How to Conduct Property Due Diligence Before Buying Property in Lagos

Buying property in Lagos is a major financial decision. Whether you are purchasing land, a house, an apartment, or commercial property, the fact that a seller possesses documents relating to the property does not, by itself, mean that the seller has a valid and transferable title.

A property may be subject to government acquisition, an existing mortgage, litigation, family claims, competing interests, restrictions on transfer, or other legal issues that may not be apparent from the property itself.

This is why property due diligence in Nigeria should be undertaken before paying the purchase price or committing substantial funds to a transaction.

Proper due diligence helps a prospective buyer establish who owns the property, the nature of the seller’s interest, whether the title is genuine and transferable, whether the property is affected by government acquisition or other encumbrances, and whether there are legal or practical obstacles to completing the transaction.

What Is Property Due Diligence?

Property due diligence is the process of investigating the ownership, title, history, legal status and other relevant circumstances surrounding a property before purchasing it.

The purpose is not merely to determine whether the seller has a document. It is to establish whether the seller has good and marketable title and whether the buyer can safely acquire the interest being offered.

Depending on the property, due diligence may involve:

• examining title documents;
• conducting searches at relevant government registries;
• investigating previous transfers of the property;
• confirming the identity and capacity of the seller;
• checking for mortgages, charges and other encumbrances;
• investigating pending or threatened litigation;
• determining whether the property is affected by government acquisition;
• inspecting the physical property;
• confirming that the property being sold corresponds with the documents; and
• reviewing the proposed contract and transaction documents.

Why Is Property Due Diligence Important in Lagos?

Lagos has a highly active property market, but property transactions can involve complicated chains of title and competing interests.

A buyer may encounter situations where:

• the person presenting the property is not the true owner;
• a property has been sold to more than one person;
• a family member purports to sell family property without the necessary authority;
• a property is subject to a mortgage or other encumbrance;
• the property is affected by government acquisition;
• the seller’s title is defective;
• the property is already the subject of litigation;
• the dimensions or location of the property do not correspond with the documents;
• the seller lacks authority to sell; or
• the transaction documents contain terms that expose the buyer to unnecessary risk.

These problems can be extremely expensive to resolve after completion.

The safest time to discover a title problem is before you buy the property.

1. Identify the Seller and Confirm Their Capacity to Sell

The first question should be:

Who exactly is selling this property, and what gives that person the authority to sell it?

If the property belongs to an individual, the buyer should verify the seller’s identity and examine the documents establishing the seller’s interest.

If the property is owned by a company, the company’s ownership and authority to dispose of the property should be investigated.

If the property belongs to a deceased person’s estate, the buyer should determine who has the legal authority to deal with the property.

Family property requires particular caution. A person who claims to be the family head or a family representative may not necessarily have unlimited authority to dispose of family land.

The buyer should therefore investigate the ownership structure rather than relying solely on the seller’s representation.

2. Examine the Root of Title

A critical part of property due diligence is identifying the root of title.

The root of title is the document or transaction from which the seller’s interest can be traced.

Depending on the circumstances, relevant documents may include:

• a Deed of Assignment;
• Certificate of Occupancy;
• Governor’s Consent;
• Deed of Conveyance;
• grant or allocation documents;
• court judgment;
• vesting assent;
• probate or letters of administration;
• customary documents; or
• other documents establishing the history of the property.

A buyer should not simply look at the latest document. The history of the title may reveal defects or competing interests.

For example, if A transferred the property to B and B is now selling to C, it may be necessary to investigate how A acquired the property in the first place.

A defective root of title can affect subsequent transactions.

3. Conduct an Official Search

One of the most important stages of property due diligence is conducting an appropriate search at the relevant land registry.

For property in Lagos, a legal practitioner can conduct the necessary searches and examine the records available from the relevant authorities.

The purpose of the search is to establish matters such as:

• whether the title exists in the relevant records;
• the registered owner or holder of the interest;
• the nature of the interest;
• whether the property has been transferred;
• whether there are registered encumbrances;
• whether there is a mortgage or charge;
• whether there are restrictions affecting the property; and
• other matters disclosed by the registry records.

