OVERVIEW OF SALE OF LANDED PROPERTY IN NIGERIA
ALL YOU NEED TO KNOW IN SALE OR BUYING OF PROPERTY IN NIGERIA
PROPERTY LAW TRANSACTION
OVERVIEW OF SALE OF LAND/PROPERTY IN NIGERIA
It is pertinent to note that a GIFT OF LAND is not a sale of land. The following are the ways of acquisition of land in Nigeria:
· Gift inter-vivos
· Grant from state authority/customary grant
· First settlement on virgin area
· Long possession
· Partition of family land
ROOT OF TITLE TO LAND IN NIGERIA
There are good root of title on one hand and bad root of title. Good root of title includes:
· A Deed of Assignment duly perfected
· A legal mortgage duly perfected
· A deed of gift
· Registered title
· Court vesting order
The following are bad root of title
· A licence
· A lease
· A sub-lease
· Equitable mortgage
· Power of Attorney whether by deed or otherwise
· Deed of Assignment and Mortgage not perfected
RESTRICTION TO SALE OF LAND IN NIGERIA
There are some legal restrictions to sale of land.
A. Legislative Restrictions: under the Act, the land is vested on the Governor and the Governor must consent to alienation of land. Also, consent is not to be granted to the assignment of land to a person under 21 years. See section 7 LUA. Again a non-Nigerian cannot be granted a right of occupancy except with the approval of the National Council of States. See section 46 LUA
B. Incident of Customary Land Tenure: before a family or communal land can be sold, the consent of the head of family and principal members must be obtained.
C. Town planning: certain areas might be restricted to industries by the Town Planning Law and Registration
D. Contractual restriction: covenant in lease may restrict sale of land such as the covenant against assignment, subletting or otherwise parting with possessi
E. Doctrine of Lis pendis: restriction on sale of land by an order when proceedings concerning the land is pending in court. When land is subject of litigation.
PROBLEMS AFFECTING CONVEYANCING PRACTICE IN NIGERIA.
· Multiplicity of applicable laws/Duality of tenure
· Purchasers only consult solicitors at the tail end of transaction.
· Customary land tenure eg family property
· No full appreciation of the value of contract before conveyance.
· Materialism among legal practitioners
· Professional incompetence and lack of diligence on the part of legal practitioners
· Touts as estate agents
· Slavish dubbing of precedents
· Archaic mode of record keeping at the registry making search difficult
Sale of land is transfer of unexpired interest in land. A distinguishing factor between a sale of land and other conveyancing like lease, mortgage, is that in sale of land once interest has been transferred, it can never be taken back again. No reversionary interest. Ordinarily there are five stages in sale of land namely:
a) Pre-contract stage;
b) Contract stage;
c) Post-contract stage;
d) Completion stage;
e) Post-completion or perfection of title stage
The stages of sale of land have already been stated and individual discuss on them are below:
· Mainly involves the Pre-contract inquiries and Negotiations.
· Determine the presence or otherwise of patent defects-YANDLE V SUTTON. Example tenants in possession, damage in property.
· Determine the suitability or otherwise of the property, obvious encumbrances, provisions of planning regulations based on the principle of CAVEAT EMPTOR.
· NOTE: THE LAWYER DOES NOT NEGOTIATE THE PURCHASE PRICE FOR THE PURCHASER.
· This stage is before the contract of sale is entered. It involves the proposed purchaser making inquiry about the property to be purchased. The inquiry made would determine whether there is any encumbrances on the property, patent defects, the suitability of the property with respect to the purpose of purchase (Town Planning Law restricts certain areas for only residential). Also, negotiation is done in this stage. The discovery made by the inquiry would affect negotiations especially the purchase price. For instance, if there are still tenants with subsisting lease on the property, that would affect negotiation. In one word, the pre-contract stage concern INQUIRY and NEGOTIATIONS. Note that the vendor is only under duty to disclose latent defects.
· At this stage, equitable title in the property is transferred to the purchaser. Legal interest does not pass to the purchaser, as it passes upon completion.
· There are three ways in which the equitable interest can pass to the purchaser to wit;
ü Oral contract
ü Open contract
ü Formal contract of sale of land( drafted by the vendors solicitor).
