Real Property acquisition and infrastructure development remain integral to human progress. However, investors often face significant challenges due to a lack of understanding of the complexities involved in making informed decisions, which poses setbacks for both individual investors and the broader economy.
To address this knowledge gap, Wigwe and Partners are launching Bricks & Mortars, a comprehensive knowledge-sharing initiative. Bricks & Mortars aims to provide authoritative guidance on both fundamental and intricate issues surrounding Real Property acquisition and Infrastructure Development.
This initiative promises to be transformative, offering clear insights and dispelling misconceptions about Real Property acquisition and infrastructure development in Nigeria.
Navigating the intricacies of Due Diligence in Property Acquisition; Key Insights
Acquiring property is a significant aspiration for many, yet this joy can be fleeting. Consider the scenario of waking up just days after acquiring your dream home, only to find it being demolished by the government or facing eviction due to a court judgment against the property. These scenarios underscore the potential issues in property acquisition. Such risks highlight the critical importance of thorough due diligence to safeguard the buyer’s investment and prevent against the transfer of bad title to the property.
Due diligence in property acquisition involves carrying out a thorough evaluation of the target property’s commercial potential and identifying risks or liabilities. This comprehensive process covers a range of activities which must be taken into consideration before decisions are made.
In preceding paragraphs, we shall examine some of these issues which include
A.Title
B. Zoning
C. Encumbrance (s)
D. Government Taxes and Rates
E. Environmental Concerns
Title
Acquiring a property creates a sense of ownership, but if proper title isn’t ensured, the investment may be wasted. Understanding the Legal Title is crucial for buyers to confirm actual ownership and ensure that buyer enjoys quiet possession. Different titles exist and the extent to which they grant possession differ. Some of these title include, certificate of occupancy, deed of assignment, excision, probate, governors consent and more.
Understanding the Nature of Title held by a vendor may involve conducting search at the appropriate places, including the Land registry, Courts Registry, the surveyor-general’s office, and visiting the location of such property, etc. In determining the title validity, one must examine the root of title.
For example, if Mr. A intends to sell a property to Mr. B, Mr. B must verify that Mr. A’s title is valid and flows from a legitimate source. Ensuring a clear and valid title protects the buyer’s investment and guarantees legal ownership.
Zoning
The objective for acquiring properties differs. While some may be for building residential spaces, others may be for setting up office spaces. In drawing-up designs and layouts, Government delineates certain places for a particular use which may be commercial, residential or mixed use.
In addition, prospective buyers should be aware that town planning regulations may designate certain areas within the town for specific uses, such as agriculture. Conducting search to ascertain the specific nature, purpose and use of a particular piece of land is crucial for potential customers. By undertaking such due diligence, intending buyers can mitigate the risk of inadvertently acquiring land that is subject to Government acquisition which ultimately results in demolition by government authorities.
Encumbrance(s)
The presence of adverse interests can significantly impact a potential buyer’s decision-making process. Conducting a comprehensive title search to identify outstanding liens, mortgages, and pending litigation is crucial.
Such due diligence helps to mitigate the risk of a buyer acquiring a property encumbered by preexisting claims, which could potentially cloud the title and lead to future disputes. It ensures buyers make informed choices and safeguards the purchaser from unforeseen complications arising from ownership issues.
Government Rates and Taxes
In most instances, properties, developed or undeveloped have certain rates that must be paid as a matter of Law. These rates differ depending on the location of the property. Some of the rates and taxes include ground rents, tenement rate, mansion tax (applicable in Abuja), electricity and water rates, etc. Having an understanding of whether or not they said taxes have been paid can be of great help in allowing a buyer in making a decision of the premium he may be willing to part in exchange for ownership of the property.
Environmental Concerns
Prospective buyers should exercise due diligence to identify potential environmental hazards, such as contamination, that could cause harm to the property and its occupants. A comprehensive environmental site assessment is recommended to evaluate such risks. Furthermore, purchasers are obligated to comply with all applicable environmental regulations.
Conclusion
Acquiring property requires thorough due diligence to avoid legal and financial complications. While it may take a real deal of time, the nature of the transaction demands caution. In balancing urgency or purchase and caution, a buyer may enter into a Contract of Sale. This document grants the buyer an equitable interest pending the conclusion of the sale or purchase.
DISCLAIMER
This article is for informational purposes only and reflects the author’s opinions and research. In the event where you require advice, kindly reach out to legal personnel the for advice.
Written By:
Ikechukwu Obialor: Associate
Wigwe and Partners
