Scope of Rights of Creditor Banks over Mortgaged Property in Ethiopia

Abstract

This article examines the Ethiopian mortgage system focusing on the scope of rights of creditor banks over the mortgaged property including its validity requirements. It employed a doctrinal research method, including the analysis of FSC cassation cases, relevant laws, and literature review. The article highlights that laws and cassation court practices give better rights and protections to banks in the Ethiopian mortgage system. Concerning the validity requirement, banks are exempted from the authentication. Banks also have the right to determine which property shall be sold first when more than one property is mortgaged. Besides, they are entitled to payments first when several creditors claim the same property and sell practically mortgaged property that belongs to the debtor or third-party in the same manner even if the third-party mortgagor is assimilated to a guarantor. Moreover, practically, banks prohibited the sale of mortgaged property by taking over its title deed and securing its injunction. The article argues that the law should empower banks to sell the mortgaged property even when it is transferred to third-party or belongs to third-party mortgagor in the same manner as they would sell properties directly mortgaged by the debtor. Accordingly, it recommends equitable procedural safeguards to all involved parties while addressing liabilities that arise from foreclosure procedures.