Prior to discussing these contracts, the position of the law on any contract of sale of land is that the contract must contain certain conditions in writing namely: parties, property, purchase price and signature. It is desirable that both parties’ sign the contract, however, the signature of the vendor must be there. Where the contract is not in writing, it is unenforceable. In this regard, section 4 Statute of Frauds, section 5(2) Law Reforms Contract Act, 1961 and section 67(1) PCL all provide that:
“no action shall be brought upon any contract for sale or other disposition of land on any interest in land, unless the agreement upon which such action is brought, or some memorandum or note thereof is in writing, and signed by the party to be charged or by some other person thereunto by him lawfully authorized.
However, the provisions above do not apply to the sale or other disposition of land under customary law. Dealings in land under customary law are mostly done orally. Section 5(3)(a) Law Reforms Contract Act, 1961 specifically excludes contracts under customary law from the requirement of writing by providing that the requirement that all contracts must be in writing before being enforceable shall not apply to contracts for the sale or other disposition of land under customary law. See ADEDEJI v. OLOSO ; ALAKE v. AWAWU; where the requirements for a valid oral contract were stated.
An oral contract for the sale of land is generally unenforceable because it does not satisfy the requirements of section 4 Statute of Frauds, section 5(2) Law Reforms Contract Act, 1961 and section 67(1) PCL. It is valid, though unenforceable. However, there are two exceptions under which an oral contract for sale of land would become enforceable. They are:
a) Under native law and custom, oral contracts is a common method of validly acquiring land because under native law and custom, the requirement of writing is not essential. See section 5(3)(c) Law Reforms( Contracts Act). Accordingly, an oral contract of the sale of land under customary law is enforceable. But in ADEDEJI v. OLOSO (2007) 5 NWLR (PT 1027) 134, it was held that before it is enforced, the following conditions must be satisfied:
a) Payment of the full purchase price
b) The purchaser is put into possession; and
c) The transaction is conducted in the presence of credible adult witnesses
See also ODUSOGA V RICKETTS ; ALAKE v. AWAWU;
B) Secondly, as a general rule oral contracts are unenforceable as it does not satisfy the requirements of writing pursuant to section 4 of the statutes of fraud Act. However, where there are sufficient acts of part performance, the court would mandate the other party to perform his obligation under the contract. This was the position in INTERNATIONAL TEXTILE INDUSTRIES NIG LTD V ADEREMI., section 5(3)© LAW REFORM(CONTRACTS) ACT.
In ADENIRAN v. OLAGUNJU, the court stated that there will be part performance when:
a) There is proper oral evidence to prove or establish the terms of the oral contract
b) The contract must be specifically enforceable in the sense that it is not a contract for personal service
c) The act constituting part-performance must unequivocally refer to the oral contract; and
d) The party complaining must have wholly or in part executed his own part of the oral contract.
It must be noted that where the conditions for validity of an oral contract have been satisfied, it is sufficient to constitute part performance and the contract will be enforced.
However, it is risky for parties to rely on the doctrine of part performance for the enforcement of the oral contract because the order of specific performance is discretionary.
PROBLEMS/DISADVANTAGES OF ORAL CONTRACT
An oral contract is not advised because:
a) It is generally unenforceable, though valid
b) Money paid as deposit is unrecoverable where Purchaser defaults. THOMAS V BROWN
c) In the case of Part Performance, Its enforcement is subject to judicial discretion after part performance has been proved.
An open contract is one which satisfies the minimum requirements of the Statute of Frauds which are:
· It is in writing
· Purchase price
· Signed by the vendor
The open contract is not usually detailed as it leaves most terms of the contract to be implied by law. That is, every open contract is subject to a code of implied terms. This has been described as the major shortcoming of open contracts because implied terms are usually uncertain. In KACHALLA v. BANKI, it was held that a simple receipt of payment is an open contract. See also PAYE v. GAJI; Other examples are:
· Receipt of purchase price (receipt of payment). YAYA V MOGOGA,
· Rough Draft of Agreement
· Written offer which has been accepted orally or in writing.
· Minutes book
Where land is sold and receipt is issued, equitable interest passes and it can be enforced by specific performance. See OSAGIE v. OYEYINKA
Advantages of open contract
· It is valid and enforceable
· Equitable interest passes to the purchaser. OSAGIE V OYEYINKA.
