By Vanessa Irenuma
Real estate and property law in Nigeria encompasses the legal framework and regulations governing the acquisition, use, ownership, and transfer of real property within the country. It plays a crucial role in ensuring the security of property rights, promoting land development, and resolving disputes related to real estate. Here\’s an overview of key aspects of real estate and property law in Nigeria:
1. Land Tenure System:
a. Customary Land Tenure: Nigeria operates a dual land tenure system, which includes customary land tenure and statutory land tenure. Customary land tenure is governed by traditional or customary laws and varies from one region or community to another. It often involves communal ownership and allocation of land by traditional rulers or chiefs. In Nigeria, diverse customs and tradition regulate ownership of land from private personal to family and communal ownership. Ownership of land is generally vested in the village, community or family with the head holding it for the use of the whole village, community or family respectively. Individual right is limited to use and enjoyment of a portion of the land allocated to them. Alienation without the consent of other members is invalid because absolute ownership is vested in the community, village or family as the case maybe. The head-man is a caretaker in a representative capacity.
b. Statutory Land Tenure: Statutory land tenure, on the other hand, is regulated by federal and state laws. It includes land owned by the government, public land, and land acquired under statutory rights. The land tenure system is the process of granting ownership of land to individuals, legal bodies, corporate bodies, and natural bodies based on their use of these land. This statutory instrument is used to ensure that human habitats are safe and sustainable.
2. Land Registration:
a. Land Titles: In Nigeria, there are various types of land titles, including the Certificate of Occupancy (C of O), Right of Occupancy (R of O), Deed of Assignment, and others. These titles determine the legal rights of the property owner. In Nigeria, you need a number of land titles and other documents before you can buy land or property. Land titles are legal papers that says who owns a certain piece of land or property. On the other hand, land documents are things like a receipt, invoice, contract of sale, survey, deed of assignment and allocation that you get after you buy land.
(1) Certificate of Occupancy [C of O]: it is a document given out by the state government that shows that someone owns land. Without a certificate of occupancy, your land or property can be taken from you at any time without paying you anything.
(2) Right of Occupancy [R of O]: It is the legal right of a person or group to live on or use land in a way that is allowed by the Land Use Act. The R of O title gives a person, a group, or a business the right to use a piece of land in a way that the government has approved.
b. Land Use Act: The Land Use Act of 1978 vests all land within the territory of each state in the governor of that state, making the governor the trustee of the land on behalf of the people. Individuals and entities can obtain rights of occupancy or leases from the government through the issuance of certificates of occupancy. The implication of this act affects only landowners. Landowners need to acquire a Certificate of Occupancy, generally known as C of O, which the State Governments of the land will issue as evidence of a right of occupancy. This right of occupancy is granted to individuals to occupy, develop and use the ground for a period not exceeding 99 years. This means all the rights you have for this land are a lease, In a situation whereby a developed residential building was revoked according to Section 33 of the Land Use Act, the Governor has the discretionary right to offer resettlement instead of compensation. And if a person accepts resettlement, his right to compensation will be considered to have been fully satisfied, and no further balance shall be paid to such person. This only implies that the State Governors may have unlimited power over the land use.
Which just means the government may take your land anytime. The Land Use Act empowers the state Governor or the Local Government to revoke a right of Occupancy if your land is needed by the Federal, State, or Local Government for the Public Purpose of the country. According to the Land Use Act, in the case whereby a right of Occupancy is revoked, the occupier ad the holder shall be entitled to compensation for the value as the land was cancelled.
In a situation whereby a developed residential building was revoked according to section 33 of the Land Use Act, the Governor has the discretionary right to offer resettlement instead of compensation. And If a person accepts resettlement, his right to compensation will be considered to have been fully satisfied, and no further balance shall be paid to such person. This only implies that the State Governors may have unlimited power over the land use. An individual is entitled to no more than a half hectare (1.25 acres) of undeveloped land within a State. However, in rural areas, the country’s customary grant of land is limited to 5,000 hectares for grazing and 500 hectares for agricultural
3. Property Transactions:
a. Sale and Purchase: Property transactions in Nigeria involve the sale and purchase of land, buildings, or both. These transactions are subject to various laws, including the Conveyancing Act, which governs the transfer of property, and the Stamp Duties Act, which regulates the payment of stamp duties on property documents. A contract of sale of land is an agreement whereby the vendor promises to sell and the purchaser to buy the land in question. It is a binding agreement that the courts will enforce if necessary. The most important significance of this agreement is that it allows the purchaser ample time to investigate the title of the vendor. The parties to the transaction are Vendor and Purchaser. The Vendor’s solicitor is to prepare the Formal Contract of Sale of Land.
