ARTICLE
23 December 2024

Legal 500 Country Comparative Guides 2024

GE
G ELIAS

Contributor

We are a leading Nigerian business law firm founded in 1994 and now organized across 18 practice groups, covering 25 industry sectors. We are also a member of Multilaw, a leading global alliance of independent law firms in over 90 countries worldwide.
This Comparative Guide offers insight into Nigerian laws and regulations governing the country's real estate sector. Nigeria is a federation. It has thirty-six (36) States and a Federal Capital Territory, Abuja.
Nigeria Real Estate and Construction

1. Overview

This Comparative Guide offers insight into Nigerian laws and regulations governing the country's real estate sector. Nigeria is a federation. It has thirty-six (36) States and a Federal Capital Territory, Abuja. The real estate sector is primarily regulated by the law of the State where the land in use is situated. Real estate located in the Federal Capital Territory, Abuja is governed by Federal statutes and regulations.

"Statutes of General Application" (laws in force in England on January 1, 1900) still apply in Nigeria to the extent that more recent Nigerian statutes have not overridden them. Nigeria was a colony of the United Kingdom prior to 1960. Nigerian land law has a complex and challenging triple heritage: English common law; Nigerian legislation; and Nigerian customary (including Islamic) law.

2. What is the main legislation relating to real estate ownership?

The main statutes governing real estate ownership in Nigeria are: (a) the Land Use Act, 1978, Chapter L5, Laws of Federation of Nigeria, 2004 (the "Land Use Act") and (b) the Constitution of the Federal Republic of Nigeria, 1999 (as amended) (the "Constitution").

By the Preamble to the Land Use Act, with the exception of real estate vested in the Federal Government or any of its agencies prior to 1978, ownership of real estate in a State's territory is vested in the Governor of the State to hold in trust (in a public law sense) for the residents of the State. The Constitution affirms the right of every Nigerian to own and acquire landed property in any part of Nigeria.

Other pertinent legislation includes the: (i) English Law Conveyancing Act, 1881 (the "Conveyancing Act") (it is a Statute of General Application in many States); (ii) Property and Conveyancing Laws of various States; (iii) Nigerian Urban and Regional Planning Act, 1992 (the "Nigerian Urban and Regional Planning Act"); (iv) Land Instrument Registration Laws of various States; (v) Federal and States tax laws; (vi) Administration of Estate Laws of various States; (vii) English Wills Act, 1837 and the Wills laws of various States; and (vii) Recovery of Premises Act, 1990 and the tenancy laws of each State.

In addition to the foregoing, the laws governing real estate in Lagos State, Nigeria's commercial capital, include (a) the Land Registration Law Cap. L41, 2015 (on title and charges registration) and (b) the Land Use Charge Law, 2022 (on tax).

3. Have any significant new laws which materially impact real estate investors and lenders come into force since December 2023 or are there any major anticipated new laws which are expected to materially impact them in the near future?

Most States have enacted various real estate laws each with intra-State application. A significant statute in Lagos State, for instance, is the Lagos State Real Estate Regulatory Authority Law, 2021 effective since February 2022, which widened the scope of regulation of real estate transactions in Lagos State.

Since 2023, significant laws have emerged that offer new perspectives for real estate investors and lenders. Notably, the Business Facilitation Act (Miscellaneous Provisions) Act 2023 has amended existing laws, including those related to the National Housing Fund (NHF). Additionally, the Deduction of Tax at Source (Withholding) Regulations 2024 establishes rules for withholding tax from payments to taxable persons under various tax acts, including the Capital Gains Tax Act, 1967 (as amended), Companies Income Tax Act, 1990 (as amended), and Personal Income Tax Act, 1993 (as amended) for specified transactions. The anticipated Nigerian Real Estate Industry (Regulations and Development) Bill, 2023 is expected to further impact real estate investment by introducing new regulatory framework and development guidelines for players in the real estate industry.