· Vendor is now qualified trustee
· Vendor has a right of lien until the purchase price is completely paid
Disadvantages of open contract
· Usually entered into without proper legal advice
· Searches and requisitions are not properly conducted
d) It is not detailed enough and it is open to implied terms which are usually uncertain.
A formal contains not only the basic requirements but goes further to include detailed terms of what the parties have agreed. These are terms which ordinarily would have been implied into the contract. Examples are:
· Balance and interest on unpaid purchase sum
· Capacity of the vendor
· Risk and insurance
· Possession before completion
· Completion date
· Provision for fixtures and fittings inter alia
The formal contract sets out both the particulars of sale and the conditions of sale. The particulars of sale are the basic requirements of the statute of frauds, while the conditions of sale are the terms by which the parties are to be bound, which must be clearly spelt out. See TERRENCE v. BOLTON.
Advantages of formal contract over open and oral contract
There are specific advantages attached to formal contracts namely:
· It crystallizes the position of the parties as parties are bound by the terms of the agreement at an early stage in the transaction.
· The terms of the contract are certain.
· It is used to circumvent implied covenants
· Parties agree on the fixtures and fittings for the land and building and can thereby reduce the incidence of stamp duties to be paid on the property.
· The purchaser is given adequate time to investigate vendor’s title.
· The death of either the party does not terminate the contract as personal representatives proceed with the contract
· It prevents last minute withdrawal as parties are bound by the terms and any such withdrawal would amount to breach.
· It prevents gazumping and gazundering. That is, the vendor cannot unilaterally and subsequently increase purchase price as the price has already been fixed in the contract (gazumping). And the purchaser cannot compel the vendor to reduce the price because he has an offer of a lower price (gazundering).
· The CFSOL is an available document in the hands of both parties. The vendor can tender it as evidence of expectation of money, while the purchaser can create a mortgage of his equitable interest.
Special conditions in a formal contract
Read conveyancing note first
The following terms ordinarily are to be implied by the court if they were not stated in the contract. Thus terms that would ordinarily be implied are modified by the parties.
DEPOSIT CLAUSE: it contains the deposit paid as security by the purchaser to the vendor as evidence of his intention to complete the purchase of the property. The deposit is different form part payment in that deposit is made before the conclusion of the contract to show commitment on part of the purchaser that the sale is not gratuitous while part payment is part of the purchase price made after the conclusion of the contract. The contract is thus final having the payment of the balance. Part payment is not forfeitable. See Odusoga v. Rickett.
It is pertinent to note that deposit is usually paid to the vendor’s solicitor and it can be paid to him as a STAKEHOLDER or as an AGENT of the vendor. However, it is advised that the deposit be paid to vendor’s solicitor in his capacity as stakeholder in which case he will be acting as agent for both parties and will only pay the money to whichever of the parties becomes entitled to it.
Where the purchaser pays the money to an agent of the vendor, he does so at his own peril. See SORREL v. FINCH.
Note that where money is paid to the solicitor as stakeholder, he should deal with it by paying it into client’s account.
NB: The position of the law is that where the purchaser pays deposit and the parties are unable to complete the contract for sale due to a default on the part of the vendor, then in law, the purchaser can recover the amount paid as deposit, with interest. This principle was stated in CHILLINGWORTH v. ESCHE. But where the default is on the part of the purchaser, then the vendor is entitled to forfeit the amount paid as deposit and sue for damages for loss of bargain.
BALANCE AND INTEREST ON UNPAID PURCHASE PRICE: since deposit is paid, a clause providing for payment of balance and interest upon it should be inserted.
Note that the law implies that balance is to be paid upon completion. Where the parties intend that it should be paid before completion, then an express provision should be made.
Interest is usually on the unpaid balance and not on the entire purchase price. It is usually 4%, but if parties intend to increase, then express provision must be made.
Effect of balance and interest on unpaid purchase price clause:
a) Helps parties to determine time when balance is to be paid
b) Helps parties to agree on the quantum of interest.
c) Helps to modify the law that purchaser who fails to pay within time loses part payment.
