This article by Mr. Debo Adejana deals with the importance of documentation and sequence of execution in any transaction involving real estate.
In real estate, documentation is very key. Real estate is the type of asset that is immovable and highly illiquid; in layman’s language it means it cannot be sold quickly. It can be there for years and yet remain where it is. You can hardly sell real estate in an hour or a day like other assets. The processes that come with the sales of real properties is incomparable, which means it is not as liquid as other assets. Hence, the singular fact that real estate is immovable makes documentation very important.
Another characteristic of real estate is its durability; durability in this context means a situation where land cannot be destroyed or put to ruin. Land will always be where it has been from time immemorial, ownership will change from time to time but the land will never cease to exist.
Again, land has existed since creation, only ownership of land has been transferred from time to time or hand to hand. This transfer of ownership can only be validated through documentation.
Documentation is highly pivotal in transactions involving landed properties or real estate as a whole. This brings me to the aspect of sequencing in real estate which is equally as important as documentation; In fact both should come hand in hand.
Let’s use rental properties in real estate as a case study. Take for example, when a tenant takes up a property having being satisfied with the price, the contract of agreement, exchange letter among other things, there should be an agreement called tenancy agreement between the landlord and the tenant done by a lawyer. If this agreement is just dumped and not signed, it will be of no use or benefit. This means that it can’t be tendered when it is needed in a court of law.
This implies that every document needs to be executed for it to become tenable, enforceable or for it to become an agreement binding the participants going into the contract.
Therefore, tenancy agreement binds the landlord and the tenant. Refusal to sign tenancy agreement yet gaining possession of a tenanted space may become a huge problem in the future. It will be almost impossible to get that tenant to sign the agreement afterwards especially in this part of the world.
How do I mean?
The tenant has gained possession of the property by moving into the house or office he transacted. You may probably be on a lost cause getting him to sign the documents especially when he does not agree with the contents of the letter. The situation gets worse if there are things in the agreement he doesn’t agree with and there are issues that were not discussed prior to his occupying the said property. The implication of this is that the tenant may stay in that property until the expiration of his rent without putting pen to paper. Eventually nothing will seem to bind the tenant and the landlord.
The above premise is enough reason sequence should not be overlooked in transactions involving real estate.
The right sequence should come in this order;
1. There should be a meeting between both parties where your terms of contract is discussed and agreed upon. 2) Afterwards, a contract document in form of tenancy agreement is drawn out.
2. Both parties should have at least one copy of the agreement before the tenant moves into the property for the period specified.
Now, the essence of this is to forestall any problem that may arise in the immediate future. In a situation where the aforementioned steps are not taken, it then becomes a challenge when the tenant becomes problematic or does not agree with some actions taken by the landlord.
If the contract of agreement is later brought to the notice of the tenant who has already rented the property, the landlord will not be able to force him to sign and subsequently the tenant could hold him to ransom.
Going down memory lane, there was a situation that came up some years back where the estate management team of an estate property and the residents were having a challenge that had to do with services rendered to the residents. The issues bordered around service charge. The leader of the protest carried out by the residents was quoted on the pages of the newspaper to have said that he did not have any agreement with the estate managers, neither did he sign any document yet he’s being living in the estate and had now become a source of worry for the estate management team.
That is why the issue of documentation should never be neglected in any real estate transaction. It was earlier buttressed in the course of this article that documents are important, albeit, the sequence of execution of this document is equally important. Please never take it for granted!
MD/CEO, Realty Point Ltd