There are also the Economic Stabilization Bills, 2024 currently before the National Assembly seeking a total overhaul of the tax landscape in Nigeria. It is expected that the Bills will be passed into law in the coming months.

Other forthcoming federal legislation that may impact real estate investment includes the: (i) National Urban Development and Regional Planning Commission (Establishment, etc.) Bill, 2019; (ii) Abuja Geographic

Information Systems Agency Bill, 2019; (iii) Environmental Impact Assessment Bill, 2023; (iv) Constitution of the Federal Republic of Nigeria, 1999 (Alteration) Bill, 2023; and (v) Federal Lands Registry Act, (Amendment) Bill, 2023.

4. How is ownership of real estate proved and are ownership records available for public inspection?

Ownership of real estate can be proved in many ways including: (a) making and tendering in evidence written witness statements; (b) giving oral evidence in court; (c) tendering in evidence agreements and private documents of title; and (d) tendering certified true copies of public documents of title. On (a) and (b), well-established exceptions to hearsay evidence rules allow oral historical tradition to be admitted in evidence. See NUT v. Bukar (2021) LPELR-56149 (CA).

Title to real estate can be acquired in more than one way: (a) government grants by the issuance of Certificates of Occupancy, leases or otherwise; (b) transfers by private citizens executing transfer documents such as deeds of assignment, vesting deeds and deeds of gift; (c) acts of ownership such as historic occupation, long occupation, farming, constructing buildings and buying and selling land; and (d) succession by operation of law (e.g. on death).

Land ownership records are generally managed by the States land registries and are available for public inspection in some States. Access procedures, requirements and fees vary by States, and not all States have digitized records. In most cases, for access, an application is required to be made along with payment of an application fee. Unlike in several states, in the Federal Capital Territory, Abuja, the consent of the owner of the property is required before a person can undertake and obtain any information on the property from the record of the Abuja Geographic Information System Office.

Additionally, where the owner of the real estate is a company, additional information about the assets of the company, especially the existence of registered encumbrances on the property, can be accessed from the corporate records maintained at the Corporate Affairs Commission (the "CAC") upon making a formal application and paying the requisite fee.

5. Are there any restrictions on who can own real estate, including ownership by any foreign entities?

There are possible restrictions on ownership as to minors and, at least on one view, aliens (foreigners).

By Section 7 of the Land Use Act, any person below the age of 21 (twenty-one) years cannot own real estate, except where (a) it is owned by his/her appointed guardian or trustee on his/her behalf, or (b) ownership devolved on such minor upon the death of the holder.

In Heubner v AIE & P Company Ltd., (2017) 14 NWLR (pt. 1586) 397, the Supreme Court stated that a foreigner is prohibited from acquiring and owning land in Nigeria without the prior approval of the National Council of States ("NCS").1

The statement in issue in Heubner is in fact obiter dictum in that all that was directly in issue there was an old statute in the Northern States. That statute, unlike the State law in Lagos and the rest of the Southern States in Nigeria, did not allow a State Governor to authorize foreigners to own land. A number of States have in fact enacted laws allowing alien ownership of real estate. In Lagos State, for instance, the Acquisition of Land by Aliens Law of Lagos State 1971 ("ALAL") regulates the ownership of real estate in Lagos State by aliens.

The Constitution s. 43 provides that every citizen of Nigeria shall have the right to acquire and own immovable property anywhere in Nigeria. The Land Use Act s. 1 says that "all land in each State is vested in the Governor of that State, to be held in trust and administered for the use and common benefit of all Nigerians within that State". The Land Use Act is technically part of the Constitution. Land Use Act s. 315(5)(d).

The Heubner dictum says that by virtue of the Land Use Act s. 1, only citizens of Nigeria are entitled to own immovable property in Nigeria. This appears to be a non sequitur. A Governor literally "h[olds]" land for the "benefit" of "Nigerians within" a "State" where he issues a Certificate of Occupancy to an alien who (like the entrepreneur in Heubner) creates jobs and will pay taxes in the State or to a Nigerian company which is controlled by such an alien (which is clearly permissible) who will also pay taxes.

