The Nigerian real estate sector is one of the most lucrative investment opportunities in Nigeria. However, due to the complexities and potential risks involved, it is essential for buyers, sellers, and developers to have a thorough understanding of the legal requirements associated with real estate transactions. Proper due diligence ensures that all parties involved are protected from fraud, disputes, and potential legal issues. This article provides a comprehensive legal checklist to guide you through real estate transactions in Nigeria.
1. Verify Property Ownership and Title Documents
Before making any real estate transactions in Nigeria, e.g., purchasing any property, the first and most important step is to verify the ownership of the property. Confirming the seller has a legal right to sell the property is crucial to avoid fraud or disputes. The key title documents you need to verify include:
• Certificate of Occupancy (C of O): This document is issued by the state government and confirms that the holder has a legal right to occupy and use the land for a specific purpose.
• Governor’s Consent: When a property with a C of O is being transferred to a new buyer, the law requires that the consent of the state governor be obtained to validate the transaction.
• Deed of Assignment/Conveyance: This is the legal document transferring ownership of the property from the seller to the buyer. Ensure the deed is properly executed, signed, and stamped.
• Land Purchase Agreement: This outlines the terms and conditions of the sale, including the purchase price, payment terms, and any other relevant clauses agreed upon by both parties.
It is advisable to hire a real estate lawyer to conduct a thorough search at the Land Registry to verify the authenticity of these documents.
2. Conduct a Land Search at the Land Registry
Before making any real estate transactions, conducting a land search is critical in determining whether the property is free from encumbrances or disputes.. At the Land Registry, you will be able to confirm the following:
• The current ownership of the property.
• If there are any pending litigation or legal disputes over the land.
• Whether the land is under any government acquisition.
• The size and boundaries of the property.
This step protects buyers from fraudulent sales or purchasing land with conflicting ownership claims.
3. Investigate Encumbrances and Litigation
Before proceeding with the purchase of any property, investigate whether there are any encumbrances, such as mortgages, liens, or unpaid debts attached to it. If a property is encumbered, the buyer may inherit these obligations, which can lead to future legal and financial complications.
Additionally, it is essential to search for ongoing litigation involving the property. Property disputes can delay or derail real estate transactions, so it is important to confirm that the property is free from legal proceedings.
4. Verify Zoning and Land Use Regulations
In Nigeria, land use is regulated by local and state government laws. Each state has zoning laws that define the type of development or usage permitted on specific plots of land. For instance, some areas are designated strictly for residential purposes, while others may be zoned for commercial, industrial, or agricultural use.
Before purchasing land, it is critical to verify whether the intended use of the property complies with the zoning regulations of the area. Failure to comply with these regulations could result in legal penalties, demolition of illegal structures, or other sanctions.
5. Confirm the Property’s Survey Plan
A survey plan is a technical drawing that shows the exact boundaries and measurements of a parcel of land. It also includes important details about the property’s location and physical features such as roads, rivers, or neighbouring properties.
A licensed surveyor should prepare the survey plan, and the Surveyor-General’s office should authenticate it. This document is essential in preventing boundary disputes and ensuring that the land being sold matches the description provided by the seller.
6. Obtain the Governor’s Consent for Subsequent Transactions
In Nigeria, the Land Use Act of 1978 vests all land ownership in the government. As a result, any transfer of interest in land (including buying, selling, leasing, or mortgaging) requires the consent of the state governor. Without this consent, the transaction is considered invalid.
Before finalizing a real estate transaction, ensure that the Governor’s Consent has been obtained, especially if the land is already under a Certificate of Occupancy. Obtaining the Governor’s Consent legally transfers the interest in the property to the buyer and makes the transaction enforceable in law.
7. Draft and Review a Comprehensive Sale Agreement
A comprehensive sale agreement is a crucial document in any real estate transaction. It sets out the terms and conditions under which the property is being sold and serves as a binding contract between the buyer and seller. Key components of a sale agreement include:
• The full names of the buyer and seller.
• The description and location of the property.
