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How to conduct Real Estate Due diligence.

Conducting due diligence on title to the property and the capacity of the seller to alienate the interests is the discretion of the purchaser. It is a necessary process to be carried out for the buyer’s protection and it is usual in the transfer of title process for the buyer to instruct a solicitor to conduct due diligence to ascertain the title and interests in the real property, the land use and zoning purpose, external or third party interests, residue or the term of years and the status and capacity of the seller.

Have A Preliminary Engagement with the Vendor

Before buying land in Nigeria your preliminary meeting with the land owner (vendor) should enable you inquire into the nature of the vendor’s title to the land (i.e. whether the land was inherited, purchased, gifted, assented, mortgaged, leased, or acquired by the vendor by virtue of long possession). You will have to conduct a physical inspection at the site of the land or building to reveal encumbrances, easement, restrictive covenants or constructive notices. At this preliminary stage, you can reach an informal agreement with the vendor on the fair purchase price of the building or land and on the mode of payment.

Consult a Real Estate Solicitor

Where an informal agreement is reached, you have to immediately engage the services of a real estate solicitor to help you avoid costly errors and future troubles which are common with land transactions and could place your interest in the land at jeopardy.

What Your Solicitor Will Do

Land transactions require extensive investigation. To enable your Solicitor investigate the title of the vendor on your behalf, he or the vendor’s solicitor will draw up a Contract of Sale Agreement for you and the vendor to sign, then you make a deposit of the purchase price of the land – pending the successful outcome of the investigation of the vendor’s title by your solicitor. Without a Contract of Sale Agreement, the Vendor has no obligation to prove that he has a good title in the land. By this obligation, the vendor is bound to put forward his title documents and evidence the root of title in the land and trace the unbroken chain of transactions to himself.

Solicitor’s Due Diligence

Your solicitor will proceed to conduct a search and investigation based on the title documents presented by the vendor. The documents – depending on the nature of the vendor’s title may include Deed of Conveyance; Deed of Legal Mortgage; Deed of Surrender; Deed of Gift; Assent; Certificate of Occupancy; Deed of Assignment; Lease Agreement; Power of Attorney; Declaration of Trust; Survey Plan; Certified True Copy of Court judgment; Vesting Order; etc.

The investigation and title search may be conducted at the Locus, Lands Registry, Probate Registry, Law Court, Corporate Affairs Commission (CAC), the city planning authority such as FCDA, LASPPPA, UCCDA, Economic and Financial Crimes Commission (EFCC), Independent and Corrupt Practices Commission (ICPC), etc. Real property may be a proceed of crime or a subject of investigation for fraud and money laundering. This may warrant your solicitor to carry-out due diligence at any anti-graft agency.

The Result of the Solicitor’s Investigation

Your solicitor’s investigation will reveal the status of the land and any encumbrances or potential problems associated with it.
  • Typical title search will reveal the actual owner(s) of the land;
  • Whether the property description corresponds with description given by the vendor;
  • Whether the signatures and boundaries in the instrument are consistent with the ones in the abstracted documents;
  • Whether there is any break in the chain of devolution of the property;
  • Whether any part of the land has been sold to a 3rd party;
  • Whether the land is in dispute;
  • Whether the land was acquired by the government for overriding public interest;
  • Whether there are legal or customary restrictions imposed by the prior owners of the land,
  • Whether there are problems with adjoining owners or prior owners;
  • Whether your planned improvements or developments will violate extant restrictive covenants impose on the area where the land is situated by the city planning authority such as UCCDA, FCDA, LASPPPA;
  • Whether there is an easement on the land,
  • Whether a caveat has been placed on the property;
  • Whether the real property is a proceed of crime and a subject of an investigation by security agencies or has been confiscated by the government;
  • Whether the land is a subject of litigation in court;
  • Whether the court judgment vesting title on the vendor has been appeal against or set-aside; etc.
Your solicitor will render a legal opinion in writing advising you on any of the issues affecting the land and whether you should proceed to close the transaction.

POST SOURCE: Lex Artifex “Before buying a land in Nigeria”

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