In any event, the Land Use Act empowers the NCS to make regulations on "the conditions applicable to the transfer of such rights to persons who are not Nigerians". (Land Use Act, s. 46(1)). There is, however, currently no regulation enacted by the NCS pursuant to its power under the Act.

The Governor's consent must be obtained before any interest in real estate can be legally transferred to any person whether Nigerian or not (Land Use Act s. 22). The ALAL allows a foreigner to acquire an interest in land subject to the prior written consent of the Governor of Lagos State. Further, any transfer of an interest for less than three (3) years (including any option for renewal) will not require the Governor's consent to be valid.

In practice, Governors do not give foreigners land for longer than twenty-five (25) years. This is in part because foreigners typically organize companies to own Nigerian land. Such companies are undoubtedly Nigerian citizens in the eye of the law even where they are controlled by foreigners.

6. What types of proprietary interests in real estate can be created?

Proprietary interests in land properly so called include statutory and deemed rights of occupancy, terms of years, easements, restrictive covenants, profits a prendre, options, mortgages and charges. We have much confused terminology and several unsupported but widely-held restrictive views here. It is important to try to be clear about these.

Possession or a right to possession of land is not necessarily a proprietary interest in law. Proprietary interests are rights in land binding third parties generally, not just a particular person or persons – in the traditional terminology, they are rights in rem rather than in personam.

Proprietary interests may or may not give rights to occupy land. Whether they do or not, they should not be confused with either the nature of the interest-disponor, the modes for transferring them, the extent of their duration in time or the nature of the relationship of the interest-holder to any other person.

On occupation, the proprietary interests that give rights to occupy land are statutory and deemed rights of occupancy and terms of years. Other proprietary interests (e.g., easements and charges) give no rights to occupy land.

A lease is a deed granting a term of years. The correct technical name for the interest granted is a term of years.

The lease, properly so called, is the document under seal granting the term.

Statutory rights of occupancy are rights granted by a Governor to another to occupy land and are typically evidenced by Certificates of Occupancy. Statutory rights of occupancy are typically granted for terms certain, but no law prohibits granting a statutory right for an indefinite period.

Only Governors can grant statutory rights of occupancy. All other proprietary interests can be granted by both Governors and other disponors. No law says that rights to occupy land that, before the Land Use Act, were not limited in duration to terms certain have now been "converted" into rights for 99 years certain, but there are lawyers (not us) who maintain that such a conversion automatically occurred the moment the Land Use Act became law.

"Deemed Rights of Occupancy" is the post-Land Use Act, operation of law, label for "estates in land" (in the traditional English common law sense) acquired by holders and/or occupiers of land prior to the commencement of the Land Use Act in 1978. No legislation specifies a calendar time limit for them. However, some proponents of the theory that an automatic "conversion" occurred in 1978 argue otherwise.

An easement is the right to use the land of another for the better enjoyment of one's own land (for example, a right of way over a neighbour's land).

Charges and mortgages are collateral for obligations, typically but not necessarily obligations to pay money. Options to acquire interests carrying a right to occupy land are themselves proprietary interests.

A profit a prendre is a right physically to take and carry away natural physical parts of, not just flora on, another's property. They are not important in practice because by statute all natural minerals are owned by the Federation, not by either the States or citizens.

Restrictive covenants are covenants imposing restrictions on the use of the land of another in order to improve the enjoyment of one's own land (e.g., that one's neighbour should not build so high as to obstruct natural light to one's land).

As to modes, the modes for creating or transferring proprietary interests were indicated in answers to question 4 above: e.g., deeds (including leases: a lease, strictly speaking, is a deed granting a term of years; the term of years itself is not the lease).

As to duration, both interests giving rights to occupy land and interests not giving a right to occupy land may exist either indefinitely or for times certain. These rights to occupy that are of unlimited duration are conceptually and for practical purposes equivalent to English estates in fee simple. Nevertheless, many Nigerian lawyers today say that estates in fee simple can no longer exist in Nigeria although no statute says so.

