LEGAL GUIDANCE ON MORTGAGE ACTIONS
INTRODUCTION
The Banking and Financial Services Act No. 7 of 2017 of the Laws of Zambia in Section 110 has provided guidance on the interest a Financial Institution can recover from a non-performing debt. Below is a summary of this guidance along with best practices in commencement of mortgage actions.
RECOVERABLE AMOUNTS FROM A BORROWER ON A NON-PERFORMING LOAN
• The principal amount owing when the credit facility became non performing
• Interest in arrears but such interest shall not exceed the principal amount owing when the credit facility became non-performing
• Expenses incurred in the recovery of amounts owed by the borrower. e.g. legal, advertising costs, valuation costs, real estate agent fees.
• Court process must demonstrate before court what the outstanding balance is in terms of principal balance and interest arrears at the time the credit facility is deemed non-performing.
• Court process must break down the outstanding credit facility balance into principal portion and interest portion.
PROOF OF DEBT
• The affidavit must exhibit –
(a) A true copy of the executed mortgage deed.
(b) True copy of the facility agreement
(c) True copy of Bank statement
(d) True copy of Demand letter(s)
(e) True copies of letters of commitment to pay if any.
• The affidavit must contain statements of information or belief with the sources and grounds thereof
WHERE A PLAINTIFF SEEKS POSSESSION
• Where the plaintiff claims delivery of possession the affidavit must show the circumstances under which the right to possession arises and the state
of the account between the mortgagor and mortgagee with particulars of –
(a) the amount of the advance,
(b) the amount of the periodic payments required to be made,
(c) the amount of any interest or instalments in arrear at the date of issue of the court process,
(d) the amount remaining due under the mortgage, and
(e) give particulars of every person who to the best of the plaintiff’s knowledge is in possession of the mortgaged property.
(f) Serve notice of the proceedings on the person on whose behalf the land charge is registered and all occupiers of the property if any.
WHERE A PLAINTIFF CLAIMS PAYMENT OF MONEY SECURED BY A MORTGAGE
• Where the Plaintiff claims payment of money secured by the mortgage the affidavit must how the claim is calculated i.e
(a) The amount of the advance and the amount and dates of any periodic repayments and any interest claimed;
(b) the amount which would have to be paid (after taking into account any adjustment for early settlement) in order to redeem the mortgage at the date of commencement of the proceedings;
(c) The dates between which a particular rate of interest applied, the number of days in that period, and the capital on which the interest
was calculated.
WHERE THE PLAINTIFF IS CLAIMING INTEREST TO JUDGMENT
• Where the plaintiff’s claim includes a claim for interest to judgment, the affidavit must state the amount of a day’s interest.
We therefore advise that going forward, mortgage action matters allotted to us or any other law firm as the case may be, carry the breakdown of
interest and principal amounts when the debt became non-performing and to provide important information required in the affidavit as stated above to ensure expedited adjudication and avoid unnecessary delays