Investing in real estate requires a significant amount of money. If a buyer makes a mistake during the purchasing process, such buyer could end up in financial trouble. As a result, it is necessary for a buyer to examine the property documents with the utmost care and attention to detail.
It is interesting to note that although land is a physical asset, the identity of the person to whom it belongs cannot be established merely by a claim of ownership. Instead, the claim of ownership must be validated by multiple documents that demonstrate the property’s ownership status.
The buyer can ensure that he avoids unwanted litigation, financial mishaps, and unnecessary mental pressure by obtaining appropriate legal advice, carefully examining documents, and verifying pertinent information about the property.
In this article, we discuss some of the factors that should be taken into account before purchasing a property in Nigeria.
- Due Diligence
It is a trite principle of law that a person cannot convey a better title, than what he himself has. Accordingly, where a person has no title to a property sells it to another; the sale is void ab initio. This is based on the principle of “Nemo Dat Quod Non Habet”, meaning he who does not have cannot give out
Flowing from this, as a first step, the buyer should undertake due diligence, to ascertain the existence of the title with the seller, the nature of the title, and the ability of the seller to convey clear and marketable title, free from encumbrance. The property’s title documents include a Certificate of Occupancy, the Governor’s Consent, the Deed of Sale, the Gift Deed, and/or the Partition Deed, which document the transfer of title over the years, ultimately leading to the seller’s ownership. - Verify the seller’s identity.
Similar to verifying the property’s title, the buyer must also confirm the seller’s identity and any potential conditions governing the seller’s ability to transfer the property. These may include court orders restricting the property’s sale based on criminal actions against the seller. It is essential for the buyer to confirm the property’s identity to avoid a situation where a property that is a subject of criminal investigation is purchased.
In the case of a company, its articles of association, and particulars of directors to determine who can execute the title document must be ascertained. In the case of a jointly owned property, it is essential to identify all co-owners. - Regulatory agencies permits
Globally, building regulations are in place to ensure health, safety, and the achievement of aesthetic and urban planning objectives. Building regulations in each state would ordinarily establish the legal requirements and standards for the design and construction of buildings. Building control refers to mandatory and routine inspections at various phases of construction to ensure compliance with building regulations. Flowing from this, in the case of built structures, it is crucial for a prospective buyer to confirm that the necessary permits were obtained prior to the construction of the property such buyer is seeking to buy.
- Status of statutory payments
In the event that Ground Rents, Neighbourhood Improvement Charges, or Tenement Rates are not paid when they are due, the Non-payment of those statutory payments may constitute a charge on the property. Therefore, a potential buyer needs to confirm with the appropriate state authorities that the seller has not fallen behind on the payment of property taxes before moving forward with the purchase.
Requesting receipts from the vendor can be another useful strategy in this scenario. It is important to keep in mind that once ownership of the property has been transferred, the new owner is legally responsible for the payment of any delinquent taxes or other fees that have been assessed against the property. - Payment options for the property
A prospective buyer must determine the type of payment option he intends to provide. Is payment to be made in full, in instalments, or financed by a bank or finance company? This is a pre-negotiation decision that the buyer must have made. The prospective buyer must inform the seller of the payment method they intend to use to acquire the property.
In the event that credit is used to finance the purchase, it is imperative that the prospective buyer hire a lawyer to review the terms of the financing in order to avoid hidden fees. It is crucial to involve real estate attorneys in all aspects of financing, such as analysing financing options, negotiating term sheets, and managing the closing process efficiently and in a timely manner.
Real estate attorneys also advise lenders on loan transactions from the outset, frequently advising on complex underwriting issues and optimal debt structuring as the transaction progresses from underwriting review to term sheet to closing.
Conclusion
A buyer should not enter into a transaction hurriedly, regardless of how lucrative it may appear, unless they are absolutely certain of the seller’s credentials and his ownership of the asset is duly confirmed by documentary proof. There are instances where a seller may attempt to sell contested real estate at a reduced price. Initially, this opportunity may appear alluring; however, in the long run, it will prove to be a significant source of difficulty and problems.
It may therefore be prudent to retain the services of an experienced real estate lawyer to protect the buyer’s interests and ensure that all financial and legal requirements are met.