b. Land Use Act Compliance: It\’s essential for buyers and sellers to ensure that property transactions comply with the Land Use Act and other relevant laws. This often requires obtaining the necessary land titles and approvals from the appropriate authorities. Upon a satisfactory due diligence by the parties and consensus on the transaction costs, completion of the real estate transaction includes preparing and execution of the relevant documents which depend on the nature of the transfer transaction. The usual documents are Sale and Purchase Agreement, Deed of Assignment or Deed of Lease or Sublease and Power of Attorney (optional). The application form for Consent of the Governor (or Minister for Federal Government owned titles) signed by the seller or lessor is a mandatory requirement. Upon execution of the relevant documents and transfer of possession of the property to the purchaser or lessee, the process for obtaining consent of the Governor (or Minister for Federal Government land interests) and registration of the transfer of interests should commence subject to payment of the applicable taxes and fees.
4. Land Use and Development:
a. Planning and Zoning Laws: Urban and regional planning laws in Nigeria regulate land use and development. These laws define permissible land uses, zoning regulations, building codes, and environmental standards. Compliance with these regulations is crucial for property developers. In Nigeria, land use, planning, and zoning matters are residual matters in the Constitution of the Federal Republic of Nigeria 1999 (as amended) and regulated under specific legislations promulgated by the respective State\’s Houses of Assembly of the 36 states and the National Assembly for the planning and zoning matters in the Federal Capital Territory, Abuja (1).The various states in Nigeria have enacted their own Physical Planning Laws which were adapted from the Federal Act (the Nigerian Urban and Regional Planning Act No. 88 of 1992 (as amended by the Urban and Regional Planning Act No. 18 of 1999) with necessary in Lagos is the Lagos State Urban and Regional Planning and Development (Amendment) Law 2019. Generally, the conditions for the grant of a development permit by the Control Department must conform to the conditions of use stated in the title document or grant of the right of Occupancy for the land in question. In the dynamic landscape of Nigeria\’s growing economy, potential investors are seeking opportunities to maximize their returns and contribute to the country\’s development. Among the key factors that can significantly impact investment outcomes is an understanding of land zoning and land use planning. In this article, we will explore the importance of land zoning and planning in Nigeria, and why potential investors should be aware of its implications. Land zoning and planning play a vital role in shaping the physical and economic landscape of Nigeria. These processes involve dividing land into different zones based on designated purposes, such as residential, commercial, industrial, agricultural, and recreational areas. The primary goal is to optimize land use, ensure efficient resource allocation, and create sustainable and vibrant communities.
b. Building Permits: Property owners and developers must obtain building permits from the relevant local government authorities before commencing construction or renovation. A building permit is an official approval to proceed with a construction project. It is also intended to ensure that the project plans comply with local standards for land use, zoning and construction. These standards are intended to ensure the safety of current and future owners and occupants and enforcement of zoning and land use policies. Specific issues the building permit process may address include structural integrity, zoning, sanitation, water and sewer lines, fire resistance and electrical services. Permits ensure that construction is performed in compliance with state and local codes, including safety standards. … Failure to obtain a building permit is a violation of Contractors License Law. It should be noted that Building control regulations within Nigeria are within the control of State and Local Governments and they vary from state to state. In Lagos state the grant of Building permits is governed specifically by the Lagos State Physical Planning Permit Regulations 2019 and is enforced by a number of Regulatory agencies that include the following:
i. The Lagos State Physical Planning Permit Authority (LASPPA) under the Ministry of Physical Planning &Urban Development,
1. The Lagos State Lands Bureau,
2. The Ministry of Environment,
3. The Lagos State Building Control Agency (LASBCA).
5. Property Rights and Ownership:
a. Co-ownership: Property can be jointly owned by multiple individuals or entities. The legal structure of co-ownership should be clearly defined to prevent disputes. Property that is acquired or owned jointly by two or more individuals is said to be co-owned legally. In Nigeria, co-ownership of a property by two or more people is permitted in at least four different ways: joint tenancy, tenancy in common, tenancy by the entirety, and family ownership. When property is owned by co-owners as joint tenants, it means that each joint tenant is an equal owner of the entire property and has the right to possess the entire property. No co-owner has a separate stake in the property or part of ownership. No shared renter may claim ownership of any real estate. No joint tenant may dispose of any portion of the property without the other tenants\’ approval or without first severing the joint tenancy since the joint tenants maintain their interest in undivided shares and are considered to be one single owner in the eyes of the law.
