REAL ESTATE INDUSTRY IN NIGERIA

The real estate industry in Nigeria is as lucrative as it is challenging. In Nigeria, the real estate industry has come of age. This article discusses the overview of the real estate industry in Nigeria, what a prospective buyer needs to look out for before purchasing a land or any property, as well as the legal implications of different titles to land.

WHAT IS REAL ESTATE?

The definition of real estate is important to our understanding of the general concept. Real estate connotes an entity consisting of lands and buildings which has some value of economic worth. It also consists not just of lands but also, improvements, fixtures, roads, structures, utility and systems.

CATEGORIES OF REAL ESTATE

There are four main categories of real estate; each category is distinct with its features and purpose. The categories include: Land, Residential, Commercial and Industrial.

Land:

Land is the foundation for all other types of real property, it is an undeveloped property, which is bare and vacant till the point of acquisition by developers who combines it with other properties, rezone it and increase the value of the property.

Residential:

Residential real estate consists of houses for individuals, families or a group of people. This category is the commonest of all categories of real estate. It comprises of single-family apartments, town houses and other types of living arrangements.

Commercial:

This type of real estate consists of lands and buildings that are used by businesses to carry on their business; this includes but is not limited to malls, offices, medical centres, hotels, etc.

Industrial:

This consists of buildings and lands used for industrial purposes like factories, warehouses, logistics, and construction.

Having identified the four major categories of real estate. There still exists some other specific examples, this includes, but is not limited to “single-family dwelling, multiple family dwelling, huts.

AREAS OF REAL ESTATE

The real estate industry in Nigeria can be divided into different areas, which in turn create jobs and build career paths within the industry.

Development

Real estate development is a process that involves the purchase of raw land, rezoning, construction and renovation of buildings, and sale or lease of the finished product to end users.

Sales and Marketing:

This aspect of real estate has to do with sales and marketing firms. These firms are saddled with the responsibility of working with developers with the aim of marketing and selling already developed lands and property. The sales and marketing firms usually earn a commission for properties sold through them or their agents. In the same veins, they are remunerated for materials and advert put up in order to facilitate a sale.

Brokerage:

A real estate brokerage is a firm that employs a team of real estate agents (realtors) who help facilitate a transaction between the buyers and sellers of property. Their job is to represent either party and help them achieve a purchase or sale with the best possible terms. They help potential buyers work within their budget by presenting them with a variety of opportunities that they can choose from.

Property Management:

Property management firms help real estate owners rent out the units in their buildings. Their jobs include collecting rent, showing units, fixing deficiencies, performing repairs, and managing tenants. Often times, they are the middlemen between tenants, prospective tenants, and the house owners. They are saddled with the responsibility of taking the inventory of everything in the property (fixtures and fittings) upon entry and exit of a tenant, this is to ensure that upon entry, the property is fit for habitation and upon exit, the property is left in a tenantable condition (reasonable wear and tear exempted) They charge a fee, typically a percentage of the rent, to property owners.

Lending:

Like every other investment, the real estate industry requires financing. Often times, property owners and or developers do not have the total funds to complete their building projects. Hence, they take credit facilities from banks, the government and other financial institutions. Lenders usually require a form of security for these loans so that in the event that the borrower is unable to pay as agreed, the security can be liquidated and converted to money.

Professional services:

There is a variety of real estate professionals who work in the industry and help make it function. The most common examples (other than the ones listed above) are Accountants, Lawyers, Interior Designers, Stagers, General Contractors, Construction workers. It is important to state that the role of Lawyers in this sector cannot be overemphasized. Lawyers are the only professionals authorized to draft instruments that passes title from vendor to purchaser. Additionally, a Lawyer is trained to conduct due diligence before an intending purchaser is advised to purchase a land or property. This is to avoid foreseeable pitfalls that can arise from defective titles.

 

THE CONCEPT OF DUE DILIGENCE

It is imperative to state that as exciting as acquiring land or property may be, it is important and advisable to exercise caution. Only persons who have valid titles to land and property can pass same to another person or company. Hence, it is important to trace the root of title in order to verify whether the vendor has a good root of title or a bad root of title. Before proceeding to purchase a land or property, a purchaser and/or his Solicitor is required to do the following:

Conduct a search

The solicitor is required to conduct a search on the Vendor’s title documents. Title documents includes but are not limited to Deed of Assignment, Deed of Gift, Deed of Mortgage, Certificate of Occupancy, a Registered Survey. The investigation and title search may be conducted at the Locus, that is, the land or property itself, the Lands Registry of the state in which the land is situated, Probate Registry, the Court, Corporate Affairs Commission. In recent times, real property have proven to be proceeds of crime, hence the search should also be conducted with the Economic and Financial Crimes Commission (EFCC), Independent and Corrupt Practices Commission (ICPC). The aim of this is to confirm that such property is not a proceed of crime, in order to avoid confiscation in the future.

