Roy Simiyu, a successful businessman would like to obtain some funds for expansion of his business premises through a mortgage facility.
Roy Simiyu would like to know what options would be available to the bank with regard to the proposed security in the event of his business failing and his being unable to repay the loan.
Describe the options available to the bank. (10 marks)
ANSWER
• Statutory Power of Sale: this is the power of the mortgagee to sell the security if Roy fails to repay the loan. The mortgagee must give the requisite notices to the mortgagor i.e. Roy.
• Fore Closure: this is a foreclosing order which bars the mortgagor from redeeming his security.
• Appointment of receiver: the bank is ordinarily emthe mortgage to appoint a receiver to take over the security given the mortgagor to facilitate payment of the debt.
• Suit on personal covenant: This is the right of mortgagee to sue the mortgagor in the event of default. It is an action for recovery of the amount due from the mortgagor.