b. Mortgages: Property can be used as collateral for loans or mortgages. Mortgage transactions are regulated by the Mortgage Institutions Act and the Land Use Act. A Mortgage (sum of money) is the transfer of ownership of a property (home) as security to a lender (Mortgage Bank), under the express or implied condition that the property (home) will be re-transferred to the borrower (home-owner), upon repayment of the mortgage. Section 1  of the mortgage act state that No mortgage business shall be transacted in Nigeria except by a company which is duly incorporated in Nigeria for that purpose and in possession of a valid license granted by the Minister authorizing it to do so.
6. Dispute Resolution:
a. Land Disputes: Land and property disputes are common in Nigeria. They may involve conflicting claims to ownership, boundary disputes, or disputes related to land allocations. Dispute resolution mechanisms include litigation in the courts, traditional dispute resolution methods, and alternative dispute resolution (ADR) mechanisms such as arbitration and mediation. The occurrence of land-related disputes remains inevitable due to conflicting interests often associated with land rights. However, how these disputes are resolved remains of great interest to development scholars and policy makers alike. The degree of perceived tenure security in an ordinal scale is measured using the combined indicators of perception of occurrence of ownership dispute and the perception of not losing plot should dispute occurs.
Further, a two-stage sequence of choice of institutions for land-related dispute resolutions was constructed from the data to obtain four categories of possible resolution pathways. Partially constrained generalized ordered logit and multinomial logit models were also employed to assess the effects of plot holders’ Socio-economic and plot characteristics on perceived tenure (in)security and choice of dispute resolution pathway, respectively. Results reveal that the level of perceived tenure security decreases with increasing indicator combination and the choice of informal – informal pathway remains dominant even in the presence of legal pluralism. Policies that promote land documentation, strengthened extension services, and strengthened institutional capacities and access are envisioned to play significant roles in reducing land-related disputes and facilitating their resolution.
7. Property Taxes and Duties:
a. Property Taxes: Property owners are subject to property taxes imposed by local government authorities. The rates and collection procedures can vary depending on the location. Property tax rate in Nigeria is annually is 0.3% for recreational property, 0.4% for residential property, 0.6% for commercial property and 0.7% for others. Property taxes in Nigeria are usually levied annually by the state government with varying rates depending on the state and the location of the property within the state. The two major property taxes are governor’s consent fee and land registration fee. In Lagos (which is the economic hub of Nigeria), governor’s consent fee, land registration fees, and other levies payable to the state give rise to a total levy of 3% of the fair value of the land. Also, Right of Occupancy fee and tenement rates are chargeable by state and local government authorities.
b. Stamp Duties: Stamp duties are payable on various property-related documents, including agreements of sale, lease agreements, and transfer documents. Under the Stamp Duty Act, stamp duty is payable on any agreement executed in Nigeria or relating, whatsoever, to any property situated in or to any matter or thing done in Nigeria. Instruments that are required to be stamped under the Stamp Duties Act must be stamped within 40 days of first execution. Stamp duty is chargeable either at fixed rates or ad valorem (i.e. in proportion to the value of the consideration), depending on the class of instrument. Stamp duty is imposed at the rate of 0.75% on the authorized share capital at incorporation of a company or on registration of new shares. All deposit banks and financial institutions are required to charge stamp duties of NGN 50 on every eligible transaction above NGN 10,000. There are exemptions for transactions between accounts held by the same bank customer and for salary accounts. The 2020 Finance to remove electronic transfer from the scope of stamp duty and introduced an electronic money transfer levy, which is applicable on electronic receipts or electronic transfer for money deposited in a financial institution, on any type of account. The applicable levy is NGN 50 on any transfer of NGN 10,000 or more.