CAPACITY OF VENDOR:
the capacity of the vendor needs to be stated. Vendors may convey as beneficial owner, trustee, mortgagee, lessor, settlor or personal representative. Usually, capacity of vendor is as a beneficial owner and the following terms are applied:
· Right to convey
· Right to quiet possession.
· Freedom from encumbrances
· Further assurances
As a lessor, in addition
· There is a Valid and subsisting lease
· That all covenants in the head lease have been observed and performed.
· The Power of sale has arisen and exercisable( the legal due date has passed)
· All conditions precedent have been complied with
RISKS AND INSURANCE: ordinarily the court would imply that the risks in the contract are to be borne by the purchaser unless there is a contrary agreement. However, if the purchaser is not in possession, a clause could be inserted for the property to be insured or for the vendor to retain liability until completion.
PROVISIONS FOR FITTINGS AND FIXTURES: fixtures and fittings are things attached to the property. If fixtures and fittings are to be included in the contract, it should be provided for as a purchaser is not meant to pay for fixtures.
COMPLETION DATE: law usually presumes that contract is to be completed within reasonable time. With this clause, the parties can insert the completion date. Where the date is fixed, the contract is to be performed within that date. Failure to comply amounts to a breach of the contract. See JOHNSON v. HUMPHREY
Once a party is in breach of the provision as to the date of completion, the innocent party must serve on the defaulting party a notice to complete before terminating the contract or suing for damages.
POSSESSION BEFORE COMPLETION:
The law implies that the purchaser gets possession only upon completion. Thus, unless otherwise stated, purchaser can only take over possession on completion. However, where parties intend that purchaser should take over possession before completion, express provision should be made to that effect.
PRECAUTIONARY MEASURE:However, it must be noted that where purchaser is to take over possession before completion, the clause should be properly drafted so that he takes possession as a mere licensee or a tenant at will. This is to make it easy to evict him if the contract fails due to the fault of the purchaser and this fact must be stated in the CFSOL.
SUMMARY OF THE SPECIAL CONDITIONS
Deposit refers to money paid by the purchaser to the vendor as evidence of his commitment and intention to complete the contract. It is a security for the performance of the contract. BIYO v. AKU (1996) 1 NWLR (pt. 422) 1.
The general rule is that Payment of deposit is not essential to the formation of complete and binding contract, therefore, where the parties intend the deposit be paid by the purchaser, then express provision must be made for it in the contract for sale.
Specifically, in a formal contract, I would provide for deposit for the following reasons:
a) It assures the vendor of the purchaser’s intention and commitment to complete the contract; Biyo v Aku.
b) It binds the vendor to the contract unless a breach occurs on the part of the purchaser;
c) If the purchaser defaults in completing the contract, the vendor may forfeit the money paid as deposit and can sue for damages for loss of bargain;
d) If a breach is committed by the vendor, the purchaser is entitled to recover the money paid as deposit, with interest.; Chillingworth v. Esche (1924) 1 Ch. 97;
e) Where deposit is paid and the contract is duly completed, then upon completion, the money paid as deposit becomes part payment without more; and
f) Where there is an agreement to pay deposit, the failure of the purchaser to pay the deposit amounts to a breach which the vendor can treat as a discharge of the contract and sue for damages.
Deposit is traditionally fixed at 10% of the purchase price; subject, however, to increment or reduction by agreement of the parties.
b) Balance and interest on unpaid purchase sum:
I would provide for the payment of balance and interests on unpaid purchase sum for the following reasons:
a) Where part payment is made, the law implies that the balance will be paid upon completion. Therefore, if the vendor intends that balance of the purchase price be paid to him before completion or after completion, then a clause must be provided in the contract to specify the time for payment of the balance;
b) Helps to modify the law that purchaser who fails to pay within time loses part payment.
c) Unless the parties agree otherwise, interest on unpaid purchase price is usually fixed at 4%. So, the contract should state the amount of interest that the purchaser will in the event of default. Where it is the vendor that is in default, no interest will be paid.
f) Capacity of the vendor:
The vendor can convey as beneficial owner, mortgagee, settlor, trustee or personal representative and in each case, different covenants for title are implied into the contract. The covenants for title to be implied are as provided for under Section 7(a) and (b) of the Conveyancing Act 1881, and Section 100(1) (a) and (b) of the Property and Conveyancing Law, 1959.
