Loans and Jointly Acquired Properties: A Brief Note on Adjei v Adjei
Early on this year (on 21st April 2021), the Supreme Court in Peter Adjei v Margaret Adjei held that property acquired with a loan, which was still being paid, could not be classified as jointly acquired property.
In this case, the Petitioner (husband) filed a petition for divorce against the Respondent (wife) and sought custody of their two children. The Respondent cross-petitioned for a divorce and, among others, asked that the matrimonial home be given to her in addition to a lump sum payment of GHS 400,000.00 and a monthly maintenance of GHS 2,000.00 for herself and the children. The High Court granted the divorce and refused the Petitioner’s plea for custody. The High Court also granted the Respondent’s request for the matrimonial home and further awarded her a lump sum of GHS 500,000.00 and a monthly maintenance award of GHS 1,500.00 for the two children.
The Petitioner, being dissatisfied with the grant of the Respondent’s reliefs, especially that of the matrimonial home, appealed on several grounds including the ground that that the matrimonial home was acquired before the marriage and that the Respondent single-handedly built the structure using funds from a loan. It was established however that it was not true that the Petitioner had acquired the matrimonial property before the marriage. It was the land on which the property was built that was acquired before the marriage. The construction of the matrimonial home together with three other houses on the same land took place during the marriage. In essence, the Petitioner’s case was that: “I bought the land before marriage. I took a loan during the marriage to raise the structure. The Respondent contributed nothing. The property is mine [alone]”. The Supreme Court agreed.
The aim of this piece, however, is to examine the very narrow question of whether property acquired using a loan during the pendency of a marriage falls outside of the scope of the category of properties that may be described as jointly acquired property. The discussion will start off on the meaning of jointly acquired property, and then examine whether the acquisition of a property through a loan excludes this category of property from the scope of properties jointly acquired.
The author considers this discussion important as there is the potential for estrange spouses to start asserting that property acquired during a marriage was one acquired with a loan (which is still being serviced), and therefore, the non-contracting party [to the loan agreement] cannot assert an interest in the property in dispute.
Jointly Acquired Property
The law is fairly settled. Individuals in a marriage are entitled to own properties in their name. In other words, marriage is not a barrier to owning property. The only kind of property that is up for distribution is property which was jointly acquired.
The phrase “jointly acquired property” is not a technical one. It is simply property acquired during the pendency of a marriage as a result of the joint efforts or contributions of both spouses. The case law is straightforward on the meaning of jointly acquired property. It is enough to point out that for a property to be jointly acquired, the party asserting a claim to the property must demonstrate some positive step or action towards the acquisition of property. As Houlden J remarked in Re Jago Plumbing & Heating Supplies Ltd:
‘It seems to me that “acquire” contemplates some positive action or step being taken, as contrasted with “accrue” which contemplates a result which flows, naturally from events which have occurred.‘
From this definition, a jointly acquired property is one acquired in common by two or more people through some active and positive step as opposed to benefits accruing to them individually (such through gifts, and inheritances). The distinction between acquiring and accruing is important in understanding the scope of the items that are likely to fall within the category of jointly acquired property and those that are likely to fall outside of it.
In the Supreme Court decision under review, the majority was therefore right [at page 10] to say that:
“… it is not every property acquired single-handedly by any of the spouses during the subsistence of a marriage that can be termed as a ‘jointly-acquired’ property to be distributed at all cost on this equality is equity principle. Rather, it is property that has been shown from the evidence adduced during the trial, to have been jointly acquired, irrespective of whether or not there was direct, pecuniary or substantial contribution from both spouses in the acquisition … so where a spouse is able to lead evidence in rebuttal to the contrary, the presumption theory of joint acquisition collapses.”
Loans and its impact on joint ownership
At page 14, the Supreme Court majority noted that:
“The petitioner contended, without any challenge whatsoever from the Respondent that, he single-handedly took a loan from the Bank to put up the four units of flats, three of which he was renting to tenants to liquidate the loan and to maintain his family since he was on pension. Again, the loan had not still been fully liquidated … with this what the Petitioner was implying was that he had not fully acquired the four units of flats at the time of the dissolution of the marriage, since the loan he single-handedly took to build them had not been fully repaid.”