A search should be carried out before substantial payment is made, rather than after the transaction has already been completed.

4. Investigate Government Acquisition

A property may appear perfectly normal on physical inspection and still be affected by government acquisition.

This is particularly important in Lagos, where land may be affected by various government schemes, infrastructure projects, committed acquisitions or other planning considerations.

A buyer should therefore investigate whether the property falls within an area affected by government acquisition or other restrictions.

This is one reason why merely asking the seller for a Certificate of Occupancy is insufficient.

The legal status of the particular property must be independently investigated.

5. Compare the Documents With the Physical Property

Legal due diligence should not be conducted entirely from a desk.

The property should also be physically inspected.

The buyer should compare the description contained in the title documents with the actual property.

Among other things, the investigation should consider:

• location;
• boundaries;
• dimensions;
• access;
• adjoining properties;
• existing structures;
• occupation;
• persons in possession; and
• whether there are visible disputes or competing claims.

For undeveloped land, a proper survey plan and physical inspection can be particularly important.

If another person is occupying or claiming the property, that should be investigated before the buyer proceeds.

6. Investigate Existing Possession and Occupation

A buyer should pay attention to who is physically occupying the property.

Suppose a seller claims ownership of a property but another person is living on it, operating a business there, cultivating it, or otherwise exercising possession.

That situation should not simply be ignored.

The occupant may be:

• a tenant;
• a purchaser;
• a family member;
• a licensee;
• a trespasser; or
• someone asserting an independent claim to title.

The nature of that person’s interest should be investigated before completion.

7. Search for Litigation and Competing Claims

A property involved in litigation can expose a purchaser to substantial risk.

A buyer should therefore investigate whether there are existing or threatened proceedings concerning:

• ownership;
• possession;
• boundaries;
• inheritance;
• family ownership;
• mortgages;
• contractual rights; or
• other interests in the property.

Where appropriate, relevant court records should be investigated.

This is especially important where the seller’s title appears unusual, there are known disputes in the area, or someone other than the seller is occupying the property.

8. Verify the Survey Plan

The survey plan is an important component of land transactions.

The buyer should ensure that the survey information corresponds with the property being purchased.

The investigation should consider issues such as:

• the coordinates;
• dimensions;
• boundaries;
• location;
• relationship with adjoining properties; and
• whether the land falls within an area affected by acquisition or other restrictions.

A buyer should be particularly cautious about purchasing land based only on a seller pointing to a physical location.

You should know exactly what land you are buying.

9. Investigate Existing Mortgages, Charges and Encumbrances

A property can be subject to an existing financial or legal burden.

For example, a property may have been used as security for a loan.

If the buyer proceeds without properly addressing the encumbrance, the transaction can become complicated and potentially expose the buyer to serious financial risk.

The due-diligence process should therefore investigate whether the property is subject to:

• mortgages;
• charges;
• liens;
• restrictions;
• caveats or similar interests;
• leases;
• pending transactions; or
• other encumbrances.

Where an encumbrance exists, the transaction should be structured to ensure that the buyer obtains the intended interest without inheriting an undisclosed problem.

10. Review the Agreement Before Signing

Property buyers sometimes concentrate so heavily on the title that they overlook the contract itself.

That is a mistake.

The sale agreement should clearly address matters including:

• the identity of the parties;
• description of the property;
• purchase price;
• payment structure;
• completion;
• delivery of title documents;
• possession;
• responsibility for taxes and charges;
• existing encumbrances;
• consequences of default;
• representations and warranties;
• indemnities where appropriate; and
• completion requirements.

A buyer should ideally have the agreement reviewed by a lawyer before signing or paying a substantial deposit.

What Documents Should You Ask the Seller to Provide?

Depending on the property and the circumstances, a buyer may need to request documents such as:

• Certificate of Occupancy;
• Deed of Assignment;
• Governor’s Consent;
• Deed of Conveyance;
• Survey Plan;
• previous title documents;
• evidence of allocation;
• building approvals where relevant;
• probate or letters of administration where the property forms part of an estate;
• corporate documents where a company is involved; and
• other documents relevant to the property’s history.

