surveyors for an appointment of an independent Valuer and the decision of the Valuer appointed by the Sierra Leone Institution of Engineers shall be final. (3) The price obtained from the sale of a mortgaged property under this Act shall not be less than eighty five per cent of the appraised market value of the property. (4) Where there is no sale at eighty five per cent of the appraised market value as provided under subsection (3) after two attempts at sale, the property may be sold at a price less than eighty five percent of the appraised market value and neither the Mortgagee nor an affiliated party of the Mortgagee shall be precluded from purchasing the mortgaged property at such subsequent sale. 14 15 Cap 256 Price of property not to be less than 85% of market value. Cap 256 (5) A Mortgagee who contravenes subsections (3) and (4) shall not be entitled to bring an action against the Mortgagor to claim the remainder of any amounts still owed. (6) Failure of the Mortgagee to comply with subsections (3) and (4) shall however not render a sale under this Act invalid. 15. (1) Both the Mortgagor and the Mortgagee have an insurable interest in the mortgaged property. (2) Unless a contrary intention appears expressly or by necessary implication, where the Mortgagor has covenanted to insure all or any part of the mortgaged property and fails to do so as required by the terms of the mortgage, the Mortgagee shall be entitled, after giving notice in writing to the Mortgagor, to insure and keep insured the mortgaged property against loss or damage by theft, fire, earthquake or other natural disaster; and the premiums paid by the Mortgagee for any such insurance shall be secured with the same priority as the mortgage and, where the mortgage secures payment of money, shall be added to the principal sum with interest at the same rate as on the principal sum. (3) Unless a contrary intention appears expressly or by necessary implication, where the Mortgagor has covenanted to insure all or any part of the mortgaged property and the insurance has been effected by the Mortgagor, or on behalf of the Mortgagor by the Mortgagee, all money received on such insurance shall be applied in making good the loss or damage in respect of which the money is received unless the Mortgagor elects to apply all or part of it toward the performance of the act or acts secured by the mortgage. 16. Where any Mortgagor under a mortgage to which this Act applies fails to pay any property rates due in respect of the mortgaged property the Mortgagee may pay the rates and moneys so paid shall be secured with the same priority as the mortgage and shall be added to the principal sum with interest at the same rate as on the principal sum. 17. A Mortgagor under a mortgage to which this Act applies shall not transfer any interest in the mortgaged property without the consent in writing of the Mortgagee. 18. (1) A Mortgagor under a mortgage to which this Act applies shall not create further charges on any interest in the mortgaged property without the consent in writing of the Mortgagee. (2) A charge created in contravention of subsection (1) shall be void in so far as the Mortgagor’s obligation under the prior mortgage agreement has not been fully discharged. PART IV – MISCELLANEOUS 19. Subject to paragraph (c) of subsection (1) of Section 2, any person who, being a person to whom a loan is granted under this Act, uses the whole or part of the proceeds of the loan for any purpose other than the purpose for which the loan is granted, the loan and any interest thereon shall immediately become payable and that person commits an offence and shall, on summary conviction, be liable to a fine not exceeding two million Leones or to a term of imprisonment not exceeding twelve months or both fine and imprisonment. 20. Where an offence under this Act or under any rules made thereunder is committed by a body of persons then– (a) in the case of a body corporate, every director and officer of the body corporate shall be deemed to have committed the offence; and (b) in the case of a partnership, every partner or officer of the body shall be deemed to have committed the offence: Provided that no such person shall be deemed to have committed the offence if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of the offence having regard to all the circumstances. 16 17 Insurance. Rates. Mortgagor’s right to transfer restricted. Mortgagor’s right to create further charges restricted. Penalty for using loan for unauthorised purpose. Offences by bodies of persons. 21. An action brought under this Act shall be by way of Originating Notice of Motion, and the proceedings shall be governed by Order 8 of the High Court Rules, 2007. 22. The Minister may, by statutory instrument, make rules necessary for the efficient implementation of, and otherwise for giving full effect to, the provisions of this Act. SCHEDULES