The Supreme Court, in saying this, affirmed the Court of Appeal’s position that until a loan is fully paid, the property in respect of which the loan was obtained cannot be said to be property of the borrower and therefore cannot be considered as jointly acquired property.
It is this position taken by the Court of Appeal and affirmed by the Supreme Court that the author seeks to reflect on. Suffice to say that no authority was cited in support of the proposition that so long as the loan amount had not been fully paid, the property could not be considered as jointly acquired.
Did the Petitioner fully acquire the Property?
The court’s position was clear: The Petitioner had not fully acquired the matrimonial property together with the other adjoining buildings because (a) the petitioner took a loan; and (b) he was still repaying the loan.
But the court fell short of directly saying who owned the property. Property ownership cannot be left hanging. At any point in time, a property or item must belong to someone. This is why the Evidence Act says that: the things which a person possesses are presumed to be owned by him. And secondly a person who exercises acts of ownership over property is presumed to be the owner of it. From the facts, the Petitioner was the one collecting the rent and exercising other acts of ownership over the property. He was the person in possession. And therefore, it stands to reason that he was the one who owned the property.
Further, the Supreme Court’s assertion that the Respondent did not fully own the property is not helpful. Take this scenario. ‘A’ approaches a financial institution for a loan. The financial institution grants ‘A’ the loan. ‘A’ uses the loan to build a two-bedroom property. If one is asked: who owns the bedroom property: the answer is not the financial institution. The answer is that the owner of the property is ‘A’ who took the loan. The financial institution may take security/mortgage over the building but the taking of security to secure the performance of an obligation does not operate to change ownership in property. The property will belong to ‘A’. According to section 7 of the Borrowers and Lenders Act, 2020 (Act 1052), a security interest in a property does not operate as a transfer of title in the property from the borrower to the lender.
Further, let us assume for a moment that the Supreme Court was right – that since the loan was still being serviced, it does not become a jointly acquired property. Does the nature of the property change after the loan is fully paid [in the sense that it becomes a jointly acquired property]?
In the light of the above discussion, the Supreme Court took a wrong turn when it concluded that merely because the Petitioner took a loan (which is still being paid), the property did not qualify as one which could potentially fall into the pool of assets that the other spouse could lay claim to. The financial circumstances or arrangement under which a property was acquired should not serve as an independent ground for determining whether a property is to be considered as jointly acquired in the first place.
Well, I must say that it’s an insightful piece of work. However, I would have prefer that at the end of the analysis you post the full case for people like us to read it so we can clearly understand your positions and concerns. Having said that I will look for the case anyway and read it before agreeing with your note. Yet, I have some few questions for you.
1. What was the purpose of the loan the petitioner took from the bank?
2. Was the loan for a general purpose or a mortgage loan?
3. What does the law say about general purpose loan vis a vis ownership of property?
4. What does law say about mortgage loans vis a vis ownership of property?
Note, anyone who takes a loan for the purpose of a mortgage does not fully own the property for which he took the loan.
Please counsel if you address this question in the light of the law then we are good to go.
Hello Patrick, here is a link to the case on ghalii.
Happy to engage more after you are done.
I disagree that the judgement was wrong. Just as someone else posted above, if the loan was taken for building the house and it has not been fully paid off, the house cannot be said to fully belong to the respondent hence cannot be considered to be jointly owned. The lender can take possession of the house, sell it and defray the remaining balance of the loan if the borrower defaults. What happens if it has already been transferred to another person?
You cited the lenders and borrowers Act 2020, the ruling by both superior courts do not in any way offend or contradict the Act.
Your criticism of the judgement cannot represent a fair assessment of the matter in my view.
Companionship and the performance of household chores alone, without any financial input, have been held by the courts to be adequate contributions by a spouse to the acquisition of joint property.
Therefore I think the financial circumstances or arrangement for the acquisition of property is a fair and just basis for determining if a property is joint property. It would be grossly unfair to require Spouse A to continue making payments on a loan (which has not been substantially paid off) he/she contracted to put up a house, if the ownership of the house has been transferred to Spouse B when Spouse B’s contribution is of the companionship and household chores kind, since this contribution ceases upon divorce.
Of course the reverse would be true if there are only a few months of payment left to fully service the loan.
So again, the financial circumstances of acquisition of property would determine what is fair on a case by case basis.