Key Legal Documentations When Purchasing Property in Nigeria

Purchasing a property is a significant investment, and in Nigeria, it comes with its own set of legal considerations that every potential buyer should be aware of. The legal considerations cover individuals looking to buy a home, investors interested in commercial properties, or someone seeking land for future development and it is important to understand the legal landscape which ensures a smooth and secure transaction. 

In this blog post, we will explore the key legal considerations when purchasing property in Nigeria, providing you with the necessary knowledge to navigate the complexities of the real estate market.

1. The Laws Concerning Land Ownership: 

The land ownership system in Nigeria is governed by the Land Use Act of 1978. The Act vests all land in each state of the federation in the hands of the state governor, who holds it in trust for the people. This means that individuals or corporate bodies do not own land outright but are granted the right to use the land through a system of leases and allocations.

There are two types of land ownership: 

• Customary Ownership: In rural areas, land is often held under customary law, where it is owned and managed by communities or families according to traditional practices. Before buying land under customary ownership, investors must understand and comply with stipulated practices, which may involve consulting local chiefs or family heads.

• Statutory Ownership:  In urban areas, land is typically held under statutory ownership, governed by modern laws and regulations. Here, the state government issues Certificates of Occupancy (C of O), which is a crucial document that signifies legal ownership and grants the holder the right to use the land for a specified period, usually 99 years.

2. Conducting Due Diligence

Before purchasing any property, thorough due diligence is essential to avoid potential legal pitfalls and some of the things to consider include: 

• Title Verification: The first step in conducting due diligence is verifying the property’s title. This involves confirming that the seller has a valid and unencumbered title to the property. This typically involves checking the following documents:

Certificate of Occupancy (C of O): The Certificate of Occupancy is the most important document that proves ownership of land. Please don’t buy land that does not have a C of O and ensure that the C of O is genuine and that it corresponds to the property in question.

Deed of Assignment: This document transfers ownership from one party to another. It should be duly registered with the appropriate land registry.

Governor’s Consent: Under the Land Use Act, any transfer of land requires the consent of the state governor. This consent must be obtained and documented to ensure that the transaction is legally binding.

Obtaining the governor’s consent is a legal requirement for all land transactions in Nigeria. This process involves submitting the deed of assignment and other relevant documents to the state government for approval. Without the governor’s consent, the transaction is considered null and void, and the buyer risks losing their investment.

• Searches at the Land Registry

Another crucial part of doing due diligence is to conduct a search at the relevant land registry. This search will reveal whether the property has a valid title, whether there are any encumbrances (such as mortgages or legal disputes), and whether the land is subject to any government acquisition or revocation. It’s advisable to hire a reputable lawyer to assist with this process.

• Verify Survey Plan

A survey plan is a document that shows the precise boundaries and dimensions of the property. Verifying the survey plan ensures that the property being purchased is accurately represented and that there are no boundary disputes with neighbouring properties. The survey plan should be prepared by a licensed surveyor and authenticated by the Surveyor General’s office.

3. Understand Land Use and Zoning Regulations: 

Nigeria has specific land use and zoning regulations that dictate how land can be used. These regulations are enforced by the state and local governments and are designed to ensure that land is used in a manner that aligns with broader urban planning goals.

Zoning regulations determine how land in specific areas can be used, whether for residential, commercial, industrial, or agricultural purposes. Before purchasing property, it’s important to verify that the intended use of the property aligns with the zoning regulations in place. Violating zoning regulations can lead to legal disputes and may result in the property being confiscated or the structure being demolished.

4. Read Legal Documentation and Contracts: 

Proper legal documentation is critical in any property transaction. This includes the sales agreement, deed of assignment, and other relevant contracts. These documents should be drafted and reviewed by a qualified lawyer to ensure that they are legally sound and protect the interests of the buyer.

The first contract that should be issued is the sales agreement. The sales agreement is a binding contract between the buyer and the seller that outlines the terms and conditions of the property sale. This document should clearly state the purchase price, payment terms, closing date, and any other conditions agreed upon by both parties. It’s important that the agreement is comprehensive and leaves no room for ambiguity.

The second document is the deed of assignment. The deed of assignment is the document that legally transfers ownership of the property from the seller to the buyer. This document should be executed after the full purchase price has been paid and should be registered with the appropriate land registry to make the transfer legally binding.

5. Payment of Taxes and Fees: 

Purchasing property in Nigeria involves the payment of various taxes and fees, which must be settled to avoid legal complications. These include:

• Stamp Duty:  Stamp duty is a tax levied on legal documents, including property transfer documents. The amount of stamp duty payable depends on the value of the property and must be paid before the deed of assignment can be registered. Failure to pay stamp duty can result in fines and legal penalties

• Capital Gains Tax: Capital Gains Tax (CGT) is payable on the profit made from the sale of property. The seller is typically responsible for paying CGT, but it’s important for the buyer to ensure that this tax has been paid, as unpaid CGT can become a liability for the new owner.

• Registration Fees: Registration fees are paid to the land registry to officially record the transfer of property ownership. The fees vary depending on the location and value of the property. Ensuring that the property is properly registered is crucial to securing legal ownership.

6. Foreigners Purchasing Property in Nigeria:

Foreign nationals are permitted to purchase property in Nigeria, but there are specific legal considerations they must be aware of. Under the Nigerian Investment Promotion Commission (NIPC) Act, foreigners are allowed to own property for business purposes. However, the acquisition of land for agricultural purposes is restricted. Foreign buyers must also obtain the necessary immigration approvals and comply with all relevant laws and regulations. It’s advisable for foreign buyers to work with local legal professionals who understand the intricacies of Nigerian property law.

Navigating the Nigerian property market can be overwhelming, especially for first-time investors. Like any other market, it’s not immune to fraud and scams. Unscrupulous individuals may attempt to sell property they don’t own, sell the same property to multiple buyers, or forge documents to deceive unsuspecting buyers. To avoid falling victim to such schemes, it’s crucial to engage the services of a qualified lawyer, surveyor, and a reputable real estate company with a proven track record.

This is where BO Properties comes in. We are professionals dedicated to helping you navigate the complexities of property transactions and protecting your interests. When you purchase property through us, we ensure that all documents are genuine and correspond to the property in question. Our team is with you every step of the way, from the initial purchase to securing a reasonable return on your investment.

Whether you’re a first-time buyer or a seasoned investor, let us handle the hard work for you. Contact BO Properties today and take the first step toward a secure and profitable investment journey.