SOME SALIENT & RECONDITE LEGAL ISSUES IN PROPERTY
TRANSFER & DOCUMENTATION.

1. INTRODUCTION

Buyer beware
Property acquisition, legal documentation and the perfection of title is a very wide and complex area of law and human activity. Property acquisition is fraught with dangers and many buyers are prone to lose their money. However, if you follow one simple rule as a buyer there will be no problems. The rule is caveat emptor or let the buyer beware. Where a person seeks to buy land and circumstances point to the either the absence of credible ownership or the probable existence of an earlier purchaser of the land, then the buyer must proceed with extreme caution. It is the duty of the buyer to properly investigate the title of the vendor of any property which he seeks to purchase using the help of professionals. In Kumo v Bappari, the Court of Appeal sounded a note of warning,
“The fundamental principle in all land transactions is captured in the Latin maxim, “caveat emptor”, which means, let the buyer beware. A purchaser is required in law to first of all conduct a search in the relevant registries before committing his money in any property transaction.”

2. AGENCY

Authority of agent to sell
2.1 An agent who does not have exclusive legal right to a property by deed or power of attorney cannot sell it. In Akin-Taylor v Boja Investment & Development, the Court of Appeal held that,
“It is now the accepted position under our law that an estate agent despite his style (name) is an independent person engaged on a commission basis to find and introduce a willing purchaser. ……. An estate agent does not have actual, implied nor ostensibly apparent authority to ask for or receive a pre-contract deposit as agent of the vendor.”

2.2 In Incar v Bolex, Incar (the company) wanted to dispose of some properties and engaged estate surveyors (the agents) by express appointment in writing to look for buyers. Their instructions were, “to look for prospective buyers for the properties and communicate same to the company.” Pursuant to their instructions, the agents received an offer of N4m from Bolex for the property but the agents without reverting to Incar accepted the offer and collected a cheque for the sum of N4m. Incar rejected the amount and insisted on the sum of N4.2m. Meanwhile, Incar had received offers from other agents and eventually sold the property to another buyer (Trevi) for the sum of N4.25m. Therefore, Bolex commenced an action to enforce the contract of sale purportedly entered into between them and the company through the agent.

2.3 The main issue for determination was the correct interpretation of the letter of instruction given to the agent. The agent argued that the letter gave them authority to sell the property but the company countered that the letter did not confer any such power. The question was whether an estate agent who had authority to accept offers from prospective buyers also had the power conclude a binding contract on behalf of the owner of the property. The Supreme Court held that,
“It is not in dispute that the Company commissioned the Firm (the agents) to look for buyers for its properties. Exhibit H (the letter of authority) is clear on this point and to that extent PW1’s Firm was and remained an agent of the Company as long as its properties mentioned in Exhibit H remained unsold and not withdrawn from sale. The Firm however is not, on the basis of Exhibit H, an agent of the Company for the purpose of concluding a contract of sale of the property in dispute. On the evidence before the Court, both oral and documentary, it could not reasonably be found that PW1’s Firm at anytime had general authority to sell the property in dispute without reference first to the Company for its acceptance of a particular offer. The Firm’s authority was to introduce buyers to the Company for the latter’s consideration to accept or not. The Firm had no authority to contract on the Company’s behalf. That being so the Respondent (Bolex) had failed to prove that there was a valid contract of sale between it and the Company capable of being enforced by an order of specific performance.”