• The agreed purchase price and payment schedule.
• Warranties and representations by the seller regarding the property’s condition.
• Dispute resolution mechanisms.
• The closing date and any conditions that must be met before the transaction is finalized.
It is recommended that both parties engage legal counsel to review and negotiate the terms of the sale agreement to protect their interests.
8. Payment of Relevant Taxes and Fees
Real estate transactions in Nigeria are subject to various taxes and fees that both the buyer and seller must pay. These include:
• Stamp Duty: A tax payable on the deed of assignment or sale agreement.
• Capital Gains Tax: Payable by the seller on the profit made from the sale of the property.
• Value Added Tax (VAT): If applicable, VAT is paid on the sale of certain properties.
• Registration Fees: Payable for registering the title of the property in the buyer’s name.
Ensure that all applicable taxes and fees are paid to the relevant authorities to avoid penalties or issues with the property title registration.
9. Register the Title with the Land Registry
Once the sale is completed, the buyer must register the title of the property with the Land Registry in the state where the property is located. The registration process involves submitting all relevant documents to the Land Registry, including the deed of assignment, survey plan, and Governor’s Consent.
Registering the title legally recognizes the buyer as the new owner of the property and protects the buyer’s interest in the event of any future disputes over ownership.
10. Ensure Compliance with Environmental and Building Laws
Real estate developers must ensure their projects comply with environmental and building regulations. These laws are enforced by various government agencies, including the Federal Ministry of Environment and state environmental agencies.
Before embarking on any construction project, developers are required to:
• Obtain an Environmental Impact Assessment (EIA) certificate for large projects.
• Comply with building codes and safety regulations.
• Secure permits from relevant authorities for new developments.
Non-compliance with these regulations can result in legal penalties, fines, or demolition of the project.
11. Due Diligence for Corporate Buyers or Sellers
When dealing with corporate entities in real estate transactions, it is essential to perform additional due diligence. Verify the corporate status of the company by conducting a search at the Corporate Affairs Commission (CAC). This ensures that the company is legally registered and has the capacity to buy or sell property.
12. Investigate Rights of Occupancy and Customary Land Titles
In rural areas, land is often held under customary law, and ownership is based on traditional rights of occupancy. If you are purchasing such land, it is important to verify that the community or family selling it has the authority to do so. In many cases, customary land titles are not registered with the government, making it essential to exercise caution and consult a lawyer experienced in customary land matters.
13. Legal Representation and Consultation
A real estate transaction is a complex process that requires legal expertise to navigate successfully. Engaging a qualified real estate lawyer to guide you through the transaction is highly advisable. The lawyer will help with:
• Conducting due diligence.
• Drafting and reviewing legal documents.
• Negotiating the terms of the transaction.
• Ensuring compliance with all legal requirements.
The cost of hiring legal counsel is often outweighed by the potential savings from avoiding fraud, litigation, or other costly disputes.
14. Power of Attorney
In situations where the buyer or seller is unable to be physically present during the real estate transactions, a Power of Attorney (PoA) may be used. A PoA grants another person the legal authority to act on behalf of the buyer or seller. Ensure the PoA is properly executed and notarized to avoid legal complications.
15. Closing the Real Estate Transactions
The final step in closing real estate transactions is where the buyer completes payment, and the seller hands over all necessary documents. At this stage, ensure that:
• All documents have been signed and witnessed.
• All payments have been made, including taxes and fees.
• The property has been inspected for compliance with the agreed-upon conditions.
• The title has been transferred and registered in the buyer’s name.
Conclusion:
Understanding and working around the complexities of real estate transactions in Nigeria requires a high level of expertise and attention to detail. Diya, Fatimilehin & Co., with its decades of experience, offers a full range of services to ensure smooth and secure transactions. From conducting due diligence to verifying ownership and handling legal documentation, we provide reliable guidance and support.
If you are buying, selling, developing property, or making any other real estate transactions, we ensure that your transaction complies with Nigerian laws and regulations, giving you peace of mind and confidence throughout the process.