It is also important to conduct a physical search on the property, in order to ascertain its true state as pictures and videos can now be edited to suit the sender of same. Physical inspection of the locus usually reveals a caveat on the property (if any), and any latent and patent defect can be noticed.

The aim of carrying out proper due diligence- conducting searches is to reveal one or more of the following:

1. The actual owners of the land;
2. If the property description corresponds with that given by the Vendor;

• If the signatures and boundaries in the instrument (e.g the survey plan) are consisted with the ones in the abstracted document;

1. If the land is in dispute;
2. If a caveat has been placed on the property;
3. If there is easement of land;

• If there is a dispute with the adjoining owners or prior owners.

 

COMPULSORY ACQUISITION OF PROPERTY

By virtue of Section 43 of the 1999 constitution of the Federal Republic of Nigeria (as amended) every citizen of Nigeria is empowered to acquire and own immovable property anywhere in Nigeria. However, this right is subject to the interests of the governor and it is unlawful for the holder of a statutory right of occupancy to alienate his right of occupancy by assignment or any part thereof without the consent of the Governor. The Governor may also revoke a right of occupancy for overriding public interest. Overriding public interest in the case of a statutory right of occupancy mean the requirement of the land by the Government of the State or by a Local Government in the State. It is for public purposes within the State, or the requirement of the land by the Government of the Federation for public purposes of the Federation; the requirement of the land for farming purposes or for the laying of oil pipelines or for any purpose connected therewith. Other grounds for compulsory acquisition include the requirement of the land for the extraction of building materials and the alienation by the occupier by sale, assignment, mortgage, transfer of possession, sub-lease, bequest or otherwise of the right of occupancy without the requisite consent or approval.

Although, for compulsory acquisition by the government to be valid, the provision of the law on the compensation of the holder of the right of occupancy must be obeyed. However, in the event that the valid title documents do not exist or cannot be produced by the ‘owner of the property’, he or she would not be entitled to compensation by the Government. This goes to further reiterate the importance of obtaining a good root of title when purchasing a land or property. In the event that things go south in the future, the holder of valid title document(s) will not suffer a total loss.

 

CLOSING THE TRANSACTION

Where the status of a land is satisfactory to a Solicitor, the necessary instruments are drafted by the Purchaser’s Solicitor and vetted by the Vendor’s Solicitor. The instruments may be a Contract of Sale, a Deed of Assignment, a Land Sale Agreement or any other closing paper. The documents are required to be executed by both parties and their witnesses. The Vendor then transfers all the original title documents and the keys (if the transaction involves a building) to the Purchaser upon receipt of full payment of consideration or as otherwise agreed on by parties.

PERFECTION OF TITLE TO LAND

The consent of the Governor confers validity to any act of alienation in land under the Land Use Act. It is compulsory to obtain the consent of the governor where the land is situated, pay the appropriate taxes (stamp duties) on the instrument and register or file the instrument at the state lands registry and at the Corporate Affairs Commission where one of the parties is a Company. An unregistered land instrument is inadmissible in evidence at a court proceeding.

 

LEGAL IMPLICATION OF DIFFERENT LAND TITLE

When it comes to land title, there exist different types of title to land. The nature of ownership of a property will determine the applicable document for such property transaction. These documents make claim of land ownership legitimate. Below are the various types of land documents:

Certificate of Occupancy

This is the officially recognized land document needed to prove and exercise a degree of control over land, without interruptions. It is an instrument given by the state or federal government which leases lands to the owners for 99years. Holders of Certificate of Occupancy have a legal interest in the land.

Deed of Assignment

This is a legal document that transfers the ownership of interest in a property from one party to another. The deed usually contains important information and clauses like the consideration clause, description of property. It is important to note that only a registered Deed of Assignment is proof of legal interest in land, while an unregistered Deed of Assignment is proof of an equitable interest in land.

Survey Plan

This document shows the boundary measurement of land for accurate measurement and description of the land. This document is handled by Surveyors and regulated by the Surveyor-General. A survey plan only indicates an equitable interest in land and in the event of sale, only the equitable interest is passed. Survey plans are also required to be registered in the state Ministry of Lands where the land is situated.

Excision

The process whereby a land under acquisition by the government is released (usually a portion and released to a community) is called “Excision”. Excision properly spelled in a gazette will form a good root of tile and indicate a legal interest in the land.

Grant of Probate & Letter of Administration

These are instruments issued by the Probate Registry to the Executors and Administrators of an Estate respectively. It confers the authority on either of them to deal with the Estate of the deceased person, and that includes the authority to legally transfer his or her property to another person. When accompanied by other title documents, the grant of the above-mentioned instrument can indicate and transfer a legal interest in land.

Gazette

A Gazette is considered to be an official record book where all special government details are spelt out, detailed and recorded. A community owning a gazette can only sell lands to an individual within those lands that have been excised to them.

 

In conclusion, in order to avoid foreseeable pitfalls, it is important to remain abreast with the laws that govern the real estate industry, conduct due diligence at all times no matter how harmless a land or property transaction may seem.