Legal Guide On Real Estate
Real estate investment in Nigeria is one of the major investments attracting both local and foreign investors. From the commercial city of Lagos to the centre of power, Abuja, several individuals and companies engage in real estate investment, although many also buy real estates for just personal use.
FACTORS TO CONSIDER FOR REAL ESTATE INVESTMENT
Laws Governing Real Estate in Nigeria
Several laws are regulating real estate in Nigeria. Real Estate is regulated by federal statutes such as the Land Use Act 1978 and Land Use Law of various states among others.
The Land Use Act 1978 is the principal law enacted to regulate ownership of the real estate in Nigeria. By the provisions of the Act, the power to control and administer all land situated within a geographical area of a state is vested in the State Governor for the benefit of the citizens. The Governor is responsible for granting a right of ownership for individuals and corporate bodies to hold and use the land for a limited-term, and such grant is evidenced by the issuance of a Certificate of Occupancy or Governor’s Consent.
By the provision of the Land Use Act, it becomes unlawful to transfer any interest in land without first obtaining the consent of the governor of the state where the land is located, as provided under Section 22 of the Land Use Act.
Acquisition of Real Estate
Acquisition of real estate begins with the pre-contract stage of conducting due diligence on the land to be acquired to discover issues such as the nature of the title of the vendor, pending ligation on the land (if any), interest to be alienated, the capacity of the vendor, the physical condition of the land, encumbrances on the land, land survey, or whether the land is under government acquisition. At this stage of land acquisition, it is advisable to engage the services of a property lawyer for proper advice and guidance.
After due diligence has been conducted and the acquisition of an interest in land has been completed, certain documentation will be required. Transactions for the transfer of land interest above three years are required to be evidenced in writing and by a deed duly executed between transacting parties.
Post completion stage of real estate transactions involves perfecting the title of interest acquired by a land purchaser. The purchaser of an interest in real estate is responsible for ensuring that all costs and taxes required for the perfection of the title are paid. The perfection of the title involves certain stages such as;
Governor’s consent– The Land Use Act provides that a statutory holder of occupancy must obtain the Governor’s consent of the State where the real estate is located for a valid transfer of an interest in real estate by way of assignment, mortgage, lease, sub-lease, or otherwise. The official fees payable for the grant is usually between 1% to 2% of the assessed value of the property.
Stamping of the document- Under the Stamp Duties Act, the stamping of transfer of an interest in real estate documents must be done within 30 days of execution of the deed of transfer instrument. Stamping of the document is a condition to be satisfied for registration of transfer of an interest in the land document.
Registration of document- Registration is a compulsory process for deed of transfer of interest which involves registering the holder of an interest in real estate as the owner to the exclusion of others. Registration of transfer of an interest in land must be done within 60 days of execution of the deed of transfer. The transfer instrument submitted for registration must have Governor’s consent endorsed on it. An unregistered title document may lose priority against a subsequent instrument that is registered since registration governs priority. It is also important to state that an unregistered deed is not invalid; however, it is inadmissible in court as evidence of proof of title.
In Lagos State, the registration of title to land is governed by the Lagos State Lands Registration Law, 2015. The law in Section 62 (1) provides that “the mode of transfer of an interest in land, sub-lease or mortgage must be by deed, such transfers shall be deemed to be complete only after the deeds have been registered at the Land Registry”.
The process of registration involves the submission of the required application to the Land Bureau of the state where the land is located. In Lagos State, the land registration process involves two systems of Deed Recording and Title Registration of the ownership transferred. Deed recording system gives publicity to land transactions, that a claimed interest already exists on the land, and to establish priority against any subsequent claim to the same interest. While title registration is the authentication of the ownership or legal interest in land transferred. This system confirms transactions that confer ownership or interest in land. When the land is registered in the register of titles, it serves as conclusive proof of title.
Foreign Investment in Nigerian Real Estate
Generally, under Nigerian law, foreigners are restricted from investing directly in real estate in Nigeria. The restrictions placed by the law are to limit or control foreign monopolization of land ownership in Nigeria. However, by the provisions of the Acquisition of Lands by Alien Laws, of the States of the Federation, foreigners may be allowed to acquire real estate from a Nigerian citizen in Nigeria, but such acquisition is subject to the prior approval of the state governor.
Foreigners can also invest in real estate by the acquisition of land through a corporate body incorporated in Nigeria. Hence, for foreigners looking to invest in real estate in Nigeria, they must ensure that the prior approval of the state governor is first had and obtained.
Real estate investment is one of the leading areas of investment that has contributed to the financial economy in Nigeria. However, Nigeria real estate sector is still witnessing a lot of crisis, which include fraudulent practices by land grabbers, breach of contract by real estate sellers, sale of government acquired lands, among others. Considering all these problems, the real estate buyers and investors are advised to always retain the services of good real estate solicitors to navigate such investments.