Introduction
“Real estate is still gold if you do it right.”
That was the first line of a LinkedIn post shared by Investor Jimi at the beginning of March this year.
In that post, Investor Jimi shared how he sold one of his real estate assets for 80 Million Naira three years ago to fund the Master’s degree of his first son in the United States of America.
The interesting gist of the LinkedIn post shared by Investor Jimi is that he bought the real estate (a virgin land) at Ajah in Lagos Island for 25 Million in 2019 and sold it for 80 Million Naira in 2022.
I smiled when I read the LinkedIn post shared by Investor Jimi because I was the lawyer who advised Investor Jimi on the transaction and handled all the legal aspects from start to finish.
It is possible to successfully buy real estate in Nigeria and get massive value from it like Investor Jimi.
That is exactly what you will discover if you read this article to the end.
What Buying Real Estate in Nigeria Entails
When you buy real estate you will acquire the legal right to own a piece of real estate to the exclusion of all other persons.
As the owner of a piece of real estate in Nigeria, you have the legal right to use the property as you want and sell it whenever you want following existing laws.
There are four stages you must go through if you want to successfully buy real estate in Nigeria. They are:
- The pre-contract stage.
- The contract stage.
- The completion stage.
- The post-completion stage.
Let’s take a deep dive into these four stages.
The Pre-Contract Stage (What you must do before you enter into a real estate Contract)
When Investor Jimi approached my law firm to help him buy the property that I told you about in the introduction of this article, I asked him a question:
“Investor Jimi, are you willing to look for another property if we discover after our due diligence that this property you are interested in has a defective title or has some other issues that will negatively affect your enjoyment of the property?”
Investor Jimi answered in the affirmative.
It took us another eight days to find a suitable property that did not have any issues because the property Investor Jimi wanted to buy had a defective title.
That is why Investor Jimi made so much money selling the property.
Due diligence is the foundation of any successful real estate purchase. Due diligence in real estate is an investigation aimed at uncovering any existing risks or defects in a real estate asset. Due diligence is arguably the most important step you must take as a real estate investor before you buy an off-plan property.
Due diligence before buying real estate involves investigating the following:
- Physical inspection of the property to ascertain the state of the property.
- Title searches.
- Status of the property to determine whether the property is free from government acquisition.
- Capacity and legal right of the Owner (s) to sell the property.
- Compliance with physical planning laws and regulations regarding use and construction.
- Whether there is any pending litigation in court or investigation over the property by any law enforcement agency.
- Whether there are unpaid taxes, bills, rates, utilities, etc.
The above list is not exhaustive and the type of due diligence you will require depends on the type of property you want to purchase, the location, and the type of title available.
The Contract Stage (What you must do when you are entering into a real estate contract)
During the contract stage in your real estate purchase transaction, you as the purchaser of the real estate will agree with the owner/seller on the terms and conditions for the sale of the property.
For example, you may intend to pay the purchase price in installments because there are sitting tenants on the property.
Once the owner has evicted the tenants and the property is empty, then you will pay the balance of the purchase price.
During the contract stage of a real estate purchase transaction, you should take the following steps as the purchaser:
- Reach an agreement with the owner/seller of the property on the terms and conditions of the sale. Some major terms and conditions that should be agreed upon are: (a) Price; (b) Payment terms (c) When vacant possession will be delivered to the Purchaser etc.
- Engage your lawyer to prepare a Contract of Sale. A contract of sale is compulsory if payment will be made in installments or if the sale of the real estate will not be concluded immediately after negotiation.
- Engage your lawyer to prepare a Deed of Assignment. Under Nigerian law, a transfer of ownership in real estate from one person to another must be done by deed, mostly Deed of Assignment in several States in Nigeria.
Completion Stage (What you must do to complete a real estate purchase transaction)
This stage requires that you take the following steps as the purchaser of real estate:
- Payment of the purchase price. Payment should be made to the owner/seller of the property or a person authorized in writing by the owner/seller to receive payment on behalf of the owner/seller.
- The signing of the contracts. A contract for the sale of real estate cannot be signed by a minor (a person under twenty-one years).
- Handing over/taking possession of the property. This entails doing something to establish your presence as the owner of the property after the purchase, like constructing a fence, or corner piece, clearing the property if it is a bush, commencing construction or renovation of the building, etc.
Post Completion Stage (What you must do as a purchaser to perfect your title after buying real estate)
Under Nigerian law, real estate cannot be transferred from one person to another person without obtaining the consent of the Governor of a State.
Failure to obtain the consent of the Governor after buying real estate as a purchaser means that you have not acquired a legal interest in the property.
Perfection of title usually involves that you take the following steps after purchasing a piece of real estate:
- Stamping of your Deed of Assignment.
- Consent of the Governor on your Deed of Assignment.
- Registration of your Deed of Assignment.
The Lands Registry of each State is responsible for processing and approving applications for the governor’s consent upon payment of various fees.
In Lagos State, the total official fees payable to the Lagos State Government for perfection of title is usually 3% of the value of the property.
The legal implication of perfection of title by obtaining the consent of the Governor is that your purchase will be registered at the Lands Registry which makes it easy for potential buyers to verify your ownership claim over the property.
Generally, properties with the Governor’s consent usually appreciate more in value than properties without the Governor’s consent. So having the Governor’s consent over your property is an investment worth making when you buy real estate.
Conclusion
Indeed, real estate is still gold as Investor Jimi said.
However, buying real estate can lead to serious problems and loss of your hard-earned money if you make costly mistakes or fail to avoid unnecessary risks.
That’s why like Investor Jimi, you should engage an experienced real estate lawyer to hold your hands and guide you from the beginning to the end whenever you want to purchase real estate in Nigeria.
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P.S. Thank you for reading this edition of my newsletter. Please click the subscribe button above so you will be notified when I publish the next edition of my newsletter.
P.S. This article is for general education 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.
P.S. If you would like to get more insights on this topic in audio format, please follow my podcast (Real Estate Law Conversations) by clicking this link: https://bit.ly/realestatelawconversations
P.S. If you want to contact me about this article or any real estate law-related matter, please send an email to: sesi@bloomgatelaw.com
