So you just concluded comprehensive due diligence on your desired property and the report says you can proceed to buy the property. Congratulations! I know you are super excited to proceed with the purchase but wait! You need to get the purchasing stage right.
You may be thinking but I’ve conducted a comprehensive due diligence and all the boxes checked, so why can’t I proceed?
Read More: Master Real Estate Due Diligence: Why A Simple Registry Search Won’t Protect Your Investment
First of all, I commend you for conducting the due diligence. That’s a great feat for any serious minded investor.
But that is not actually all that will protect you from getting scammed of your money. Like the saying goes; ‘Crossing the river doesn’t make you reach the promised land’.
At the purchase stage, you need to be sure you’re buying correctly such that your interests are protected and money is not lost.
In this article, I will be sharing the next steps to take in buying your desired property after the due diligence process.
Specifically, we will discuss:
- Negotiation stage
- Payment stage
- Contract Drafting and Execution stage
- Deed of Assignment Drafting and execution stage
- Handing over of property documents
- Taking physical possession of property
- Perfection of title stage
- Common mistakes to avoid
Negotiation Stage
After conducting due diligence, you; as the buyer should negotiate the purchase price with the seller, discuss payment terms, and other conditions of the sale. At this stage you should:
– Agree on the purchase price
– Discuss payment terms (e.g, full or instalment payment)
Many companies offer this instalment payment option to proposed buyers. If you will like to discuss the terms, you should negotiate the terms with the company. You should check out their terms especially penalties for default and the process of transferring ownership to you.
Payment Stage
The next stage after negotiating price and terms of payment is to do what?
Pay for the property. You will make the payments according to the agreed-upon terms. Based on the terms, if it was instalment payment, then you pay the initial deposit as agreed. Then spread the balance across the number of months agreed-upon.
Or you can decide to make full payment at once.
Please note that at the point of making payment, cash is never advisable.
You know one has to be security conscious. Aside from the issue of security, for better proof of evidence, you need to have a trail of electronic bank transfer.
Please as soon as you make payment, ensure you get a receipt whether from the bank or from the family if buying family land. As a measure of further protection, you can as well take pictures or videos of the transaction.
Contract Drafting and Execution Stage
At this stage, I usually advise that you engage a property lawyer to draft the property documentation on your behalf. Based on the instalment payment, the lawyer would usually draft a contract of sale which you and the seller will sign.
A contract of sale dictates the terms of sale of the property and the obligations of you and the seller with regards to the sale of the property.
Now note, that this contract of sale will also apply where the payment terms needs to be documented even if you are yet to make payment.
Execution of Deed of Assignment Stage
At this stage, your lawyer will make provision for the deed of assignment which you and the seller will sign. It is this document that transfers ownership of the property to you after full payment. So whether you made full payment by instalment payments or outright payment , this is the document that proves you are now the owner of your property and formalizes ownership transfer and you should keep a copy for yourself.
In case you’re buying from a company, most times, they usually would have the deed of assignment drafted. So you will have to engage your lawyer to ensure that the clauses included protects your interests as much as possible and that what you are being given is a deed of assignment and not a contract of sale.
I have seen instances where the buyer made full payment of the property and the documents that was given to the buyer by the seller was a contract of sale. A contract of sale is not a proof of transfer of property ownership. It only shows terms of sale. Alright?
Handing Over of Property Documents
Immediately the deed of assignment is signed and dated, the seller must hand over all property documents to you, including:
Certificate of occupancy, Survey plans, building approval (in case of a developed property like a house) and deed of assignment previously covering the property. This is to prove the chain of title, that is, how the seller got to become the owner of the property including previous buyers.
Taking Physical Possession of the Property
Collecting the property documents is not enough. You must take physical possession of the property. How do you do this? You can decide to do this by collecting the keys to the apartment if it is developed property and changing the keys or building a fence round the property and mounting a gate.
You can also decide to begin activities on the property by commencing building or farming or employing a security guard to protect the property.
Please note that if you are going to develop the property, you must obtain a building approval from the government.
This is a non negotiable requirement especially in Lagos state.
Think of this as a way of taking permission from the government to develop the property. In Lagos state, the Lagos State Building Control Agency (LASBCA) is in charge of this approval.
Obtaining this approval is necessary to ensure you comply with all building requirements and prevent your property from being demolished in the future.
Perfection of Title at Lands Registry
The stage where you apply for Governor’s Consent is the final stage.
The law stipulates that for every land transaction, the Governor of the state must be aware and his consent to that transaction must be sought. This step is the final step that makes the government recognise you as the legitimate owner of the property and is usually recorded with the state government. This is usually done at the lands registry.
By following these stages, you can expect a smooth and secure property transfer process.
Common Mistakes To Avoid
Delaying Document Preparation and Execution
In real estate transactions, one of the things you must avoid is delaying document preparation.
When documents necessary are not drafted as at the time the process and information are still fresh, there is a possibility that you may forget some important details that ought to be included when you’re now ready to draft and execute them.
Another issue is that since payment has been made, the seller may become unavailable to sign the documents which will cause delay in final execution.
Remember, the most important factor to transfer ownership is deed of assignment when it is signed by all parties involved which is you; the seller and your witnesses. Without the seller’s signature, the deed of assignment is as worthless as a tissue paper!
In fact, as much as possible, let payment for the property and execution be done together. Don’t delay the execution part by even a second!
Poor Communication
Another thing to avoid is communication gap between you and the seller.
Where there is poor communication, you are likely to stall your lawyer’s duty in respect of the property transaction. The important information that the lawyer needs will be delayed or won’t be sufficient enough.
There are instances where parties, that is you and the buyer may be several miles apart, how will information be passed?
At our law firm, in a recent property deal, what we did was to create a group for the seller and the buyer so that all information in respect of the transaction and the documentation would be passed.
Doing this helped the parties involved avoid misunderstandings, misinterpretations, and delays and fostered timely updates about the progress of the property transaction.
Not Reviewing Documents Thoroughly
Reviewing the property documents is as important as the review conducted during due diligence investigation.
It is important you review the property documents (Contract of sale and deed of assignment) to ensure that all terms and conditions, obligations, particulars about the property are clearly stated before signing.
You cannot afford to take the words of a seller for it and not review what is documented especially when it is the seller (company) drafting the documents.
If you don’t thoroughly review the property documents before you sign them, you may later discover critical clauses or terms that you ought to have questioned or discoverthere was a fundamental error in the documents.
And when this happens, you end up getting yourself legally bound by a wrong transaction and probably lose money or suffer from legal issues in the future.
Insufficient Funding
A very common mistake buyers make during real estate transaction is not planning for professional service fees.It is not only the land you’ll be paying for. You’ll also be paying for legal fees, surveyor fees, building approval fees, Governor’s consent application fees, agency fees. Where land purchase budget does not cover all these, it can lead to premature transaction. What do I mean? You may end up being stuck and not buy the property because you did not plan well for the costs of the property.
Conclusion
Now, from all what we’ve discussed, you can see that it’s never enough that all the boxes of comprehensive due diligence checked. Taking the next step to claim ownership is just as important and needs the expertise of a property lawyer.
At Charis Legal Practice, we offer our services to sophisticated investors who want to invest a minimum of 30 million naira in real estate investment in Lagos, Ogun, Oyo and Osun states and ensure they get the best legal service possible.
If you need our team to work with you while going through all the above stages relating to the purchase of your property, you can click HERE to get started.
This Is How Charis Legal Practice Can Help You!
- Expert Documentation
Our skilled lawyers draft and review all legal documents, ensuring accuracy, clarity, and protection of your rights.
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