Where the capacity of the vendor is expressly stated, then there is no need to provide for the covenants for title as they are automatically implied by law.
c) Risk and insurance:
Upon the exchange of contracts, the risk and responsibility for the property passes to the purchaser and the vendor is under no duty to continue to insure the property. PAIN v. MELLER (1801) 6 Ves 49. Even if the vendor insures the property in his own name, the purchaser is not entitled to any share in the insurance money in the event of a damage to the property. RAYNER v. PRESTON.
Therefore, I would include a clause on risk and insurance to protect the purchaser. The contract would provide for an insurance policy by the purchaser or in the joint names of both vendor and purchaser or that the purchaser would contribute to the premium paid by the vendor so as to entitle him to a proportionate share in the insurance money in the event of loss or damage.
d) POSSESSION BEFORE COMPLETION:
Unless the contract provides otherwise, the purchaser gets possession of the property upon completion. Therefore, where it is intended that the purchaser should take possession before the completion of the contract, then I would include a clause to that effect in the contract.
However, in drafting that clause, I would take caution to ensure that the purchaser takes possession merely as a Licensee or a Tenant at Will and I would expressly state so in the CFSOL, in order to facilitate eviction where the contract is not concluded due to the purchasers fault.
F COMPLETION DATE
· Where a contract fixes a date for the completion of the sale, the contract must be performed on that date, otherwise the non-defaulting party could terminate the contract.
· Any interest payable on the balance of the purchase money will become due with effect from the date agreed upon completion.
PARTICULARS OF INSTRUCTION NEEDED FOR DRAFTING A FORMAL CONTRACT OF SALE IN NIGERIA
1. Particulars of the parties or personal details of the parties, both vendor and purchaser. This will include:
Ø The names of the parties;
Ø Whether any of the parties is an illiterate or is blind;
Ø Their addresses;
Ø Nationality; and
Ø Phone numbers and e-mail addresses,
2. Particulars of the property: location, description, whether there are third party rights or restrictive covenants, survey plan (if any);
3. PARTICULARS of witnesses.
4. Price or Consideration.
5. Nature of the vendor’s title;
6. Capacity of the vendor;
7. Terms to be clearly stipulated in the contract as to(conditions for sale):
Ø Possession before completion
Ø Payment of balance of purchase price and interest on unpaid sum
Ø Risk and Insurance
Ø Completion date
Ø Fitting and fixtures.
Parties may either act by the same solicitor or different solicitors. When can the same solicitor act for the two parties? SMITH V MANSI
· Where there is no conflict of interest
· Title to the property is sound(there will be no need for investigation)
· The parties consent
· The major terms and conditions of the contract are certain.
· Sometimes, where the consideration is little. It is however not applicable at all times.
VENDORS SOLICITOR PREPARES THE CONTRACT OF SALE OF LAND.
ROLE OF VENDORS SOLICITOR
· Prepares the Contract of sale of land.
· Advises the vendor on all stages and processes
· Receives deposit from the purchaser or his solicitor as stakeholder.
· Deduces title on behalf of vendor
· Prepares abstract and epitome of title.
The purpose of Deducing Title is to show a good root of title.
EXCHANGE OF DOCUMENTS/CONTRACT
· Exchange of contract is the physical exchange of two signed parts of the contract by the vendor and the purchaser (Udemezue says that it is the physical exchange of the contract with the payment of deposit). It is the process of making the contract binding on the parties.
Whether exchange of contracts is necessary:
· Exchange of contracts is necessary because the contract only becomes binding on the parties after it has been duly exchanged.See ECCLES v. BRYANT AND POLLOCK;
Exchange of a contract of sale of land is effected as soon as each part of the contract, signed by the vendor or purchaser is in the actual or constructive possession the other party or his solicitor so that at his own need, he can have it available to him for use.
B) An exchange of Contract is necessary where there are different solicitors acting for the parties. Thus, where one solicitor acts for the vendor and the purchaser, exchange of contract is not necessary- SMITH V MANSI.
Whether there will be exchange of contract is determined by whether the parties have different lawyers or same lawyer. Exchange of documents happens during the contract stage and as a general rule, while a deed takes effect upon delivery, a CFSOL takes effect when it is exchanged. Exchange brings the contract into existence. Exchange of documents is only necessary when separate solicitors act for the purchaser and vendor and the procedure is thus
Procedure for Exchange of Contract.
