Preliminary Considerations Before Entering into a Contract of Sale of Land in Nigeria


Academic Paper, 2021

7 Pages, Grade: 5.0


Excerpt

Preliminary Considerations Before Entering into a Contract of Sale of Land

Certain preliminary considerations exist at the pre-contract enquiry stage before venturing into a contract of sale of land. Ade who is desirous of purchasing land would need to carefully assess the following to ensure that the land is free from incumbrances:

1.0. The Nature of Interest or Right on the Land

The quantum of interest usually transferred in a sale of real property is an absolute interest of the vendor. Prior to the Land Use Act 1978 1, an agreement for sale of land culminated into a transfer of a freehold or leasehold interest which was dependent on the transferor’s title. The former was represented by the term conveyance, while assignment was used for the latter.

This practice no longer exists under the Land Use Act, which vests the ownership of all lands in the state on the Governor, so that the highest a person can acquire is a right of occupancy. A right of occupancy has been judicially recognized as a leasehold interest2 since it is a term of years and not an absolute interest granted by the governor for the enjoyment and use of land for 99 years. The situation remains the same for a person who was entitled to a freehold interest before the Act3 which was converted into a right of occupancy deemed granted under the Act.4 The deemed grant has the same tenor as an actual grant made by the Governor. In the case of Savannah Bank v. Ajilo , Obaseki JSC stated the effect of a deemed grant under the Act as follows:

…When therefore section 34(2) of the Act converted the interest held by an owner to a statutory right of occupancy, the Act reduces him to the position of a tenant subject to the control of the State through the Governor.

It follows that an absolute interest cannot be transferred under the tenor of the Land Use Act. The right of occupancy may be assigned or transferred subject to the consent of the Governor first had and obtained.5 The term assignment best applies when it is an unexpired residue of the vendor’s interest that is being conveyed. In the case of alienation of family land, the term transfer would best be employed since it is not merely a conveyance of an unexpired residue. Worthy of mention is that the absolute right over improvements on land is vested in the holder of a right of occupancy for which he can transfer to the purchaser subject to the consent of the Governor.6

2.0. The Rule of Nemo Dat Quod Non Habet

The vendor must ensure that he has property to sell since in law a person cannot give what he does not have.7 In a contract of sale of land, the purchaser may opt-out at any time before the completion stage when he comes into the knowledge that the vendor lacks title to the property offered for sale. Lack of title exists when the vendor does not have the authority to sell the property in question, for instance, section 36(5) of the Land Use Act bans the alienation of land in a non-urban area. Also, a vendor would not be able to sell a property he inherited jointly with others, without the ratification by the coheirs. Also, a member of a family cannot alienate the interest of the family over land, as the land does not belong to him but the family.8

This rule applies in tracing the devolution of the vendors’ title which is reflected in the abstract or epitome of title deduced by the vendor.

3.0. Caveat Emptor Rule ‘Let Buyers Beware’

The rule places a duty on the purchaser of land to investigate the title of the vendor, encumbrances on the land, and overriding third party interest which can be revealed by a physical inspection carried out on the land. Under this rule, the purchaser is not required to uncover all the defects of the vendor’s title. Only patent defects that can be revealed by a physical inspection of the property would fall under the ambit of this rule. For latent defects, the vendor is required to disclose it to the purchaser since it is hidden, failure of the vendor to so disclose would enable the purchaser, upon coming to the knowledge of it, to repudiate the contract.

