In this article written by Abiodun Doherty, he highlights the need for property investors to study property law. Stating that an investor doesn’t necessarily need to be a legal expert but a general understanding of the law governing the aspect he is investing in is a wise decision. He also did good to highlight some principles governing real estate investment funds.
The law governs practically every aspect of human endeavour and it makes good sense to have a general understanding of the law especially as it relates to real estate investment. You don’t need to become a legal expert before you can understand and apply the basic principles of the law to your real estate transactions. Once you have a basic understanding of the principles governing property transactions, you can build on that and achieve phenomenal results.
The foundational principle that governs real estate investment is found in the law of contract. In simple terms, it is based on two or more parties agreeing to do something legal together after a process of negotiation. This means that one of the parties must have made an offer to the other party, who may then decide to accept or reject.
This party may reject the offer outrightly or simply introduce a new term that is otherwise called ‘counter-offer’. If that party accepts the counter-offer, it will become the basis of their relationship. This is then followed by a consideration or price. This process of offer, acceptance or rejection and counter-offer is an integral part of the law of contract.These processes can be made orally, in writing or determined from the conduct of the parties. Because of the sensitive nature of real estate transactions, it is important to ensure that all aspects of the transactions are evidenced in writing. One of the key reasons why real estate transactions should be in writing is the importance of safeguarding the truth about each transaction. When sensitive transactions are not documented, unscrupulous individuals are likely to twist the facts when the opportunity presents itself.
One of the principal reasons why we have several land matters in court is due to the absence of documentary evidence. For instance, there are historical land matters that originated from a lease granted by the traditional owners of the land to either visitors or strangers in the community. Due to the customary practices at that time, the visitors or strangers could be asked to give a portion of the harvest to the original land owners.
This seems okay for a while until several generations down the line and with the compensation no longer being paid. More often than not, the tenants to the land begin to claim ownership of the land. This has resulted in several communal clashes and many are yet to be amicably resolved.
There is also a legal document called a contract of sale that many real estate investors are failing to make good use of due to the wrong assumption that it is not necessary. A contract of sale is the legal document that covers the interest of the parties between their initial and final negotiation in a real estate transaction. Let’s assume that a buyer approached a seller with an offer to pay for a property by instalment.The seller will naturally be concerned with what happens to the transaction if there was a default by the buyer. The buyer could also be concerned about the integrity of the seller who could change his mind if he receives a higher offer. Other issues such as the custody of the title documents could also arise. A contract of sale comes in to confirm that the parties have agreed to deal under certain terms and that the transaction will go through once those terms are met.
As our real estate industry matures, once a property is placed under contract even before the transaction is concluded, it will be possible for a buyer to sell the property for a profit and thereafter close the initial transaction. As long as the parties keep to the terms of their agreement, it is binding and enforceable.
The Land Use Act, 1978 is the principal legislation that covers title to land in Nigeria and its primary implication is that it transferred ownership of land to the government. Whenever you buy or sell a parcel of land, you need to involve the government in the transaction. When you buy a parcel of land from traditional land owners, for instance, you need to apply to the government for a Certificate of Occupancy.READ ALSO – Substandard Imported Building Materials: A recipe for disaster
After you have been issued with this Certificate of Occupancy, if you decide to sell that property to someone else both of you are expected to secure the consent of the relevant state government to that transaction. This is a process that is expected to come into play every time a transaction occurs on that property.
In certain instances where the government decides that your parcel of land is required for public purposes, the government could revoke your Certificate of Occupancy or refuse to issue one. There are conditions stated on the Certificate of Occupancy which the government could use as a basis to revoke the certificate if those conditions are not complied with. Once you realise the power of the government in this regards, you will ensure that you take all necessary precautions to comply with the law. You may need to engage a solicitor to help you sort out these issues.
originally published on punchng