1. Vendors solicitor will take necessary instructions from the vendor and prepare the formal contract of sale of land.
2. Vendors solicitor will send the draft of the CFSOL to the purchasers solicitor for vetting.
3. Engrossment of the CFSOLfor the parties and their witnesses.
4. Thereafter, a meeting would be held in the vendor’s solicitor office. The following will take place at the meeting:
a. Vendor’s solicitor will receive deposit from the purchaser or his solicitor either as a stakeholder or as an agent
b. The vendor’s solicitor will issue receipt evidencing money received.
c. Parties and their witnesses will execute the contract of sale.
d. Vendor or his solicitor will hand over to the purchaser or his solicitor the following items:
Receipt of deposit
Epitome or abstract of title.
Vendor will hand over the duly executed copies of the CFSOL to the purchasers solicitor signifying exchange.^§
EFFECT OF RECEIVING THE DEPOSIT AS A STAKEHOLDER
It is pertinent to note that deposit is usually paid to the vendor’s solicitor and it can be paid to him as a STAKEHOLDER or as an AGENT of the vendor. However, it is advised that the deposit be paid to vendor’s solicitor in his capacity as stakeholder.
The reason are as follows::
a) He does not receive the deposit as agent of vendor or purchaser.
b) The money received by the solicitor will be held by him as trustee.
c) He is only liable to pay the money to the party that eventually becomes entitled to it.
d) He has a personal responsibility to keep the money safe.He will be personally liable for loss or misappropriation of the money. SORREL V FINCH
e) The money so collected must be kept in clients account or trust account.
f) INTEREST is NOT paid to the party entitled to the deposit.
g) As stakeholder, the solicitor is a like an interpleader for both parties.. He is not obliged to pay the money to either of the parties until that party becomes entitled to it. See ROCKEAGLE v. ASLOP WILKINSON
AS AN AGENT
1. RECEIVES THE money on behalf of the vendor
2. Bound to remit the money to the vendor
3. Liable to pay interest on the deposit.
4. Vendor is liable to the purchaser where deposit is misappropriated.
VENDOR HAS THE FOLLOWING REMEDIES AGAINST THE SOLICITOR IN THE CASE OF MISAPPROPRIATION:
· Civil ACTION FOR damages.
· CRIMINAL PROSECUTION FOR CONVERSION
· PROFESSIONAL LIABILITY FOR MISCONDUCT BY LPDC.
Parties using same solicitor
using the same solicitor, then exchange of contracts becomes an artificial nonsense.
Instances where a solicitor can act for both parties:
Rule 17 of RPC provides a legal practitioner should avoid adverse influences and conflicts of interests, except with the express consent of all concerned and after a full disclosure of the facts. However, in conveyancing transactions, a solicitor can act for both parties in the following instances:
a) Where the terms of the contract have been fully negotiated and agreed upon that a solicitor is only needed to formalize them.
a) Where the title of the vendor\\ is sound
b) Where there is no likelihood of conflict between the parties. For instance, where the parties are related by blood or where the transaction is between a company and its subsidiary; or between a personal representative and a beneficiary; or a settlor and a trustee
c) Where the parties consent to the use of one solicitor.
a. Where the consideration involved is so small that it is desirable that the parties avoid extra cost by using the same solicitor
Effect of exchange of contract
The consequences and effects of exchange of contracts are as follows:
· The contract becomes binding on the parties. ECCLES V BRYANT AND POLLOCK.
b) The vendor retains possession of and legal title to the property. However he holds over possession and legal title as a qualified trustee for the purchaser. OSAGIE v. OYEYINKA (1987) 6 SCNJ 94.
c) The purchaser acquires equitable title to the property and a subsequent purchaser of the estate acquires it subject to the equity of the original purchaser. FOLASHADE v. DUROSHOLA (1961) 1 SCNLR 150; OSAGIE v. OYEYINKA (1987) 6 SCNJ 94. Flowing from his equitable title, the purchaser can sell, assign, devise or otherwise transfer his equitable interest in the property; he can obtain an injunction to restraint the vendor from conveying the property to another person or from committing acts of voluntary waste on the property. Any subsequent purchaser acquires his interest subject to the equity of the original purchaser. EDOSA v. ZACALLA (2006) ALL FWLR (pt. 306) 881
d) The risk in the property passes to the purchaser and he is advised to take out an insurance policy on the property. See CHIDIAK v. COKER
e) The death of either or all of the parties does not affect the contract as it can be completed by their personal representatives
f) The vendor has a lien on the property for the payment of the balance of the purchase price. See ODUSOGA v RICKETTS
g) The vendor is entitled to the rents and profits from the land, but he must account to the purchaser
· H. The vendor is a qualified trustee.