Agency commission
2.4 Mere introduction of the buyer and the seller is not sufficient to earn agency commission. An estate agent who seeks to earn commission on a property brokerage transaction must do more than introduce the buyer and seller but must go further and facilitate the conclusion of the sale before commission can be earned. In Ukah v Onyia, the Court of Appeal held that,
“In order for a real estate agent to succeed in a claim for commission, it is not enough to show that he introduced a purchaser, but he must also show that the introduction was an efficient cause in bringing about the sale of the property. See Mike Achoru v INEC (2010) LPELR-3588; NPMC v Alli Balogun (1961) LLR 69. The principle in Miller Son & Co. v Radford (1903) 19 TLR 575, Erabor v Incar (Nig) (1973) NCLR 273, is to the effect that the introduction by an agent to the purchaser of the property and its eventual purchase by the defendant at the price proposed by the estate agent made the consummation of the transaction possible and the agent cannot be ignored but should be compensated for his efforts.”
Therefore, if an agent will be entitled to commission for merely introducing the buyer without more, then the letter of instruction or appointment must expressly state that fact.

3. SUBJECT TO CONTRACT

3.1 Often, during negotiations for the purchase and transfer of property agents and lawyers like to use the esoteric term subject to contract. The term subject to contract is meaningless where a transaction, has been substantially concluded and cannot be used to as a means to delay or avoid the conclusion of a transaction. In International Textile Industries Ltd v Aderemi, the landlord issued an offer letter marked “subject to contract” stating the terms of the lease which were accepted by the tenant. A cheque for the rent was issued and the landlord by letter again marked “subject to contract” accepted the payment. Later, the landlord changed their mind, sold the property to another person and refused to conclude the lease. The tenant filed an action claiming there was a binding contract to create a lease but the landlord countered that since the letters were marked “subject to contract” there was no binding contract between the parties.

3.2 The Supreme Court held that there was a binding and enforceable contract to enter into a lease despite the use of the phrase “subject to contract” by the landlord. The Court examined the meaning and relevance of the phrase “subject to contract” and said that the phrase is suited to English conveyancing practice which is governed by the Law Society’s Conditions but is inappropriate in our local conveyancing practice. The Court said;
“But more fundamental in regard to the use of those words in the circumstances of our established conveyancing procedure is the fact that it is clearly unwarranted, as I hope I have earlier demonstrated, to rely on them to frustrate or indeed sabotage by laying ambush with a purely sinister ‘subject to contract’ cudgel, a contract already fully concluded in all material particulars, the terms and validity of which the court can, or ought readily to, ascertain from documents available. The term ‘subject to contract’ has no settled effect – or shall I say no magic effect – yet, in my view, in our existing arrangement and procedure for conveyancing, whenever that phrase is used, it is my opinion that the merit and worth of it should always be open to the court to decide. That is one way of ensuring the integrity of concluded arrangements.”

3.3 Again the Court also held that,
“There can be no doubt that as a general rule, the courts in appropriate cases construe the words ‘subject to contract’ or such similar incantations so as to postpone the incidence of liability until a formal contract is drawn up and accepted by the parties. It must however be stressed that the court must refuse to postpone such incidence of liability where there exists cogent and compelling evidence of a contrary intention on the part of the parties, the use of the phrase ‘subject to contract’ notwithstanding. It must in each case be a question of construction whether the parties intended to undertake immediate obligations or whether they were suspending all liability until certain events happen.”

4. CERTIFICATE OF OCCUPANCY

Proof or root of title
4.1 A certificate of occupancy is not the only way to prove title to land. In the locus classicus of Idundun v Okumagba, the Supreme Court stated that title or ownership of land can be proved in any of the following five (5) ways; (i) by traditional evidence; (ii) by production of documents of title duly authenticated; (iii) by proving acts of possession and ownership extending over a sufficient length of time which are numerous and positive enough to warrant the inference that the plaintiff is an exclusive owner; (iv) by proving acts of long possession and enjoyment of the land; (v) by proof of possession of connected or adjacent land in circumstances which make it probable that the owner of such adjacent or connected land is the owner of the land in dispute. When buying family land along the Lekki Epe corridor, one will often find that their title is based upon gazetted excision or excision in progress. It is also important to state that a survey plan, even if registered, is not valid a document of title. This is why the deed of assignment for the sale and transfer of land must always show the root of title in the recitals and state how the vendor came to acquire title to the land to be sold.

