Sep 14, 2016

Ivie Omoregie: Governor’s Consent & Perfecting Title to Your Landed Property

In light of the recent devaluation of the naira, there has been a lot of emphasis placed on PROPERTY. Many Nigerian’s in diaspora (living outside of Nigeria…) have used this opportunity to buy the kind of property they may have been eyeing for some time but previously unable to afford. 

Effectively, with the current value of the naira, when compared to this period 3 years ago, any property which is bought in Nigeria right now, calculated in a foreign currency, would be half the price that it might have previously been, or as I like to term it “Buy 1 Get 1 Free’.

Aside from home owners, long term tenants with lease agreements exceeding 3 years have an obligation to register their interest, thus enabling anyone who might wish to deal with the property, in any manner, to see their interest. I always advise friends and relatives who take up commercial properties in which they conduct significant renovations about the importance of having long term leases and then registering their interest in same. As we recently saw with the demolition of property being rented by the Nuli Juice Company in Lagos State because of a breach perpetrated by the owner of the property, registration of interest would have created an obligation for the relevant state authorities to notify the registered lease hold tenants.

A lot of people, possibly because of the costs involved and the fact that fundamentally perfection of title to the property may not affect the status quo, tend to omit, or rather not appreciate the importance of registering their interest.

The importance of property in the development of any country is undeniable; many believe it is the surest form of security, and if done right often yields significant returns. I cannot over stress the relevance of proof of title to property in protecting one’s interest and the degree of control a person has over said property.

I am sure we have all heard of instances where an issue with proving title to a particular property has surfaced, and there was an urgent need to establish ownership as two or more people claimed to have conflicting interests.

Property law in Nigeria tends to support the party who is able to “better prove” title, thus where 2 or more parties claim to have interest in a property, the law will tend to side with the party who has the best form of title. 

The Land Use Act (The “Act”) vests all title to land in the Governor of the state in which the land is situate, who in turn holds the land on trust for the people of that state. The Act disallows any person from claiming unlimited interests in any land (i.e freehold interest), as all interest is subject to the superior title of the Governor. The initial grants of statutory rights of occupancy are for a period of 99 years; it has a striking resemblance to the concept of lease hold interest operating in the United Kingdom.

For a better understanding I would like to highlight the fact that in Nigeria the first person to occupy a piece of land which has never been occupied by any other person is entitled to the grant of a Certificate of Occupancy (“CofO”). This gives that person the right to occupy that piece of land. Where this person wishes to transfer the entirety of her/his interest or a significant part thereof to another party, that party must obtain the consent of the Governor before the interest can be validly transferred, (however in reality the buyer processes and pays for perfection; aside from this allowing the buyer to attentively pursue the application, it also forms a reassurance that due process has indeed been followed).

The best form of title an individual can have is the registration of interest in the property with the respective land registry of the state in which the property is situated. Registration of title serves as constructive notice to subsequent dealers in a property that an interest in the property has been transferred; however, does not only protect the owners’ rights, it facilitates property purchase transactions and also enables the said piece of property to be used as collateral for a loan.

To perfect your title in land, the following three steps are required: -
1.       Governors Consent;
2.      Stamping – payment of the relevant fee’s;
3.      Registration at the respective land registry.

The power of the Governor to give his/her consent in certain transactions is provided for in Section 22. of the Act and it states:

“It shall not be lawful for the holder of a statutory right of occupancy granted by the Governor to alienate his right of occupancy or any part thereof by assignment, mortgage, and transfer of possession, sublease or otherwise howsoever without the consent of the Governor first had and obtained”

This power confers on the Governor the right to consent to any of the transactions stipulated in the Act provided that they are valid. However, if the initial consent has been obtained fraudulently, the Governor may revoke same immediately.
In essence, where a property owner has a valid right to occupy a property, making him/her the equitable interest holder of the property, when such owner decides to resell, mortgage, grant an interest in the property for long periods of time (3 years or more) or carry out other transactions prescribed by the Act on the property, the consent of the Governor must be obtained as the property is held on trust by the state government. Failure to obtain the required consent renders the transaction null and void, thus the rights of any third party unenforceable.

Stamping is essentially the payment of the applicable government levies for the transaction. The amount that is to be paid by the purchaser for the transaction may be a fixed nominal fee or may be ad valorem, which means it would be a percentage of the cost of the transaction, i.e the purchase price of the property. In the case of landed property the rate at which the document is stamped would tend to be ad valorem. Failure to stamp the transaction documents renders the documents unacceptable for registration at the relevant land registry as well as meaning the documents would be inadmissible as evidence in court.

One of my uncles is the first born male in his household, thus under Benin Native Law and Custom automatically inherited his father’s property in Benin; the family house. He collects rent from some tenants and the family tends to use the property for various activities; however, being as he has no intentions what so ever of selling the property or ever residing there he has just left it. The issue with this is that the property will never yield its full potential if simply left there. He cannot even develop the property as a prerequisite for most development permits is a need to attach a copy of the title documents to the application.

A lot of people understandingly avoid the entire process of perfection of title because of want of not having to deal with government officials, and more importantly not having to pay the extra costs attached to such perfection.
However, I must stress that in case of any issues with the premises, said perfection would be for your benefit and as the perfection of title ensures the completeness and validity of most transactions. 

Ivie Omoregie is a commercial lawyer, with experience and keen interest in projects and transactions work within the Sub Saharan African region. Called to practice in England and Wales and Nigeria.

Ed's Note - This article was originally posted here.