After exchange of contract, a binding contract is in place. The vendor must go ahead to prove(deduce) that he has a good title to the property while the purchaser must investigate the proposed good title before the parties would reach the perfection stage.
PERFECTION OF THE CONTRACT FOR SALE OF LAND
NOTE that the usual procedure for perfection is Governors consent, stamping and registration.
The question has been asked whether perfection applies to a contract of sale of land. Perfection includes obtaining Governor's content, stamping of the document and registration.
With regards to Governor's consent, it is not necessary for the contract of the sale of land as it is only the equitable interest that has passed at that stage and not legal interest. Section 22 and 26 Land Use Act and Awojugbagbe Light Industry Ltd v. Chinukwe. The consent of the Governor is not required for a contract for sale of land. In AWOJUGBAGBE LIGHT INDUSTRIES LIMITED v. CHINUKWE (1995) 4 NWLR (pt. 390) 379, it was held that the provisions of the Land Use Act on the Governor’s consent do not apply to contracts for sale of land. Although section 22 of the Land Use Act prohibits the alienation of a right of occupancy without the consent of the Governor first had and obtained, it does not prohibit agreement in preparation for effecting such alienation. SEE ALSO SECTION 26 OF LUA; SAVANNAH BANK v. AJILO.
GOVERNOR’S CONSENT IS ONLY REQUIRED WHEN LEGAL INTEREST IS TRANSFERRED
Stamping of the contract of sale is mandatory as s. 58 of the Stamp Duties Act provides that it is chargeable to a fixed stamp duty. Thus, the CFSOL must be stamped however the stamp duties paid may be reduced by the parties upon agreement of the fixtures and fixture in the property.
Registration of the contract is dependent on whether the Land Instrument Registration Law of the State where the land is situate defines it as registrable instrument. That is, in AKINBADE v. ELEMOSHO, it was held that whether or not a CFSOL is a registrable instrument or not depends on the question whether the contract is defined as an instrument under the LIRL of the state where the land is located. Thus,
· In Lagos and northern states, it is not a registrable instrument.
· In old western Nigeria, it is a registrable instrument. See section 2 of LIRL and section 2(1) PCL
· In old eastern Nigeria, the LIRL is silent on it, but in OKOYE v. DUMEZ, the SC held that in those states, CFSOL is a registrable instrument and so, it can be registered
Thus, CFSOL does not require consent, but it MUST be stamped and MAY be registered depending on the location of the land.
Effects of non-registration of the CFSOL
a) It is inadmissible to prove and establish title.
b) It will lose priority.
a) Payment of fines as penalty for late registeration
b) It will not constitute notice to the whole world.
Role of a lawyer
The professional responsibilities a solicitor must take into account to act for both parties include:
· To seek the consent of both parties
· Ensure there is no conflict of interest
· Ensure the vendor has a good title
· Ensure that the terms are agreed upon
· The amount involved is small
Vendor’s solicitor prepares CFSOL, completion statement and schedule of documents to be handed over at completion.
Purchaser’s solicitor prepares Deed of Assignment.
Ethical issues in sale of land where solicitor is acting for one party or both parties
· Pay money received from the client into client or trustees account- LPA ACCOUNT RULES, RPC 23(2) RPC.
· Avoid conflict of interest- Rule 17 RPC
· Avoid tax evasion
· Advise his Client honestly- Rule 16 RPC
· Charge fees adequately not excessively or illegally- Section 48&49 RPC.
· Devotion to client transaction- Rule 14 RPC
· Keep notes with clients during meetings
· Agreement with clients should be in writing. Rule 18 RPC.
· Represent clients within the bounds of the law- Rule 15 RPC.
