Lawyer; Can the bank seize my house?

Dear Mirror Lawyer, My business partner and I applied for a loan facility from the company’s bankers to finance the importation of the Ghana Black Star prototype jerseys, artifacts and many other souvenirs we intended marketing and selling during the FIFA 2014 World Cup in Brazil. 

I secured the business loan with my two-bedroom accommodation. Unfortunately, things did not go well for the Stars.  Apart from the performance with Germany, they were unimpressive resulting in the supporters our company targeted losing hope and failing to offer the support usually seen on their vehicles, offices, homes and gifts to loved ones abroad.

We could not sell the imported goods and therefore could not make the needed money to pay the bank unlike the 2010 World Cup in South Africa. The bank is now threatening to seize and sell the two-bedroom house although we did not prepare, sign or register a mortgage over the property. I am desperate for a solution and want to know what to do.

Douglas Ayisi, Osu.

Dear Ayisi, Business like any decision in life is a risk that has its ups and downs. You may succeed or fail but the lessons learnt will prepare you for the future. In 2010, you were successful in the same business that has let you down this year. 

The loan facility described by you is governed by the Borrowers and Lenders Act, 2008 Act 773. That Act simplified the procedure for enforcing collateral given by customers to financial institutions to secure the facilities granted. 

The Act provides that if a lender like a bank undertakes to lend money to its customer or a borrower and is secured by a property mortgaged or charged, where the borrower fails to make payment on the due date, the lender shall give written notice to the borrower and request the borrower to pay the amount due within thirty days. 

The Act further says if a borrower fails to pay or make satisfactory arrangements to pay the amount outstanding to the lender within thirty days after the date of receipt of the notice, the lender may either sue the borrower on any covenant to perform under the credit agreement, or recover the security in the property charged on notice to the person in possession of the property.

The law is explicit that in the exercise of right of possession of property that is subject to a charge to secure a borrower's obligations under a credit agreement, a lender is not under any obligation to initiate proceedings in court to enforce the right of possession and that where a lender is unable to enforce a right of possession in a peaceable manner, the lender may use the services of the police to eject the borrower or other person in possession pursuant to a warrant issued by a court.

Finally, the Act provides that a person who fails without reasonable excuse, to vacate premises being recovered by a lender as a result of default in the payment of any credit facility when duly requested to do so, or obstructs a lender in the lawful exercise of power conferred on the lender by the law commits an offence and is liable on summary conviction to a fine of not more than five hundred penalty units or to a term of imprisonment of not more than six months or to both. 

In the case of a continuing offence, a further fine not exceeding fifty penalty units in respect of any day on which the offence continues will be imposed.

From the provisions of the current law explained above, the bank has the power to either go to court or appoint a receiver to manage the property or go for a warrant from the court to use the services of the Police to eject you from the two-bedroom house. 

To avoid this embarrassment, the best approach I will advise is to opt for Alternative Dispute Resolution. This will allow you to meet the bank to have this matter settled peacefully by negotiating an acceptable monthly or instalment payment.