Due Diligence For Buying Property in Nigeria

Buying property in Nigeria is a serious investment, but it requires thorough due diligence to ensure that the transaction is legitimate and that the property is free from legal encumbrances. This comprehensive guide outlines the essential steps and considerations for due diligence when purchasing a property in Nigeria.

Understanding Due Diligence

Due diligence is the investigative process carried out by a buyer to verify the accuracy of the information the seller provides. It involves a series of checks and verifications to ensure the property is as described and free from legal issues. It also connotes proper conveyancing of the property. In Nigeria, due diligence is crucial because of the complexities and potential pitfalls in the real estate market.

The below steps are involved in due diligence when buying property in Nigeria.

1. Verification of Title & General Search of the Property

The first step in due diligence is to verify the property's title and generally search the status of the property. You may need to engage a legal practitioner for this purpose. This involves checking the following: 

·      Title Documents: Ensure that the seller has a valid title to the property. Common title documents in Nigeria include the Certificate of Occupancy (C of O), Deed of Sublease, Unregistered Deed of Assignment, Deed of Assignment with Governor’s Consent, and Letter of Administration, among others.

·      Land Registry Search: Conduct a search at the Land Registry to confirm the ownership and status of the property. This search will reveal if the property is registered, if there are any existing charges or mortgages, and if the property is involved in any legal disputes.

· Other Searches: The land registry is not the only place to search for the genuineness of a property. The type of document the owner presents will determine the location to search. Some of the places where a title or document affecting a property can be searched include the Probate Registry for property that involves a grant of probate or letter of administration and the Corporate Affairs Commission (CAC) for property owned in the name of a company. This is because if a charge is registered on the company at the CAC, it can affect the property's title. 

·      Encumbrances: Verify that the property is free from any legal encumbrances, such as mortgages, liens, or pending litigation. Conduct a court search to ensure that there are no ongoing legal disputes involving the property.

·      Consent and Approvals: Ensure that all necessary government consents and approvals have been obtained for the property. This includes the Governor’s Consent for properties under government acquisition and building approvals for developed properties.

2. Charting & Land Use

 ·      Charting of the Survey Plan: Obtain a copy of the survey plan from the seller and verify its authenticity with the office of the Surveyor General in a process known as charting. The survey plan should show the exact location and size of the property. The charting will reveal whether the land falls under any government acquisition or it is free.

·      Verification of Building Approval: For a property that involves a constructed building, it is important to verify the building approval issued by the government. In this regard, a search at the Lagos State Physical Planning Permit Authority or Ministry of Physical Planning and Urban Development is highly recommended. Even if a land has a title, either registered or unregistered, the government may not approve the construction of a building on the land due to certain issues, including developmental control and environmental factors.

3. Physical Inspection

Conduct a thorough physical inspection of the property to assess its condition and suitability for your intended use. This includes:

·      Structural Integrity: Inspect the building for structural defects, such as cracks, dampness, or faulty electrical and plumbing systems. You may engage a qualified surveyor or engineer to carry out a detailed inspection.

·      Environmental Factors: Check for any environmental issues affecting the property, such as flooding, erosion, or pollution. Verify if the property is located in a flood-prone area by consulting with the relevant environmental authorities.

4. Vendor Verification

It is important to verify the credibility of the seller:

·      Identity Verification: Verify the identity of the seller by requesting valid identification documents, such as a national ID card, international passport, or driver’s license. Confirm that the seller is the rightful owner or has the legal authority to sell the property.

·      Corporate Verification: If the seller is a corporate entity, conduct a search at the Corporate Affairs Commission (CAC) to verify the company’s registration status and confirm the identities of its directors and shareholders.

5. Negotiation and Agreement

Once you are satisfied with the results of your due diligence, negotiate the terms of the sale and draft a formal agreement:

·      Sale  Agreement: Engage a legal practitioner to draft a comprehensive sale agreement that outlines the terms and conditions of the sale. The agreement should include details such as the purchase price, payment terms, completion date, and any special conditions. The sale agreement that needs to be drafted at this stage is the Contract of Sale.

·      Deposit Payment: If a deposit is required, ensure it is paid into an escrow account managed by a neutral third party, such as a legal practitioner or a licensed estate agent.

6. Completion and Handover

Upon completion of the sale, ensure that the following steps are taken:

·      Transfer of Title: Execute the necessary documents to transfer the property title to your name. This includes the Deed of Assignment, Deed of Sublease, or any other relevant transfer documents depending on how the title of the land is derived. This document must be duly stamped and registered with the Land Registry.

·      Handover of Property: Take physical possession of the property and ensure that all keys, and relevant documents are handed over to you in case the property is a building. Conduct a final inspection to ensure the property is in the agreed condition.

7. Post-Completion Obligations

After completing the purchase, there are a few post-completion obligations to fulfil:

·      Registration: Register the transfer documents with the Land Registry to formalize your property ownership. This is crucial to protect your legal rights and interests in the property.

·      Property Tax: Pay any applicable property taxes and rates to the relevant authorities. Keep all receipts and documentation as evidence of payment.

Conclusion

Conducting thorough due diligence is essential when buying property in Nigeria to avoid legal issues and financial losses. Following the steps outlined in this guide can minimize the risks associated with property transactions and ensure a smooth and successful purchase process. Always engage qualified professionals, such as legal practitioners and surveyors, to assist you with the due diligence process and provide expert advice. Remember, a little caution and diligence can save you from significant challenges or losses in the future.

By Real Estate Law Team at Resolution Law Firm

Email: info@resolutionlawng.com

Tel/WhatsApp: +2348099223322