· Account for monies received premises promptly. Rule 23
PRE CONTRACT ENQUIRIES
PRE CONTRACT ENQUIRIES ARE IMPORTANT FOR THE FOLLOWING reasons:
· TO DISCOVER PATENT DEFECTS
· TO ASCERTAIN THE SUITABILITY OF THE PROPERTY FOR THE PURPOSES OF THE PURCHASER
· IT IS IMPORTANT FOR THE PURPOSES OF NEGOTIATION. IT EQUIPS THE PURCHASER WITH ENOUGH INFORMATION TO DETERMINE HIS MANNER OF NEGOTIATION.
· TO ASCERTAIN THE PHYSICAL CONDITION OF THE PROPERTY
· PROVISIONS OF TOWN PLANNING REGULATIONS
· THE PRINCIPLE OF CAVAET EMPTOR
Odusoga v. Ricketts
The land in dispute consisst of a four plots OF LAND sold by the administrator of a deceased in 1965 to the plaintiff respondent. The plaintiff paid a part payment of £700 out of £980 of the purchase price. He went into possession and developed a part of the land, the underdeveloped part of which is now in dispute. He did not pay the balance in spite of repeated demands from the vendors. In 1971 the undeveloped part was sold to the appellant by the administratix. The trial court upon instituting proceedings did not find for him but the Court of Appeal granted his claim. This was upturned at the Supreme Court.
The issue before the Supreme Court was whether the plaintiff acquired title to the 4 plots of land in 1965 notwithstanding that he did not pay the full purchase price. The Supreme Court stated the following; for a sale under customary law, where the purchaser fails to pay the full purchase price, there is no valid sale. This must be so for to constitute a valid sale under customary law, three essential ingredients (1) payment of purchase price (2) purchaser is let into possession by vendor (3) in the presence of witnesses.
It follows therefore that where the purchase price is not fully paid then can be no valid sale, notwithstanding that the purchaser is in possession. That possession cannot defeat the title of the vendor. Where however part payment of the purchase was made and the balance to be tendered within stipulated time or in the absence of a stipulated time within a reasonable time, the vendor cannot resile from the contract of sale and the purchaser in possession will be entitled to a decree of specific performance.
Viewed from the standpoint of common law, payment of purchase price coupled with possession gives the purchaser an equitable title and he is entitled to seek an order of specific performance to compel the vendor to convey legal title to him but where the purchase price is not fully paid, the purchaser will have no right to enforce specific performance. Where the purchaser who has made a part payment of the purchase price is in default of payment of the balance, there is right in the vendor to rescind the contract of sale and re-sell the property. A mere receipt of purchase did not confer legal estate to the land in dispute on the purchaser but would confer an equitable interest.
Kachalla v. Banki&ors
The appellant bought the landed property from the sales agent at N1, 200, 000 on 16th march 1994. He paid the purchase price and was given a receipt, a deed of assignment and the certificate of occupancy on the land. He was in possession of the property. He could not register his interest in the property with the lands authority due to some intervening circumstances (equitable interest). On the 15th April 1995, the 2nd respondent bought the same property at an auction sale for the sum of N520, 000. The 1st respondent was a judgment debtor and the property was to be sold to discharge the judgment debt (legal interest). The appellant brought an action for declaration that he is the bona fide owner of the property. The trial court and the Court of Appeal dismissed the appellant’s claim. The Supreme Court upheld his appeal and held the following:
The fundamental rule is that competing interests will generally rank according to the order of their creation. Thus where a person pays for land and obtains receipt for the payment followed by his going into possession and remaining in possession, equitable interest is created for him in the land as such which can defeat the title of a subsequent legal estate of a purchaser with knowledge of the equitable estate in the land. The following are the remedies for breach of contract of sale
· Order of specific performance – see Hope v. Walter
· Rescission – see Odusoga v. Ricketts
In Okumagba v. Idundun , the Supreme Court laid down five ways in which ownership of land can be claimed.
· Traditional evidence/history
· Production of documents duly authenticated and executed
· Acts of Ownership extending over a sufficient length of time numerous and positive enough to warrant the inference of being the owner
· Acts of long possession and enjoyment(12 years, adverse possession)
· Proof of possession of adjacent land.
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