THE ACQUISITION/PURCHASE TRANSACTION PROPER
This is the second topic in the series – Before you purchase that Lagos property
Last week we talked about the legal framework preceding the acquisition of land in Nigeria with reference to Lagos. This week we will be looking at the processes involved in the purchase and acquisition of such property.
Now, where the Purchaser’s Solicitor is satisfied with the title, and a sale price agreed upon by the parties involved, he will draft the necessary documents of sale which should include the following:
1. An Agreement for Sale of Land (preceding the actual sale).
2. A Deed of Assignment of title to Land.
3. A Power of Attorney to deal with the land.
4. A Purchase Receipt.
5. Form for application for Governor’s consent (Form 1C)
These documents (especially the Sale Agreement and the Deed of Assignment) must contain the names and descriptions of the parties, proper description of the property, the agreed purchase price, the acknowledgement of receipt of that amount, the capacity in which Vendor is selling, a warranty that he has a right to sell in that capacity, condition that the contract shall be conditional on the obtaining of any requisite consents to the transaction, etc.
THE EXCHANGE OF CONTRACT
After ascertaining good title and preparing the necessary documents, the contract of sale is exchanged between the parties. The contract is engrossed in two parts and forwarded to the vendor’s solicitor for purposes of certifying the correctness of the contract, its approval and obtaining the vendors signature before sending back to the purchaser’s solicitor in exchange on payment of the agreed price.
The exchange of contract creates a binding agreement between parties to entitle either party to specific performance (i.e. to execute the Deed of Assignment). What is preferable is that signed documents are exchanged for the purchase price (either a transfer or payment by bank certified cheque).
On exchange of contact and after obtaining Governor’s consent, the assignor [vendor] becomes a trustee of the legal estate while purchaser becomes a beneficial owner and acquires equitable interest. He could deal on the land and becomes entitled to all improvements and increases in the value of property.
Read also: Before you Purchase that Lagos Property…
INTEREST/CONTROL OF LAND (PENDING PERFECTION)
In view of the time it takes to perfect the documents of title so executed, a Power of Attorney in favour of the Purchaser to deal with land as he/it deems fit is a necessary part of a land transaction. It must be made irrevocable and coupled to the purchase price.
An irrevocable Power of Attorney may be issued to accompany the contract empowering the purchaser to assign or procure the assignment of the property to himself or to any other person(s) and to execute all documents relating to it. However, the mere issuance of the Power of Attorney is not per se alienation or parting with possession. It is a vehicle by which these acts could be done.
PERFECTING TITLE TO LAND
After a successful sale, the next stage will be to secure the investment made on the land (huge cash outlay) by perfecting the Purchaser’s title. This in essence means:
Taking and exercising effective possession of the land & perhaps fencing it (even with a 2 feet perimeter wall, or corner edge walls i.e. if there are no developments already on the land). A very practical step which is often employed is also to put up a sign board on the property notifying the 3rd parties of the Purchasers interest. While these measures are not full proof, the aim at all times is to put up something that puts a careful third party on notice (caveat emptor).
Possession they say is two-thirds of the law.
Paying stamp duties on the documents of sale (usually ad valorem 2% of value of land) within 30 days of execution. Any default to stamp outside prescribed period attracts penalties. One way to circumvent this however which has even received judicial approval is to leave such documents undated till such time as one is ready to proceed with perfection.
Paying capital gains tax (which the Vendor is by law liable to pay, but which by practice is passed on to the Purchaser), usually 15% of assessed value of land.
Applying for the Governor’s consent and paying the Consent fee (10% of assessed value of land)
REGISTERING YOUR TITLE DOCUMENTS at the Lands registry and paying the Registration fee (usually 6% of assessed value) within 6 months of obtaining the Governor’s consent.
Next week, we will be discussing the effects of a non-registration coupled with some other involvements on your way to acquiring that Lagos property.
to be continued…