The importance of documentation in real estate cannot be over emphasised. It is important to note that 75 – 80 % of real estate business is legal and these legal transactions cannot be void of documentations. Before any real estate transaction can be said to be successfully concluded, all documents have to be up-to-date and duly signed by relevant parties.
In Nigeria, all land within a state (except those vested in the Federal Government or its agent) is owned by the Governor of the state, who holds land in trust for the people and has power to allocate as far as urban areas are concerned; while the rural areas is allocated by the control of local government authorities. The current land ownership system became operative after the promulgation of the Land Use Act, Cap 202, Volume 11, Laws of the Federation (1990). Prior to this law, land ownership was primarily based on settlement, conquest, sale, gifts or larches and acquiescence.
It is important that as an investor in real estate or as a real estate firm you should know what governs land ownership and the legal documents used in conveying title for land ownership in the state, where your business is located or where you intend to invest in.
What types of documents are required in a real estate transaction?
Some of the documents required in real estate are as below;
• Certificate of Occupancy (CofO)
• Letter of Allocation
• Registered Title – Deed of Assignment/Sub-lease/Indenture
• Land Certificate
• Governor’s Consent
• Deed of Assent (Registration By Administrators/Executors of an Estate)
• Power of Attorney
All these documents should be duly registered at the appropriate registry.
Before the advent of a Certificate of Occupancy, other documents such as a deed of conveyance, deed of gifts etc, also existed as proof of land ownership. Holders of such documents have statutory right of occupancy and remain valid provided they have been converted to lease hold which is subject to the Governor’s approval.
In land ownership for example, a registered document is usually obtained by customary occupants of a land registering such land at the Land Registry. This is usually done before ownership of the customary land can be transferred to another owner. After that, a deed of assignment is prepared and issued to the new owner who is expected to get a Governor’s consent for the Deed. Upon the grant of a Governor’s consent, a landowner can proceed to request for a Certificate of Occupancy (CofO). It is important to note that a C of O in its self is not sufficient to claim ownership of a property without a Governor’s consent.
The importance of knowing what title documents cover for land ownership in your state, guides a buyer when carrying out due diligence on a property. All verifications of title documents are done at the State’s Land Registry.
Other documents that are needed in a real estate transaction include but are not limited to;
• Sale/Purchase Agreement – This is another important document which contains the terms and conditions governing the sale and purchase of a property. This document serves as a guideline for the transaction between a buyer and seller. It covers purchase price, type of title, the date the agreement would become unconditional, any deposit the buyer must pay or cost that must be paid if the seller defaults. This document protects both the buyer and seller from any breach of contract as referrals can be made to this document, which serves as a binding and a legal contract once it is executed.
• Reservation form: This is usually presented to a prospective client in order to confirm the prospects commitment in a property and to reserve a property within a given a period of time, which the prospect is expected to make further commitments to buying or leasing the property. This document helps protect the interest of the prospective client and helps save the company’s productive time from non-committed prospects. It evaluates the level of interest a client has in a property.
• Receipt of payment: This serves as evidence that monies or other forms of consideration have been exchanged between the buyer and seller.
Why it is important to have accurate documentation in real estate?
1. Title documents when verified give the buyer confidence to use the land without fear.
2. Title documents that have been verified are legal documents that are admissible in a court of law in the event of any dispute that may arise in future.
3. Title documents also serve as a form of collateral which an individual can use to access loans from financial institutions.
4. For the real estate marketing firm, having all necessary title documents gives the firm the edge over their competitors as prospective buyers have confidence in your property listings. It creates a trust level between you and your client.
5. Documentation plays a pivotal role in ensuring that the real estate firm keeps track of its progress and list of clients, take note of flaws if any, in previous transactions and enable the firm measure its sales progress by the years.
It is important that both parties read all documents carefully and fully understand the full content of the documents before signing. It is strongly recommended that professional legal advice is sought prior to entering into any contractual agreement.