Recontextualizing the Neighbourhood Principle: Mortgagee Liability, Social Impact and Financial Justice in Global Secured Transactions

Abstract

This article re-examines the Neighbourhood Principle as a framework for mortgagee liability to third parties, repositioning it within a socio-legal and development-oriented context. While existing scholarship has treated the principle primarily as a doctrinal tool in private law, this study argues that its true significance lies in its capacity to address systemic inequities in mortgage enforcement, particularly in developing and transitional economies. Drawing on comparative analysis across common law and civil law jurisdictions including Nigeria, the United Kingdom, and Indonesia, the article demonstrates how mortgage enforcement practices often generate adverse social outcomes, including undervalued property sales, financial exclusion, and the erosion of wealth among vulnerable borrowers and guarantors. These effects are especially pronounced in jurisdictions with weak regulatory oversight and inefficient property markets. Integrating doctrinal analysis with empirical insights on mortgage recovery rates and enforcement outcomes, the article develops a socio-legal framework that reconceptualizes mortgagee duties as instruments of economic justice and financial system accountability. It argues that the Neighbourhood Principle provides a normative foundation for aligning secured transactions law with broader policy objectives, including consumer protection, housing security, and equitable access to credit. The article concludes with policy-oriented recommendations for legislative reform, regulatory innovation, and institutional strengthening, proposing a model of “ethical mortgage enforcement” that balances creditor rights with societal impact in an increasingly interconnected global financial system.