A purchaser who fails to inspect the property to uncover patent defects would have to take what he sees. The rule was elucidated by Uwaifo JCA (as he then was) in Onyido v. Ajemba 9:

…a purchaser must be careful to know full details about the land he is buying so as to acquire a good title by ensuring that the vendor has necessary title to what he offers to sell. The rule is caveat emptor – let the buyer beware. It is a very old and useful rule…

The honourable Justice, in that case, went on to quote the judgement of Richards C.B in Purvis v. Rayer 10:

it is a general rule in equity founded on principles of honesty and the dictates of good sense, that if a person, generally speaking, offers anything for sale, the vendee, or he who has become a purchaser, is entitled to see that the vendor has it with the qualification, and in the way in which he, the vendee, understood that he bought it; that is, so as to afford him an assurance of having bought what he wanted, and meant to buy, or at least, what was offered or professed to be sold, or he may reject the contract”.11

The usefulness of the rule was showcased in the case of Animashaun v. Olojo 12, where plot 27 was in dispute, which formed part of the Late Chief J.A Ajao’s estate. The executors were vested with the property in question, and in 1975 they effected a sale of both plots 27 and 28 to the respondent and collected the purchase price. The respondent was given a conveyance for plot 28 but not for plot 27 but moved into possession of the two plots. In 1976, the executors also sold the same plot 27 to the appellant, on whose behalf a conveyance of the said plot was made. However, due to the respondent’s presence on the premises, the appellant could not enter into possession. The appellant sued the respondent for a declaration of title over plot 27. It was held that she failed to prove that she was a bonafide purchaser of the legal estate of the disputed land without notice of the prior equitable interest of the respondent, on the basis that if she had inspected the land at the time of the sale to her as a reasonable purchaser would do, she would have discovered not only that the respondent was in possession but also upon further enquiries, that her vendor had already sold the plot and collected the purchase price from the respondent.

From the above decision, it can be deduced that a purchaser of land who fails to investigate the property to be sold to uncover encumbrances, defects in vendor’s title, or other overriding third party interest, would not be regarded as a bonafide purchaser for value without notice of a subsisting equitable interest.

However, Obaseki JSC in that case went on to hold that13, although the risk of encumbrances is on the purchaser who must satisfy himself by a full investigation of title before completing his purchase, a purchaser would be able to plead absence of notice if he had made all usual and proper inquiries and had still found nothing to indicate the existing interest.

Under the caveat emptor rule, the doctrine of notice (actual, constructive, and imputed) would apply, so that a purchaser who did not come into notice of a subsisting third party interest or any encumbrance after inspecting the land to be sold, would not be affected by the rule.

4.0. Capacity of Parties

This is a fundamental requirement for both the vendor and purchaser, as where one or both parties, lack the capacity to contract there cannot be a valid contract of sale of land. The following rules of capacity apply to different classes:

4.1. Infant: An infant has been defined at common law and under statutes as a person under the age of 18.14 The law is that an infant cannot acquire a legal interest in real property, neither can such interest be acquired on behalf of the infant in Nigeria. The Settled Land Act 1882, (which applies to Lagos state and other states that don’t have property legislation) provides that a conveyance or devise of a legal estate to an infant alone or to two or more persons which include an infant would operate as a conveyance of settled land and where the infant qualifies as a tenant for life under the Act, the statutory powers vested in the tenant for life are exercisable on his behalf by the trustees of the settlement.15
For western and mid-western states that are covered by the Property and Conveyancing Law16 and other states with property legislation, a conveyance of land to an infant would operate as a trust for sale in favour of the infant.
4.2. Family: The family can only alienate family property with the consent of the family head and the principal members of the family.17 When an Attorney acts on behalf of the family, the power of attorney must have been executed by the family head either as one of the donors or the sole donor18 and where the power of attorney involves the donee dealing with interest in land, it shall be registered under the applicable Land (Instrument) Registration Law to ensure its validity. The scope of the power must also be ascertained.
4.3. Aliens: An alien cannot acquire an absolute interest in land in Nigeria. The highest an alien can acquire is a leasehold interest. For states comprised of the former western and mid-western region of Nigeria, under the Native Land Acquisition Law, 1959, an alien can acquire no more than a term of 99 years. In northern states, the Land Tenure Law, 1963, provides that the highest an alien can acquire is no more than a term of 90 years. In Lagos state, under s.2 of the Acquisition of Land by Alien Law, 2003, an alien cannot acquire a right of absolute ownership in or over land from any native of Nigeria. The highest such alien can acquire is a leasehold interest of no more than 25years.
4.4. Incorporated Organizations: A corporation can acquire an interest in land provided that such is contained in its Memorandum of Association. S.43(1) of the Companies and Allied Matters Act (‘CAMA’), 2020 provides that, unless otherwise provided by its memorandum, a company shall for the furtherance of its authorized object or business have the powers of a natural person of full capacity. It follows that, where a company is not authorized under its memorandum to acquire an interest in land or alienate same, it cannot exercise its power in that regard, unless it will be ultra vires. The power of a company to hold and deal with land is subject to the Land Use Act. Where a conveyance of land by the company is made by deed, it must be done with the common seal of the company (under the hand and seal…), made pursuant to s.98 of CAMA 2020. The same applies to non-profit organizations such as mosques, clubs, churches, communal associations, whose corporate personality can be acquired by way of an incorporated trustee under Part F of CAMA 2020. Those non-profit organizations can only deal with real property through their incorporated trustees.19
4.5. Partnership: Partners may hold and deal with land through a trustee or agent (usually one of the partners) appointed by the partnership.
4.6. Administrator: In states comprised of former eastern and northern Nigeria, under the Administration of (Real Estates) Law, 1917, an administrator of intestacy could not administer the real estate of the deceased unless by an order of court. However, in states that are comprised of the old western and mid-western region of Nigeria including Lagos state, under the Administration of Estates Law 20, a personal representative can administer the realty and personalty estate of a deceased.
4.7. Power of Attorney: A power of attorney may be vested in a person by the vendor to deal with property on his (vendor’s) behalf. Where the power of attorney is executed by deed, the purchaser can only construe such by the four corners of the instrument.

[...]


1 Cap L5 LFN 2004

2 Per Obaseki JSC in Savannah Bank (Nig) Ltd v. Ajilo (1989) 1 NWLR (Pt. 97) 305 at 328 para ‘B’ – ‘C’

3 As in the case of customary land owners

4 Cap L5 LFN 2004, s.34(2).

5 Ibid, s.22

6 Ibid, s. 15(1) and (2)

7 I.O. Smith: Practical Approach to Law of Real Property in Nigeria, Ecowatch Publication Nigeria Ltd, 1990. P.179

8 Ekpendu v . Erika (1959) 4FSC 79

9 (1991) 4 NWLR (Pt 184) 203 at 228

10 (1821) 9 Price 488 at 518

11 This rule was also applied in Ageh v. Tortya (2003) 6 NWLR (Pt. 816) 385

12 (1990) 6 NWLR (Pt 154) 111

13 Animashaun v. Olojo (supra) at 123 para ‘A’-‘B’

14 Infant Relief Act 1874 (statute of general application) and Infant Relief Law applicable in States that comprise of the old western and mid-western region. Cap 49 LWN, 1959.

15 Settled Land Ac t, s.59.

16 Property and Conveyancing Law Cap 100 LWN 1959, s.35.

17 Ekpendu v . Erika (supra)

18 If not executed by the family head, the power of attorney would be void. Ajamogun v. Oshunrinde (1990) 4 NWLR (Pt. 144) 407

19 Incorporated trustees have separate legal personality from its members.

20 Administration of Estates Law, Cap A3 Law of Lagos state 2003. s.3(3).

Excerpt out of 7 pages

Details

Title
Preliminary Considerations Before Entering into a Contract of Sale of Land in Nigeria
College
University of Lagos
Course
Conveyancing Law
Grade
5.0
Author
Year
2021
Pages
7
Catalog Number
V1135034
ISBN (eBook)
9783346509703
Language
English
Tags
sale of real property, property law, conveyancing, Nigeria, land law, real property
Quote paper
Joel Odili (Author), 2021, Preliminary Considerations Before Entering into a Contract of Sale of Land in Nigeria, Munich, GRIN Verlag, https://www.grin.com/document/1135034

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