4.2 Since the enactment of the Land Use Act in 1978, the certificate of occupancy has become the most common and the standard title document issued by Governments in Nigeria. However, other documents of title, such as the land certificate or the registered conveyance, issued before the promulgation of the Land Use Act remain valid instruments. Also, the Land Use Act recognises a ‘deemed right of occupancy’ which protects the ownership of every person to any land held before 1978 and such a person can apply for a certificate of occupancy to be issued over the said land. See section 34 of the Land Use Act.

4.3 The fact that a person holds a certificate of occupancy does not mean that his title to land is unassailable or cannot be challenged. A Governor cannot issue a certificate of occupancy to extinguish the pre-1978 ‘deemed right of occupancy’ created or granted by section 34 of the Land Use Act. In Ibrahim v Mohammed, the Supreme Court said,
“I am satisfied that the correct view is that where there is an existing right held or deemed to be held by a person over a piece of land, the Governor cannot without first revoking that right under section 28 and paying compensation under section 29 of the Land Use Act, validly issue a right of occupancy (C of O) over the same land pursuant to his powers under section 5(1) to any other person.”

4.4 A certificate of occupancy raises the presumption that the holder is the valid owner of the land in dispute but that presumption is rebuttable and the certificate of occupancy can be challenged by someone with a better root of title. In Madu v Madu, the Supreme Court held that,
“A Certificate of Occupancy properly issued, where there is no dispute that the document was properly issued by a competent authority, raised the presumption that the holder is the owner in exclusive possession of the land. The Certificate also raises the presumption that at the time it was issued there was not in existence a customary owner whose title has not been revoked. It should however be noted that the presumption is rebuttable because, if it can be proved by evidence that another person had a better title to the land before the issuance of the Certificate of Occupancy, in that case the Certificate of Occupancy will stand revoked by the court.”

5. ORDER OF PRIORITY OF TITLE

5.1 In the absence of legal title then, possession coupled with payment of purchase price or a deed of assignment with consideration but without Governor’s consent confers equitable title on the purchaser of land. Where there are competing interests in land and one is legal title and the other is equitable title, then the holder of the legal title is superior to the holder of the equitable title, if he did not have knowledge of the equitable title. Where a common vendor has sold land to one purchaser earlier in time, there can be nothing left to give another purchaser who takes later in time. The principle, nemo dat quod non habet, meaning one cannot give what he does not have, applies.

5.2 The basic rule is that estates and interest primarily rank in order of creation and he who is earlier in time is stronger in law. In Ashiru v Olukoya, the Supreme Court held that, where two or more competing documents of title, upon which parties to a land in dispute rely for their claim of title and which documents originated from a common grantor or vendor, the doctrine of priorities pursuant to the maxim, qui prior est tempore, portior est ure, meaning that he who is first has the strongest right, dictates that the first in time takes priority. Where there are two competing equitable interests, the general rule of equity is that the person whose equity attached to the property first will be entitled to priority over the other.

5.3 Where the equities are equal and neither claimant has legal title, the first in time prevails. In Omale v Maikudi, the Court of Appeal explained the order of priority where there are competing equitable interests in land,
“On another score, Exhibits “C” and “E” revealed that the Appellant bought the purported land in dispute on the 30th day of June, 1996 while the Respondents’ bought theirs on the 26th day of July, 1999 and to this effect, the learned authors of Snell’s Principles Of Equity stated the applicable rule of priority inter alia: ‘At law, as in equity, the basic rule is that ‘Estates’ and ‘Interest’ primarily rank in the order of creation. Qui prior est temporer potior est jure; he who is earlier in time is stronger in law.’ The law is therefore settled, that the interest of the Appellant takes priority over that of the Respondents’ since he was the first to purchase the land.”
Therefore, where a person seeks to buy land and circumstances point to the probable existence of an earlier purchaser of the land, then the buyer must proceed with extreme caution, as he may not acquire any valid title to the land if he is a subsequent purchaser of the land. Owners often build a gate or fence and sometimes leave gravel or sand on undeveloped to show possession of land. This should alert any purchaser of the land to be cautious.

