Tanzania Court Of Appeal Makes Judgement On Spousal

Consent On Mortgages
On the 11th May 2020, the Court of Appeal issued a judgment in the case of Hadija Issa
Arerary v. Tanzania Postal Bank. The Court of Appeal considered what amounts to
reasonable steps taken by lenders to verify spousal consent in mortgages. They were of the
view that the mortgagee was correct to disburse the loan believing that there was no third-
party interest on the mortgaged property. In this update we will explore the judgment and its
impact on the banking and finance sector.

"The Mortgagee argued that a caveat must be filed to protect the interests of a third
party over the mortgaged property"

Background of the case

Tanzania Postal Bank (the Mortgagee) advanced a loan to Mr. Mwanuke (the Borrower)
secured by a third-party mortgage on the title deed of Mr. Pangani (the Mortgagor). The
Mortgagor swore an affidavit to the effect that he was not married and was the sole owner of
the mortgaged property. The Borrower defaulted on the loan; consequently the Mortgagee
exercised its enforcement rights under the law to sell the mortgaged property in order to
recover the outstanding amount.

Mrs. Hadija Issa Arerary (the Appellant) challenged the sale of the mortgaged property at the
District Land and Housing Tribunal (the DLHT) alleging, among other things, that she is the
legal wife of the Mortgagor and her consent was not sought and obtained before creating a
mortgage on their matrimonial property as is required by law.

DLHT found in favour of the Appellant. The Mortgagee being aggrieved by DLHT findings
successfully appealed to the High Court of Tanzania (the High Court). In its decision, the
High Court held that the Appellant failed to establish that she was the spouse of the
Mortgagor on account of the fact that the mortgaged property was registered in the sole name
of the Mortgagor who had also sworn an affidavit that, at the time of creating the mortgage,
he was not married and was the sole owner of the mortgaged property. The Appellant
preferred a further appeal to the Court of Appeal.

Submissions
The Appellant argued that her consent was necessary prior to creating the mortgage as per the
requirement under section 59 of the Law of Marriage Act, Cap 29 R.E. 2002 which states as
follows:

Where any estate or interest in the matrimonial home is owned by the husband or the
wife, he or she shall not, while the marriage subsists and without the consent of the
other spouse, alienate it by way of sale, gift, lease, mortgage or otherwise, and the
other spouse shall be deemed to have an interest therein capable of being protected
by caveat, caution or otherwise under any law for the time being in force relating to
the registration of title to land or of deeds.

She further argued that the first appellate court erred when stating that the interest in the
mortgaged property could only be protected by a caveat, which in her view was incorrect
because the Appellant cannot be deprived of her interest in the mortgaged property merely
because there was no caveat filed.

The Appellant also challenged the affidavit sworn by the Mortgagor for being defective and
that it could not have been relied upon in court. She further argued that the Mortgagee ought
to have taken reasonable steps to inquire on the marital status of the Mortgagor and that
simply inquiring from the tenants of the mortgaged property does not amount to 'reasonable
steps' under the law.

The Mortgagee argued that a caveat must be filed to protect the interests of a third party over
the mortgaged property. The Mortgagee also argued that the alleged defectiveness of the
affidavit was only minor and insignificant and that the Mortgagee had taken sufficient
reasonable steps to enquire on the marital status of the Mortgagor.

Judgment

The crucial issue is whether the mortgage of the suit property was proper in law. The Court of
Appeal held that filing a caveat to protect interests of a matrimonial home is now not a
requirement owing to the amendment made to section 114 of the Land Act which was
effected through section 8(2) and (3) of the Mortgage Financing (Special Provisions) Act
No.17 of 2008 (the Mortgage Financing Act). Section 8(2) and (3) of the Mortgage
Financing Act has shouldered the responsibility of disclosing whether or not a mortgagor has
a spouse to a mortgagor, with the mortgagee having to take 'reasonable steps' to verify such
information.

The Court of Appeal further held that the Mortgagor is required to swear an affidavit with
regards to his marital status and what was crucial was the content of the affidavit. Since the
Mortgagor did not denounce the contents of his affidavit, the Court of Appeal agreed with the
High Court's finding that the admissibility of the affidavit was irrelevant.

The Court of Appeal stated that the Appellant is barred by the principle of estoppel
articulated under section 123 of the Evidence Act [Cap 6 R.E. 2002], and, as such, the
Appellant cannot challenge the affidavit as she was not the one who swore it.

Finally, the Court of Appeal dismissed the appeal, holding that the Mortgagee was correct to
disburse the loan believing that there was no third party interest on the mortgaged property
hence the mortgage was valid. The filing of an application by the Appellant before the DLHT
was therefore a calculated move to deprive the Mortgagee of what it was supposed to recover.

What we can learn from this Court of Appeal case

 A mortgagor has a legal obligation to disclose details of his/her spouse and to seek
spousal consent before creating a mortgage over matrimonial property.
 Lenders should ensure that they obtain affidavits and take reasonable steps to verify the
matrimonial status of mortgagors.
 Spouses who do not hold a joint registration on the title deeds of their matrimonial
properties should undertake to either obtain joint registration or to file a caveat over the
property in order to protect themselves from the unfortunate event where their spouse
takes a page from Mr. Pangani's book and fails to disclose their matrimonial status.
While a caveat is no longer a necessary requirement under the law, it forms an
additional layer of protection for the aggrieved spouse. This is because upon
conducting a search at the lands registry a caveat will show up in the relevant search
report alerting banks/lenders that the property is a matrimonial home.