The demand that the spouse is involved in the purchase of property financed by a lender, which is envisaged in the Lands Act, is aimed at ensuring that the partner is aware of any loans sought to either purchase a home or where a matrimonial property has been issued as security for a loan.
The consequence of missing this document, which many young couples don’t give importance, is the automatic rejection of an application or the nullification of a mortgage charge by a court of law in the event that a spouse feels overlooked in the application of the loan.
For the single home buyers, a sworn declaration of their marital status will be required as new legislation takes effect.
According to Frank Ireri, the managing director of Housing Finance, home borrowers will be required to re-draft their loan agreements to comply with the regulations which make a spouse’s consent critical in accessing credit.
“Borrowers will have to file their marital status while applying for home loans. Individuals who fail to file necessarily paperwork may find their mortgage charges rendered null and void,” he said.
Analysts say that lenders will be strict in following the law because in the event of default while one of the spouses did not consent to the mortgage application the lender would be exposed to losses of unpaid amounts.
Prior to the passing of this law, all a borrower needed to qualify for a mortgage was to prove the ability and commitment to service the loan while the lender retained the title deed until the loan was fully paid.
The new laws also makes it a requirement for banks to find the highest possible value when selling a defaulter’s property and upon receiving the sales proceeds, they would deduct the amount owed and remit the rest to the property owner.
Before this there was no legal requirement on lenders to recover any amounts from the sale of an asset above the outstanding loan amount.