In a recent ruling, the Constitutional Court has declared that it is not illegal for individuals who have defaulted on their loans to deposit 30% of the unpaid amount in court while their cases are being heard. The court explained that this requirement serves to protect lenders from unnecessary delays or the halt of property sales due to the defaulting borrowers. This ruling was handed down on Saturday, October 14, 2023.
According to Justice Cheborion Barishaki, who delivered the lead judgement, the Mortgage Regulations No.2/2012, particularly Regulation 13(1) and (4), do not violate the constitution. It does not conflict with Articles 21, 28, 44, 126(1), and 128 of the Constitution. Furthermore, Regulation 13(5) of the Mortgage Regulations No. 2/2012 does not contravene Article 26 of the Constitution. The court reached a unanimous decision, supported by Justices Frederick Egonda-Ntende, Catherine Bamugemereire, Muzamiru Kibeedi, and Monica Mugenyi, that the enforcement of Regulation 13(1) is in harmony with various constitutional articles, including Articles 21, 28, 44, 79, and 126(1).
The court stated that the loss of mortgaged property can only occur when a mortgagor defaults on their obligations and the mortgagee exercises its remedies. This, according to the court, aligns with Article 26 of the Constitution, which protects the mortgagee’s interest in the mortgaged property.
Justice Cheborion emphasized that Regulation 13 strikes a balance between the mortgagee’s desire to secure their investment after a default and the mortgagor’s right to legal redress. Article 26 of the Constitution, which protects property rights, is not intended to address disputes arising from private contractual relationships. Therefore, the court ruled that no infringement of Article 26 occurred in this case.
The case brought before the Constitutional Court involved Ferdsult Engineering Services Limited and its director, Mr. Ferdinand Mugisha, against the Attorney General. They questioned the legality of Regulation 13(1) of the Mortgage Regulations No.2 of 2012, which mandates a 30% deposit of the forced sale value or outstanding amount for the adjournment or stoppage of a property sale.
The petitioners argued that this regulation violated the mortgagors’ constitutional right to access the courts and receive a fair hearing. The dispute arose from Ferdsult Engineering Services Limited’s challenge to ABSA bank’s intention to sell their mortgaged property in an ongoing court case.