6. MEMORANDUM OF UNDERSTANDING

6.1 We have sometimes observed parties enter into a Memorandum of Understanding (MOU) for a property transaction. In the event of a dispute, the question is whether or not the MOU constitutes a binding and enforceable legal contract. This issue came before the Court of Appeal in the case of Star Finance & Property v NDIC.

6.2 The facts were that Metropolitan Bank and Star Finance signed an MOU by which Star Finance was to grant a lease of its property to the Bank. The Bank paid the sum of N250m as rent but did not take possession before its licence was revoked. The NDIC, as liquidator of the Bank, brought an action at the Federal High Court to recover the money paid as rent but Star Finance argued that there was a lease in existence. The Court held that the MOU was not a lease and since consideration had totally failed the NDIC was entitled to a refund of the rent.

6.3 The Court of Appeal held that,
“It is my understanding that such a document is usually referred to as a Memorandum of Understanding, ‘MOU’ for short. It is not the real agreement but a document guiding the future agreement. Its status is something less than a complete contract. See Black’s Law Dictionary. The learned counsel for the Appellants (Star Finance) had urged this court in his argument to hold that the Memorandum of Understanding made by the parties herein on 13th May, 2002 was a lease known to law. He made the same submission at the court below and the learned trial Judge refused to accede to that submission in the following words:- “I disagree with the Defendants, certainly a Memorandum of Understanding cannot be seen to take the place of a formal lease. Let me say that the MOU does not take the place of a lease agreement.”
Therefore, it is advisable for parties that enter into commercial transactions and seek to have a binding and enforceable contract not to rely upon an MOU signed after negotiations but go further to prepare and execute a comprehensive and definitive legal agreement between them unless the MOU contains an express provision declaring the document to be a legally binding agreement.

7. TENANCY

Structural Alterations
7.1 One issue which occasions bitter disputes between landlords and tenants arises out of substantial improvements and structural alterations made to the premises by the tenant. Section 6(2) of the Tenancy Law states that where a tenant with the previous consent in writing effects improvements on the premises and the landlord terminates the tenancy, such a tenant shall be entitled to claim compensation for the improvements on quitting the premises. In Bocas v Wemabod, the Court of Appeal held that,
“The tenant is obliged to pay his rent as and when due. But all is not lost, he can set-off, in his landlord’s action, a claim for money expended to effect any repairs the landlord was under an obligation to effect, on the following conditions; He must prove that he informed his landlord of the disrepair; He gave him reasonable time to effect the repair; The repair he effected is of good quality; and The sum he expended to effect the repair is reasonable.”
Therefore, the advice is to always obtain the consent of the landlord, before making substantial alterations or improvements to the premises.

7.2 Where the landlord has been notified of the proposed repairs but refuses to effect the repairs, the tenant cannot refuse to pay rent until the repairs are carried out because the duty to pay rent is separate from and independent of the obligation to repair. Again in Bocas v Wemabod (2016) the Court of Appeal held that,
“In other words, a tenant is not at liberty to engage in a rent strike because its covenant to pay rent is independent of the landlord’s obligation to effect repairs – See Oke v Salako (1972) 11 CCHCJ 88, wherein Kassim, J. held, ‘A tenant’s covenant to pay rent is independent of the landlord’s covenant to repair the premises; the tenant is not discharged from his obligation to pay rent merely because his landlord is unwilling to fulfill his obligation to repair?’”
However, repairs (e.g fixing a leaking roof) are different from improvements. Where the landlord refuses to effect repairs after notice, the tenant can go ahead to effect the repairs.

Jide Bodede LLB(OAU), LLM(Lond), ABR, ACIArb.
08035130694, 08027915373
Jide@lawfieldslawyers.com