Q & A WITH ABC ATTORNEYS: It's possible to purchase a mortgaged property

Greetings, I am an average income earner Tanzanian. I have been employed as a manager at one of the factories in Dar e s Salaam for a long time now, and I have been able to keep my savings. I want to purchase a property from co- worker who was honest enough to tell me that this property has been mortgaged to one of the banks here in Tanzania. My question to you is whether it is possible to purchase a mortgaged property and if yes what are the procedures?

JR, Arusha, Tanzania

Thank you JR for your question. Well as regards to your first question the answer is yes, it is possible to purchase a mortgaged property provided you follow up the water tight procedure to protect your interest. It is proper to let you know that, there different kind of Mortgages and each have a respective way on how they are handled when it comes to purchasing.

Generally, in such a situation, you as a transferee of the property should first of all be able to obtain a written statement directly from the transferor.

This statement shall describe the form of encumbrance or for this case the scope of the mortgage. With special negotiations then the mortgage will be discharged if the transferee agrees to the mortgage.

Thus, there should be some sort of an agreement that you will pay off the mortgage and it should be as part of consideration due under the transfer of the right occupancy, but you should first obtain a valuation report from chief valuer which must be approved by the ministry of land. After this you can then prepare and execute the sale agreement. Our advice to you is that you must ensure that the sale agreement incorporates all the matters agreed upon.

Mortgage trouble

Question. A friend is behind on their mortgage and wants to keep the property. I am considering helping them with money and taking an ownership interest in the property which does have some equity they’d lose if they lost the house. Any suggestions?

J.M, Dar

There are two things in real estate and in life that occur more often than not. First, people behind on their mortgages usually lose their properties. And second, private investment partnerships, particularly when one partner is saving the other from financial distress, are rarely successful for the financially healthy partner. I understand that it is a friend of yours, but the road of helping friends in distress is littered with ruined credit scores and lost friendships and money.

If they are a lifelong friend, a family member or otherwise highly-valued friendship, that might cause one to consider helping. But you are putting your money on a pretty high-risk investment. Alternatively, you might consider buying the property and taking title so you have complete control, subject to a written agreement between the parties.

If there are profits above what you should earn for taking the risk, you could share them with the other party.

That notwithstanding, have a legal written agreement between all the parties so everyone knows the arrangement. On how to write a legally binding agreement, please do consult your attorney.

Real estate contracts

Hi, I am a businessman, but I am new in real estate business. I worry that since in my other business dealings I have run into a lot of contract/agreements disputes it might also be the same for me in the real estate business. Can you please tell me on how I can protect myself and reduce the risk of such atrocities? Thanks.

GH, Dar es Salaam

Dear GH, this is what you should know about agreements that are entered in the real estate business.

First of all an agreement must be in writing, like agreements for sale of land, with an exception to short-term leases, and must be signed by both contracting parties.

Also before signing an agreement for sale of land you have to afford yourself sometime to conduct due diligence where you will search the necessary information concerning the property and assure yourself of any encumbrances before purchasing it.

You should also take note of the covenants therein.

The agreement must also indicate the cost payable by each party, whether the price includes VAT and the timing of the payments as weel as the clause that the purchaser is at contentment with seeling the property.