However, obtaining copies of these documents from the seller is only the beginning.

The documents should be independently examined and, where appropriate, verified against official records.

Can You Conduct Property Due Diligence Yourself?

A buyer can perform some preliminary checks personally, but a proper legal due-diligence exercise is considerably more comprehensive.

The difficulty is that property transactions often involve questions of:

• title;
• statutory requirements;
• customary ownership;
• registration;
• encumbrances;
• litigation;
• government acquisition;
• contractual obligations; and
• the legal capacity of the parties.

A buyer who is unfamiliar with these issues may overlook a defect that later becomes expensive to resolve.

For a significant property investment, engaging a lawyer before making substantial payment is generally a prudent step.

Common Mistakes Property Buyers Make in Lagos

1. Paying Before Conducting Due Diligence

This is one of the most dangerous mistakes.

A buyer may be pressured to make immediate payment because another buyer is allegedly interested.

That pressure should not replace proper investigation.

2. Relying Entirely on the Seller’s Documents

A document can look genuine and still fail to establish that the seller has a good title.

Independent verification is essential.

3. Assuming a Certificate of Occupancy Makes Every Transaction Safe

A Certificate of Occupancy is important, but the existence of a C of O does not mean a buyer should abandon further investigation.

The history, status and circumstances of the particular property still matter.

4. Ignoring the Survey

A buyer should know exactly what parcel of land is being acquired.

5. Failing to Investigate Occupants

Someone occupying the property may have an interest that needs to be investigated.

6. Signing a Seller-Prepared Agreement Without Legal Review

A property transaction can involve substantial sums. The agreement should protect the buyer’s interests and clearly allocate the risks.

How Much Does Property Due Diligence Cost in Lagos?

There is no single fixed cost applicable to every property transaction.

The cost will depend on factors including:

• the nature of the property;
• the location;
• the complexity of the title;
• the number of searches required;
• whether litigation or competing claims need investigation;
• the documents available; and
• the scope of the legal work required.

A prospective buyer should therefore obtain a clear quotation based on the particular transaction.

The cost of due diligence should also be considered against the potential financial consequences of acquiring defective or disputed property.

What Happens If You Buy Property Without Due Diligence?

The consequences depend on the circumstances.

A buyer may discover that:

• the seller had no valid title;
• another person claims ownership;
• the property is subject to litigation;
• the property is encumbered;
• the property is affected by government acquisition;
• the property description is inaccurate; or
• additional legal steps are required before the buyer can obtain the intended interest.

The buyer may then have to pursue litigation or other remedies.

In some circumstances, recovering the purchase money may itself become a separate legal dispute.

That is why pre-purchase due diligence is generally preferable to attempting to cure a defective transaction after completion.

Why You Should Engage a Property Lawyer Before Buying in Lagos

A property lawyer can help you investigate the transaction from both a title and contractual perspective.

Depending on the circumstances, the lawyer can:

1. review the seller’s title documents;
2. investigate the root of title;
3. conduct appropriate searches;
4. investigate encumbrances;
5. assess potential acquisition issues;
6. review the survey;
7. identify potential litigation;
8. advise on the seller’s authority to sell;
9. review or prepare the transaction documents;
10. advise on the risks identified; and
11. assist with the completion and perfection of the transaction.

The objective is not simply to complete a purchase.

The objective is to help you acquire the property with as much certainty about your legal position as the available investigation can reasonably provide.

Final Thoughts

Buying property in Lagos should not begin with payment.

It should begin with verification.

Before committing your money, investigate the seller, trace the title, conduct the appropriate searches, verify the survey and physical property, investigate possible encumbrances and disputes, and have the transaction documents professionally reviewed.

A few hours or days spent on proper due diligence can potentially prevent years of litigation and significant financial loss.

At Lexforte Attorneys, we assist individuals, investors and businesses with property-related legal matters, including title investigation, property due diligence, land transactions and property disputes.

If you are considering buying land or property in Lagos, obtain legal advice before making a substantial payment—not after a problem arises.