Tanzania: New Regulations On Mortgaging Land

As noted in the previous updaters, the new defintion section (section 120B(3) of the Act) provided clarity on questions surrounding the meaning of "local bank" and "local financial institution".

Regulation 4 of the Regulations has now further clarified and provided context in respect of what land shall be considered "undeveloped" and "underdevleoped".

"Underdeveloped" land means land which is not developed in accordance with the conditions of relevant rights of occupancy. It includes "inadequately developed" land which is defined under Regulation 4(2) of the Regulations.

Whereas "undeveloped land" means land which is vacant, without unexhausted improvement in, on, under or over such land or without any change of substantial nature in the use of such land.

The above clarification is in relation to section 120A (2) of the Act which essentially provides that where part or the whole of the mortgaged land is undeveloped or underdeveloped, the money obtained from the local or foreign bank or local or foreign financial institution shall be utilised to develop part or whole of such mortgaged land.

Continuting the theme of investment in Tanzania, Regulation 5 supplements the Act, confirming that any person intending to obtain a loan from a local or foreign bank or local or foreign financial institution, where said loan is secured by a right of occupany, a lease of right of occupancy or a derivative right, must submit a declaration to the Commissioner for Lands (the Commissioner) stating that the mortgage money shall be invested in Tanzania.

The declaration must contain, among other things, a description of the mortgaged property, a statement on the purpose of the loan, and the place(s) where the money will be utilised.

The declaration must contain, among other things, a description of the mortgaged property, a statement on the purpose of the loan, and the place(s) where the money will be utilised.

Once the Commissioner is satisfied that the declaration contains all the required information he/she shall endorse it accordingly.

The format of the declaration is contained in the Schedule to the Regulations.

In order to register a mortgage, the mortgagee is obliged to submit to the Registrar of Titles (the Registrar) a number of documents including the certificate of occupancy, leasehold or derivative right, mortgage instruments, a copy of the declaration and a valuation report.

It should be noted that, in respect of the valuation report, this will only be accepted if it is prepared by a registered valuer, approved by the chief valuer and submitted twelve months from the date on which it was prepared.

Mortgagor to submit a report on the utilisation of money (regulations 7 and 8 of the Regulations)

Within six months of registering a mortgage of undeveloped or underdeveloped land, the mortgagor must submit to the Commissioner a report in the format outlined in the Schedule to the Regulations.

If the mortgage money is released in instalments, the mortgagor must submit a further report within six months of receiving each instalment.

Regulation 8 of the Regulations outlines the various options for service to the Commissioner and that is by hand, registered post or email.

A person knowingly making a false declaration or submitting a report containing false information is liable to a fine up to one million Tanzanian shillings (approximately USD 430), imprisonment of up to two years or both a fine and imprisonment.

Regulation 7 of the Land (Mortgage Financing) Regulations has now been repealed. It dealt with the documents that the mortgagor was required to submit to the Registrar when registering a mortgage.

With the introduction of Regulation 6 of the Regulations (as provided above), mortgage registration obligations have now shifted to the mortgagee.

This is a significant shift of responsibilities and fairly onerous on the mortgagee. Mortgagees must be alert to their new obligations.