Buying untitled lands in Nigeria requires professional help
My personal phone buzzes, its a message from Dr Ola (not real name)
“Hello Lerato. I just got an email from the company whose lands I bought in December – they say there are delays with allocation because they want to conclude on the title perfection. Why can’t they just allocate us and go ahead with title perfection still? This way those of us who want to develop can start making plans to move forward.”
Phew!!! It’s a daily hope that messages like the above will either stop coming through or when they do, it is in a different context.
When 400+ homes in one of the 79 towns and communities comprising the Ibeju-Lekki GA are demolished; as a potential or existing investor in the area – instead of taking sides with banters around how the state authorities were wrong to do this, it is time for you to learn how not to fall a victim of such situation, even though you are empathizing with them who have suffered this ordeal.
Cheap lands (also known as virgin and non-perfected title lands) have been on sale in the axis since around 2013, with over 20 real estate companies still selling an average of 3 land options per time. The question now at the forefront is – “How many people are at risk of falling victims to the above scenario?”
A good number of these future-thinking estates have sold out within the past 7 years with no form of development and/or perimeter marking currently in place to show they have ownership. And some who have invested in such lands have over time come back to ask the hard questions – do they still have rights to those lands?
But before I digress too much, let me stick to the topic of the day – “Keeping your investment safe as houses” and start with why this is the debut article on this column.
Learning from the experience of the owners of the 400+ houses means that you get to understand the possible reasons why it happened and what the possible actions and/or inactions were, which made them liable to this.
First off, a little context about location and the current situation is necessary.
- Oke Egan is but one community of 79 towns and communities in the Ibeju Lekki LGA; it is located along the Lekki-Epe expressway and within the Eleko area
- A lot of the lands in the Ibeju-Lekki and Epe Local government areas are currently being reclaimed and/or having their customary titles revoked. The reasons given by the State authorities are premised upon improving the Town Planning coordinates to meet the increased adoption and opportunities in the area.
Secondly, while these untitled lands in Nigeria that are being revoked might still be accessible for purchase, these are best done and acquired from the State through the proper channels. For cost and ease of capacity purposes, this is best done by a development company that will bear the hassle of reapplying for the title of a large mass in their name.
The reality and truth of the situation are that many of us have gone ‘chasing’ after cheap lands (untitled lands in Nigeria) to buy in the name of land banking and thus bought from traditional family owners but have yet to go and authenticate these purchases at the Lands registry – development companies inclusive (no dragging necessary but …..)
Do you have a land that is yet to be title regularized by the development company who sold it to you? Now might be a good time to ask them for updates on what they are doing about this – if they haven’t already informed you about this.
As a broker who also assists with land title verifications, earlier this year (in January and February to be precise) saw us hitting a continuous brick wall of negative results on title verifications we sent in. Imagine sending in 12 such requests within the space of two weeks but only 2 came back clean.
If you have read my eBook about real estate titled “Life in the Kitchen: Making Real Estate Work for You” you would have seen a similar circumstance with a “developer representative” where the client trusted him without doing any due diligence. That story was a true representation of some of the things we go through helping to make safe investments.
So back to the topic of how to keep your investments safe as houses and stop wasting money in the process – yes, I am moving forward this time.
Because investing is a full-cycle consisting of at least 3 stages, the waste could come in at any of these different stages. I will touch on the 3 stages of validating an investment in property and securing untitled lands in Nigeria.
Stage 1: Validating the title
Stage 2: Matching the asset with your investment goals
Stage 3: Keeping it price relative
Stage 1: VALIDATING THE TITLE AND LOCATION
Never take just the word of the developer or the seller as true to form; always do a check yourself. A check would be a due diligence investigation and/or search that you initiate with the authorities to verify the status of the property you are buying. In some cases, brokers might have done this already and will offer to give you a copy, so that too works in your favor, but there are some tiny details to still look out for in your documentation.
For example, the existence of a contract of sale only means that a transaction occurred but in layman’s terms this could have been presented to mean they have ownership rights to the land/property – they don’t. Having a Deed might ethically transfer rights to the new owner and seller – but are these new rights documented with the state?
Until a Deed is registered with the state to inform them that the property ownership has changed hands, and should the government need to revoke the land, they might do that as the information they are working with is the old one that states that the property still belongs to the former owners.
Now imagine that they want to negotiate for these untitled lands in Nigeria and/or use it for something elsewhere they need to compensate the current owners for it and possibly relocate them somewhere else. And then the party they contact goes ahead to do this without informing you that has paid for such a property. Do you see how you will lose out on your funds and assets altogether?
What to do: Get due diligence done on the property to confirm these details so you are fully aware. And when you have consummated the transaction, get your lawyer to register the deed with the authorities so that you can start the process of transferring full ownership to yourself with the knowledge of the State.
Stage 2: MATCHING THE ASSET WITH YOUR INVESTMENT GOAL
Another common mistake made by investors is in the type of asset they buy. Many buy based on the offer and with no potential plan to actually use the asset as it should or could be used. Before you argue, let’s take a quick test rhetorically – the latest land or property you bought, do you have a clear plan on what to do with it/them?
Where a plan will include plan A which is what you really want, Plan B will be what is the next best case and Plan C is the backup plan for if the first 2 do not work.
If in doing the test above, you do not have a plan then now is the best time to make one so you do not end up wasting money invested in something that will/cannot serve you.
For every client that comes to us, the first question we ask is why do want to buy this? For those who don’t immediately know we set out to explain the odds to them.
Stage 3: KEEPING IT PRICE RELATIVE
With the COVID-19 pandemic, came the realization that our normal/current property choices were no longer effective for what adapting to the new normal required. Home layouts became obsolete globally and most families needed to recreate their spaces to include work spaces for most members of the family.
Because some previous owners are looking to resell due to increased cash flow needs, you as a new buyer have to be very careful to ensure that you aren’t trapped in the web of acquiring a property that will only be a liability to you.
Here are a few things to look out for
- If buying land that the title perfection is in process, ensure that all required payments have been paid or else these would be transferred to you when you want to continue the process; back-taxes and all.
- If buying a built property, get an estate valuer to inspect and assess the current damage to the property in which case, can also get an estimate of how much it will cost you to bring the house up to standard living levels. The same would apply if you are buying an uncompleted property.
- If you are buying an off-plan property, make sure that the contract of sale which is the first document to be signed off on includes the location of the property, building approvals, structural designs as existing and the timelines for delivery. While these terms might also need to be shifted in accordance with existing realities, it would be expected that communication should be very clear and continuous to avoid friction. In some contracts of sale, an indemnity clause, as well as a non-performance/delivery clause, is usually inclusive.
How do these precautions keep the price relative?
Let me give you a clear example. If it is an off-plan project and it has been delayed with no defined end date, the subscribed owners might be required to extend their current lease for that duration or the timeline for which they can have the property on the market will be disrupted which then causes an increase in what would be labelled the cost of funds to the buyer.
If this happens, then the price of the property is now the cost paid to purchase/acquire plus the additional expense made.
Because we have learnt this the hard way, we now advice clients looking to take up off-plan units to ask for a financial compensation for non-delivery of projects in the appropriate timeframe of the project delivery.
It’s a tough decision but tough times led to this and yes, you will have those developers who will refuse such a clause, so be ready to either walk away or stay and deal with that risk.
Trying not to overload you with information, I will end this episode here and look forward to hearing what you think or any questions you might have as relates to any of the points shared.
If you have no questions, then please feel free to share in the comments below which of the points were new to you or you had heard about before.
We are all here to learn so all comments are welcome.
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