by Realtor Patrick 
On Buying Real Estate in Nigeria (Better Safe than Sorry)
It is better to be safe than sorry when buying Real Estate in Lagos or anywhere in Nigeria. Practically, the property is as good as the title (the legal right to a property), to such property. Every time a property changes hands, there is also a change in the title. Somewhere in the chain of transfers and transmissions of the property, certain lacuna could emerge with a resultant defect in the title; it is important to avoid such lacunas or ensure that regularisation steps are promptly taken to avoid costly risk exposure.
It is trite that purchase is a common means of acquiring ownership of land in Nigeria, as elsewhere. To be clear, buying real property is not all about finding a vendor willing to sell and agreeing on the price for the property. Buying property is ‘a big deal’, and for many people, it may be one of the most significant one-time transactions, they will ever make. The point of doing it right can never be overemphasized, and as with all major decisions, it is “better to be safe than sorry”!
Using transactions in Lagos State as an example, it is critical to take certain steps prior to, during, and after the purchase of land, so as to secure an unimpeachable interest in the property. This also obviates the ‘firefighting’ that could follow a flawed transaction; for example, having to pay twice or pay double consent fees for the same property; such is a ‘loss’, if the ‘defect’ had not been earlier factored by way of ‘risk discount’ into the purchase price.
Any intending purchaser must investigate (conduct searches, make inquiries, etc about) the title of the vendor and in some cases, the track record of such vendor, in order to forestall any future legal issues.
The nagging question is: how do prospective purchasers proceed with real estate transactions without falling victims to fraudulent and sham vendors? This article focuses on navigating the minefields around the issues of valid title in Nigerian Real Estate transactions; given the centrality of title as a project risk.
Acquiring and Perfecting Title in Lagos State: Buyers’ Procedural Steps
(Safe Than Sorry)
Pre-Contract Inquiries
Things typically start with when the prospective purchaser becomes aware of the availability of the land in question through an agent, personal contacts or via any mode of advertisement. The advertisement medium, whether or not the agent is a registered professional or how well one knows the personal contact who made the introduction (and in turn, how well such person knows the vendor), could impinge on the credibility of the prospective property and its vendor.
Thus, it is only if the signals are positive, that next steps are worth exploring. Accordingly, once interested, the prospective purchaser (or his agent) reaches out to the vendor/agent for preliminary discussions or further inquiries. The vendor/agent could then provide additional information (such as price and other terms/conditions for the sale). Usually, the parties will not ‘close the deal’ at this point.
The parties can, pursuant to the prospective purchaser’s preliminary interest, then proceed to plan a physical inspection of the property; it may also be necessary to further (separately) verify relevant vendor representations and circumstances of the property from occupants of the property and/or owners of neighbouring property. Again, the intended transaction may not materialise if the prospective purchaser is not pleased with the land; for example, if it is swampy, not fit for proposed use or is bigger/smaller in size than what is actually required. However, if the prospective purchaser is happy with all his findings, they can proceed to the next stage.
An offer letter may subsequently be sent to the purchaser; the offer letter should contain details of the terms and conditions of the transaction, including the roadmap for its consummation. Vendors use it to further measure the interest of the prospective purchaser: acceptance is usually a signal that prospective purchaser (with requisite financial capacity) would be willing to conclude the deal, subject to positive findings from his investigation of title.
The imperative of pre-contract inquiries in property acquisition cannot be overemphasised; it would help determine suitability, and possibly spotlight patent defects, in the target property. It is noteworthy that the vendor is under duty to disclose latent defects only, being defects that could not be discovered on physical inspection. Pre-contract inquiries may reveal obvious condition of the property such as susceptibility to flood, boundaries, interference with other property, easement and profit apendre issues, adverse entry and/or notice, facilities and fixtures (if any), etc.
Investigation of Title
After signing the offer letter, the purchaser collects copies of title documents or their details from the vendor in order to investigate title at the Lands Registry or within community/family circles, for unregistered land. Amongst minefields to avoid are properties subject to litigation, to public acquisition or government owned properties (unless the latter are being disposed pursuant to due process). If the property had been excised (and allegedly no longer subject to acquisition), it is imperative that the solicitor confirms that fact as part of his due diligence – usually by reviewing the Government Gazette in addition to Lands Registry documentary records.
This process has however been simplified since 2015 in Lagos State with the introduction of the ‘Land Information Management System’ (LIMS). Any document extracted from LIMS at the Land Registry is admissible as evidence in court, subject to the provisions of section 24 Evidence Act. Satisfactory outcomes of the title verification exercise could then lead to signing a contract of sale.
In practice, one aspect of the investigation that is often overlooked is verification at probate registry where the vendor is a beneficiary of the target property under a will. This could help with confirming authenticity of the will, whether the vendor was indeed the beneficiary of the property thereunder, and whether there is any challenge on the bequest. Thus, it is essential to ensure that the Probate (where a will exists) or Letters of Administration (in the absence of a will) was granted following due process and Assent was duly executed by the personal representatives of the deceased to properly vest the legal estate in the vendor. This issue touches on vendor’s capacity to transfer valid title and should not be glossed over by the purchaser.
Contract of Sale (CoS)
The CoS documents the agreed terms of sale and purchase of the property as well as relevant background information: parties and their description, root of title and nature of vendor’s title, price, mode of payment, deposit (if applicable), etc. A draft CoS may sometimes be sent whilst the purchaser is verifying the vendor’s title to ascertain its ownership and security status (whether subject to any encumbrance, and on what terms, etc). At the point where the signed CoS is exchanged, the vendor effectively holds the land in trust for the prospective purchaser till he pays (fully), and all conditions are fulfilled. Thus, the purchaser acquires an equitable interest in the property while legal interest is acquired at completion.
Before parties thereto can enforce the CoS, the written memorandum must exist although it need not exist at the time the contract is being made. The CoS may also include indemnity clauses – to ensure that in case of defective title, the vendor would be liable to refund the entire purchase price, possibly plus interest at a given rate. The essence of such clauses are to adequately protect the purchaser from mischievous vendors.
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Purchase Deposit
A deposit is money paid as security by the purchaser to the vendor as evidence of his intention to complete the purchase of the property pending all actions before ‘completion’, including but not limited to exchange of the executed transfer documentation. Not all vendors require payment of deposit (the purchaser may be able to negotiate such requirement away); however if paid, it may be forfeited if the depositor (the purchaser) fails in his undertaking. It is important to also protect the prospective purchaser’s interest by ensuring there is clarity around the conditions for losing the deposit. For example, there could be a timeframe within which the prospective purchaser may get his deposit back in full, irrespective of the reasons for his change of mind not to proceed with the transaction.
Refund may also be graduated on a reducing basis: the longer the period, the lower the refund entitlement, with an absolute time bar for any refund at all. Such timelines could be a function of the transactional realities. A prospective purchaser’s solicitor should be mindful of the question what is the exposure if the vendor or purchaser chooses not to proceed? The remedy of specific performance and/or damages should avail the prospective purchaser, albeit the contentious issue would be the measure of damages where specific performance was no longer feasible.
The balance of purchase price should be paid within the stipulated time on completion; parties may also agree on whether, and what rate, interest is to be charged in the event of delayed payment. It goes without saying that the purchaser is entitled to recover the full consideration, where the CoS is terminated through no fault of the purchaser.
watch out for Part 2 On Buying Real Estate in Nigeria (Better Safe than Sorry)
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