Introduction
“12 months after I paid 25 Million Naira for a plot of land in Ibeju-Lekki, an area described as “the new Lagos”, I am yet to be given physical possession of my property.
The real estate company I bought the property from shifted the date they promised to give me physical allocation of the property on three occasions.
The first day the case came up in court, the company did not show up but they fully refunded my money with some interest as claimed by my lawyer. The experience was not a pleasant one.
Well, I am the lawyer who helped Investor Jimi recover his money from the real estate company.
When we got talking during our first call, I asked Investor Jimi what he looked out for before he decided to buy a property from this real estate company.
He mentioned two things:
- The company’s attractive online branding and adverts; and
- A strong referral from a family friend who markets properties for this real estate company as a real estate salesperson.
Investor Jimi did not look out for the right things before deciding to buy property from this real estate company.
This is the first mistake you must avoid when buying property from a real estate company in Nigeria.
So how do you solve this problem?
By asking the right questions from the real estate company you intend to buy from and getting satisfactory answers.
Before I reveal these questions to you, let me tell you what a real estate company does.
The Business of Real Estate Companies
Real estate companies in Nigeria are in the business of buying and selling real estate (land and houses), usually developed as an estate. Some of them are also in the business of construction of residential buildings for sale.
Unlike buying a property from an individual or indigenous land-owning family which is usually challenging and risky, a real estate company would usually promise you security of your title and property if you purchase a property from them.
Here are the questions you must ask and get satisfactory answers to before you buy a property from a real estate company in Nigeria.
Is the company duly incorporated in Nigeria to carry on the business of real estate?
Incorporation is the legal process used to form a corporate entity or company. (Investopedia.com)
You can verify that a company is duly incorporated in Nigeria by conducting at the Corporate Affairs Commission (CAC), the government agency that approves the formation of business and non-business entities in Nigeria. The search will reveal the following details:
- The name of the company;
- That status of the company (whether active or inactive);
- The business (s) the company was established to carry on;
- The registered office address of the company; and
- The Directors and Shareholders of the company.
Is the Real Estate Company Licensed by the Appropriate Regulatory Agencies?
There are ministries, departments, and agencies (MDAs) of government at the Federal and State level that regulate real estate companies operating in a State.
Any real estate company that is not licensed or regulated by these MDAs is acting illegally and that should serve as a big red flag for you as a real estate investor.
In Lagos State for example, the Lagos State Real Estate Regulatory Authority (LASRERA) is empowered by law to register and issue permits to persons or organizations who deal in real estate transactions in the State. See Section 6 (p) of the Lagos State Real Estate Regulatory Authority Law, 2021.
Does the Real Estate Company Have A Verifiable Place of Business/Office Address?
A major legal requirement for a real estate company and companies operating in Nigeria generally is that the company must have a registered office address where they transact business with their customers.
Beyond interacting with a real estate company online, endeavor to verify the registered office address of a real estate company before you decide to do business with them.
Is the Company Willing to Allow Potential Buyers to See Their Title Documents?
This point is very important because, without a good title, your real estate investment can crumble like a pack of cards at any time, notwithstanding that you bought it from a real estate company.
That is why you must insist on conducting due diligence on the title documents to ascertain whether the title is a good one without any issues that may negatively affect your real estate investment.
Once a real estate company is not willing to release its title documents to you as a potential real estate investor, then it is a big red flag. The reason is that in real estate the title document is proof that a person claiming ownership of a piece of real estate is indeed the owner.
Is the Company Willing to Be Liable to You in the Event of Breach of Contract?
In real estate, things may not go as planned as in the case of Investor Jimi whose story you read at the beginning of this article.
That is why you must get a real estate company to commit in a written contract that they will be liable to compensate you adequately if they fail to fulfill their part of the contract.
It is not enough that your money will be refunded if things do not go as planned due to the default of the real estate company. You should consider negotiating fair and adequate compensation in the event of a breach of contract on the part of the real estate company.
Fair and adequate compensation in this context means that the compensation you will get is beyond a refund of the money you invested. If a real estate company is not willing to make this commitment in writing, then it is a red flag for you as a real estate investor.
You Cannot Do All These by Yourself, Engage a Legal Expert
All the points mentioned above bother majorly on legal matters that an experienced real estate lawyer can advise you on.
You are very likely to make a costly mistake or take an unnecessary risk when you buy a property from a real estate company if you don’t engage a lawyer to advice you from start to finish in the transaction.
When an experienced real estate lawyer advises you right from the start of your property purchase transaction with a real estate company, you are assured that your interests in the transaction will be fully protected.
Conclusion
As a real estate investor who intends to buy property from a real estate company, your goal should always be to make the right investment decision.
Making the right investment decision starts with you asking the right questions with the guidance of your lawyer. This will help you avoid making costly real estate investment mistakes and unnecessary risks.
Thank you for reading.
P.S. This article is for educational purposes and does not constitute legal advice. Please contact your lawyer for legal advice as it relates to your case/transaction. The characters and story used in the article are purely fictional.
The article was written by Sesi Hundeyin, a real estate and construction lawyer, and partner at Bloomgate Solicitors. He can contacted via email: sesi@bloomgatelaw.com