Proprietary interests that give no right to occupy land (e.g., easements) may exist for either terms certain or unlimited times.

As to relationships, a "tenancy" is not in itself a proprietary interest but rather a relationship between two specified persons in respect of given land. Where a right of occupancy is for a term certain, we say that there is a leasehold tenancy. Where the right is for an indefinite time, we should arguably say "freehold", but that would be a misnomer in Nigeria.

This is because Nigeria has never known true "freehold tenure" in the traditional English sense for the simple reason that "freehold" in its nature applies to land that the English monarch owns absolutely. The basic tenet of the English doctrine of tenure is that everyone with rights to occupy land is at best a tenant of the monarch under Angevin feudal custom.

The English monarchy colonized Nigeria (Lagos 1861-1960; the rest of Nigeria 1900-1960) but it very rarely ever actually owned any specific part of Nigerian land. What the English monarch had was political power over, not title ownership of, Nigerian land. Even cases decided by English judges during the colonial era say so very clearly. Eshugbayi Eleko v. The Officer Administering the Government of Nigeria (1931) AC 662, (1931) NGSC 1; Amodu Tijani Oluwa v. The Secretary, Southern Provinces (1921) 2 AC 399, (1921) NGSC 1.

7. Is ownership of real estate and the buildings on it separate?

Ownership of real estate can but does not necessarily include ownership of buildings on the real estate. The rebuttable presumption is that the person who owns the land also owns the buildings on it (quic quid plantatur solo solo cedit), but the parties to a real estate transaction can separate the ownership of the land from that of the buildings on it by developing properly-drawn documents for that purpose.

8. What are common ownership structures for ownership of commercial real estate?

Land may be held using vehicles that are themselves owned by more than one person (e.g., companies, partnerships, trusts and estates). Land may also be held directly by more than one person under traditional common law co-ownership structures inherited from English law such as joint tenancies, tenancies in common and tenancies by entirety. Regimes of concurrent ownership under Nigerian community, family and traditional law abound and vary from location to location. They cannot usefully be summarized here.

9. What is the usual legal due diligence process that is undertaken when acquiring commercial real estate?

Usual due diligence process steps include:

  1. searches at the CAC where the seller is a company;
  2. searches at the lands registry and other agencies of the State where the real estate is situated to identify any encumbrance or charges registered against the real estate and to confirm that all the rates and outgoings levied on the land have been fully paid up to date;
  3. searches at the courts registries to ascertain if there is a court proceeding involving the real estate or the judgment of a court has been made in relation to the title to the real estate;
  4. searches at the probate registries (with respect to inherited real estate);
  5. reviews of title documents to see if there are any clauses restricting the transfer or use of the land;
  6. for a company, reviewing its Memorandum and Articles of Association to know if the company is allowed to sell the property and whether those acting on behalf of the company have the requisite authority to do so;
  7. physically inspecting the real estate to see who or what is on it;
  8. interviews with neighbours, communities, and families to see whether there are any narratives to the effect that the seller has no right to transfer the real estate;
  9. making enquiries at town planning, building permits and land information offices, and States and Local Government tax units;
  10. making inquiries at the Surveyor-General's office to confirm the land coordinates and verify that the land is free from government acquisition; and
  11. reconfirming from the State Gazette that the land is free from government acquisition.

10. What legal issues (if any) are outside the scope of the usual legal due diligence process on an acquisition of real estate?

Due diligence, no matter how well and carefully conducted, may not capture the following:

  1. latent title defects sometimes known to the seller and other interlocutors but not detectable through prudent inspection;
  2. patent or latent physical defects (one needs to hire expert consultants for these);
  3. unregistered interests in the real estate; and
  4. undisclosed litigation and arbitration (there are no reliable registers of all disputes relating to any given land).

Footnote

1. The NCS is part of the executive branch of the Federal Government of Nigeria.

To view the full article click here

Originally published by Legal 500

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More