8. Real Estate Regulation:
a. Regulatory Agencies: The Real Estate Industry is a massive one and it’s no wonder there are quite a number of regulatory bodies for the various professions contained in the industry. The regulatory bodies in Nigerian Real Estate include but are not restricted to the following;
I. ESTATE SURVEYORS AND VALUERS REGISTRATION BOARD Of NIGERIA(ESVARBON); The Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON) is the regulatory body for controlling and setting standards for real estate and valuation practice in Nigeria. The profession gained limelight in the country when, in 1969, a group of qualified Chartered (General Practice) Surveyors formed what is known as the Nigeria Institution of Estate Surveyors and Valuers (NIESV), as a non-profit voluntary professional organization to cater for the interests of the Landed profession in Nigeria, Six years later, it was accorded Government recognition by the promulgation of the Estate Surveyors and Valuers (Registration, ETC) Decree No. 24 of 1975, now CAP III (Laws of the Federal Republic of Nigeria) 1990. By this legislation, Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON) came into being as the Regulatory Body for the profession.
II. NIGERIA INSTITUTE OF ESTATE SURVEYORS AND VALUERS (NIESV);
This Institute is involved in various practices such as valuation of interests in land and buildings for various purposes: sale, mortgage, insurance, acquisition, probate, stocks and shares, balance sheet, taxation etc., valuation of construction projects, building maintenance management, property management and development, infrastructure and facilities management, land reform, land registration, planning and analysis, construction/ project management, property inventory and audit and many more.
III. REAL ESTATE DEVELOPERS’ ASSOCIATION of NIGERIA (REDAN);
This is the principal agency of the organized private sector recognized by government and approved by the Federal Mortgage Bank of Nigeria (FMBN) – the apex mortgage lender in Nigeria – to facilitate the delivery of affordable mass housing for Nigerians. Since its formation about a decade ago, the Association has gained increased credibility and prestige. REDAN also seeks to achieve positive relations with all stakeholders connected with the housing industry including organizations, producers, providers, financiers, and landowners. The Association also strives to play an active role in the promotion of research for the development of building materials and systems, as well as standard setting for the industry.
IV. NIGERIA INSTITUTE OF TOWN PLANNERS (NITP);
The NITP is Nigeria’s leading planning body for spatial, sustainable, integrative and inclusive planning. The NITP exists to advance the science and art of planning for the benefit of the public. Planners develop long- and short-term plans to use land for the growth and revitalization of urban, suburban, and rural communities, while helping local officials make decisions concerning social, economic, and environmental problems. Because local governments employ the majority of urban and regional planners, they often are referred to as community, regional, or city planners.
V. ESTATE, RENT AND COMMISSION AGENTS ASSOCIATION OF NIGERIA(ERCAAN);
The Estate, Rent and Commission profession has been described as a noble one that has now formed an important aspect of the nation’s economy, considering the role of housing in any given country. This association is tasked with the need to educate, inform and train members on the ethics of the profession of agents and understand the best approach to landlords and tenants.
9. Land Acquisition and Compensation:
a. Land Acquisition: When the government acquires land for public purposes, it must follow legal procedures, including providing compensation to affected landowners. In Nigeria, every citizen possesses the right to acquire and own immovable property anywhere in Nigeria. However, the right to own immovable property, like every other right enshrined in the Constitution of the Federal Republic of Nigeria, 1999 (as amended), is not total but subject to certain qualifications. Upon the enactment of the Land Use Act of 1978, all lands comprised in the territory of each state in Nigeria are vested in the governor of that state and such land shall be held in trust and administered for the use and common benefit of all Nigerians. The law of compulsory acquisition of land in Nigeria is rooted in the Nigerian Constitution that every Nigerian has the right to own private property and that such property shall not be acquired compulsorily, except in the manner and for the purposes prescribed by a law that requires both the payment of prompt compensation and compliance with the rule of law on access to the court. It is however pertinent to state that the Governor may revoke a right of occupancy over any land in the state on account of overriding public interest. Compulsory acquisition of land by the government for public purposes or overriding public interest can be in several phases as stressed by the Land Use Act 1978 such as infrastructure development, urban planning, or economic projects. Talking about overriding public interest, it means the acquisition of private individual land, by the government, for the use of the state. It must however be noted that where it is discovered that such acquisition made by the government was not for public purpose, then such acquisition may be marred.
10. Real Estate Investment:
Real Estate Investment Trusts (REITs): Nigeria has established REITs, which allow investors to pool their funds to invest in a portfolio of income-generating real estate properties.
In conclusion, real estate and property law in Nigeria is a multifaceted and evolving field that is influenced by both customary and statutory laws. Understanding the legal framework, obtaining the correct land titles, and complying with land use and development regulations are crucial for property owners, developers, and investors operating in Nigeria\’s real estate market. Moreover, effective dispute resolution mechanisms and compliance with property taxes and duties are essential elements of property ownership and investment in the country.
Contact: Vanessa Irenuma