Mortgage on Immovable Property: The Law and the Practice in Ethiopia; with a Reference to East Gojame Zone Administration, Amhara Regional State, Ethiopia

Abstract

Mortgage is a means of securing claims that a person may have on another which may be created either by law, judicial decision or contractual agreements. In the event of giving loan, a number of creditors would like to assure that their loan must be repaid by a contractual security either by entering in to a separate mortgage agreement or by inserting a mortgage clause in their original loan agreement. The formal requirement of mortgage contract is deemed to be valid if and only if the mortgage agreement is made in writing and being registered by notary. In addition, for a practical purpose it is required to be registered in the municipality where the immovable property is located in order to maintain the rank for executing the right of priority on such mortgaged property where secured creditors are several.

Once the mortgage is registered, a mortgager has a legal right to retain the right of ownership on the mortgaged property which entitles him/her to transfer the right he or she had on such property including remortgage, servitude, usufruct or other rights as the clear provision of the legal regime in Ethiopia.

However, such bundle of rights owing to a mortgager seem inappropriately implemented by the municipality, court and other parties who may involve directly or indirectly in executing mortgage by whatever forms the mortgage is established. Though   mortgage is a security device on immovable property or special movable that cannot be actually delivered to the mortgagee and the right over the mortgaged property is retained with the mortgager, the finding of the research proved that its practical applicability is not in line with the existing governing laws of the country under the Civil Code, 1960. Since the state machinery and the business community creates practical misperception about mortgage on immovable property, the effect is contrary to the purpose intended to achieve by the law-making body of the country. Having understood the practical problem in implementing the laws associated with mortgage, the author of this research has come up with a remedial actions and recommendations. Accordingly, attention shall be given to judges decide issues arising with mortgage based on the sprite of the law thereby ensure the correct implementation of the laws relating to mortgage. It is quite important to provide training and awareness for all administrative organs, legal community and the business men on the laws of mortgage, and on that would-be application of such laws. Ultimately, owners of mortgaged immovable property could exercise ownership rights on such property, such as remortgage, servitude, usufruct, even to dispose of the immovable property without inconvenient thereby people is left free to easily mobilize their liquid capital in a manner that facilitates the country's business transaction and economic mobility so as to achieve the legislators intended objective.