The Constitutional Court has ruled that it is not illegal for individuals who have defaulted on their loans to deposit 30 percent of the unpaid amount in court before their cases can be heard. The court reasoned that this requirement is essential to protect lenders from unnecessary delays or the halt of property sales due to defaulting borrowers.
The court specifically examined Regulation 13(1) and (4) of the Mortgage Regulations No. 2/2021 and Regulation 13(5) of the Mortgage Regulations No. 2/2012. Justice Cheborion Barishaki, in the lead judgment, declared that these regulations do not violate or contradict various articles of the Constitution, including Articles 21, 28, 44, 126(1), and 128. Furthermore, the court unanimously decided that the enforcement of Regulation 13(1) by the courts or any other official is also in line with the Constitution.
The court’s ruling emphasized that a mortgagor may only lose their mortgaged property when they default on their obligations, which aligns with Article 26 of the Constitution, as it safeguards the mortgagee’s interest in the property.
Justice Cheborion argued that Regulation 13 strikes a balance between the mortgagee’s desire to realize their security after a default and the mortgagor’s right to legal recourse. He clarified that Article 26 of the Constitution, which protects the right to own property, does not apply to disputes between private parties arising from contractual relationships governed by contractual documents, such as the Mortgage Deed in this case.
The case before the court was brought by Ferdsult Engineering Services Limited and its director, Mr. Ferdinand Mugisha, against the Attorney General. They contested the legality of Regulation 13(1) of the Mortgage Regulations No. 2/2012, which requires a 30 percent deposit of the forced sale value of the mortgaged property or the outstanding amount before a sale can be adjourned or stopped.
The petitioners argued that this regulation violated the mortgagors’ constitutional right to access the courts for redress and a fair hearing. This dispute stemmed from the ongoing legal battle in which the engineering firm challenged ABSA bank’s planned sale of their mortgaged property.
