BRIEF EXAMINATION OF PROPERTY TRANSFERS IN TANZANIA DURING THE EXECUTION OF THE POWER OF SALE

The nature of a Mortgagee’s power of sale.

The power of sale for a mortgagee/lender is triggered when a borrower/mortgagor defaults, and the statutory sixty days' default notice expires from the date of its receipt. This grants the mortgagee/lender the authority to execute the power of sale for any registered mortgage. Importantly, the utilization of this power by the mortgagee does not constitute a disposition or transfer that necessitates approval from the Commissioner of Lands. This is due to the fact that, the power of sale is inherent in Section 132 of the Land Act, Chapter 113, Revised Edition of 2019 of the laws of the United Republic of Tanzania, allowing the mortgagee to exercise it in the event of a default. A bona fide purchaser who acquires a mortgaged property from a mortgagee/lender purportedly exercising their power of sale is not obligated, and neither is the Registrar of Title (the "Registrar") upon the presentation of a transfer for registration, to investigate whether a default has taken place or if any notice has been appropriately served. Moreover, there is no obligation to scrutinize the propriety or regularity of such a sale [1]

Procedural steps to observe, among others.

Notice by the Registrar.

Upon receipt of transfer documentation, the Registrar shall serve notice of such transfer on the mortgagor/borrower and shall suspend the registration of such transfer for one month (30 days) from the date of such notice, and at the expiration of such period the Registrar shall register the transfer as at the date of presentation.

The Mortgagee’s 10 days’ Notice.

Where a sale of a mortgaged property is made by means other than public auction, the mortgagee/lender shall be required to give notice of sale of not less than ten (10) days to the mortgagor/borrower and to any third party holding a registered interest in the mortgaged property.

Remedy against the Power of Sale.

During the thirty (30) days’ notice issued by the Registrar, a mortgagor/borrower or any other interested party in the mortgaged property may lodge an Application at the High Court of Tanzania, seeking among others, orders of injunction towards the sale.  

Powers Incidental to the Power of Sale.

Where a sale is to proceed by public auction, it shall be the duty of the mortgagee/lender to ensure that, the sale is publicly advertised in such a manner and form as to bring it to the attention of persons likely to be interested in bidding for the mortgaged land. The mortgagee/lender shall issue a 14 days public notice to the principal town or district in which the land is situated and at the place of the intended sale before conducting the public auction[2].

A sale of the mortgaged land by a mortgagee/lender in exercise of the power of sale shall be made in the prescribed form and the Registrar shall accept it as sufficient evidence that the power has been duly exercised.

Application of the Proceeds from the sale of the Mortgaged Land.

In practice, the sale proceeds received by the mortgagee/lender who has exercised his power of sale are applied in the following order of priority: -

• first, in payment of any rates, rents, taxes, charges or other sums owing and required to be paid on the mortgaged land;
• second, in discharge of any prior mortgage or other encumbrance subject to which the sale was made;
• third, in payment of all costs and reasonable expenses properly incurred and incidental to the sale or any attempted sale;
• fourth, in the discharge of the sum advanced under the mortgage or so much of it as remains outstanding, interest, costs, and all other moneys due under the mortgage, including any moneys advanced to a receiver in respect of the mortgaged land; and
• fifth, in payment of any subsequent mortgages in order of their priority, and the residue, if any, of the money so received shall be paid to the person who, immediately before the sale, was entitled to discharge the mortgage.

The Mortgagee may sell to himself.

A mortgagee/lender exercising the power of sale may sell to himself, other than in the circumstances provided by the law, and only if a Court gives him leave to do so. A Court shall not grant leave unless the lender/mortgagee satisfies such Court that a sale of the mortgaged land to himself is the most advantageous way of selling the land to comply with the duty imposed on the mortgagee/lender.

The outcome of a Sale under Power of Sale.

Every such transfer, when registered shall vest the mortgaged property in the purchaser free from all liability on account of such mortgage or of any other incumbrance registered or entered subsequent thereto, except a lease to which the mortgagee/lender has consented in writing, or to which the consent of the mortgagee/lender is not required.

By Said Nassor- Advocate

Note: This is not a legal opinion, and the contents hereof are not meant to be relied upon by any recipient unless our written consent is sought and explicitly obtained in writing.

[1] Ref.Section 51 of the Land Registration Act, Chapter 334, Revised Edition of 2019 of the Laws of Tanzania

[2] Ref. Section 12(2) of the Auctioneers Act, Chapter 227 of the Laws of Tanzania