When we speak of the sale of land in the property law practice sense, we are referring to the contract entered into before the deed is drafted and executed. This is a safeguard document, the parties can fight all the fight, make all the amendments they want to make before things get permanent. The contract is known as a contract for sale of land (C4SL). It may be oral, open or formal.
The oral one is just by words. Mostly used in customary sales. It is binding on parties if the four Ps are present: parties, possession, presence of witnesses (at least 2), and payment of some form of consideration (don’t gotta be cash). Odusoga v. Ricketts
The open contract a.k.a the bare minimum contract: So Statue of Frauds say we must put things in writing when it comes to land, you now go ahead to say okay let me just put the very important stuff and only that. Just put the three Ps and S: Parties, property, price and signature of the person to be bound. This contract is written quite alright but it is too weak. No chance to put those special conditions and clauses that make drafting a C4SL worthwhile.
Contract for sale of land that does not state special clauses is that one contract? Just kidding, an open contract is just as binding as the formal one 😁😁😁😊😊
The formal contract: The best of them all. In fact most times, the difference between this one and the deed itself is that the deed is perfected as a deed. It settles all the important details before you guys go ahead with the deed. It goes without saying that it is the most highly recommended of the three.
Before we dive into each one, let’s get the importance of having a contract before the deed, abi it’s not by force na!
First of all time to investigate the property. Then you, Mr Purchaser have equitable rights and no one will be able to run away anyhow. Imagine having a lien over the land even though you haven’t properly bought it, won’t you feel safe, and if God forbid, any party dies, it is not over. Guess what, even oga Vendor has lien over the property for his balance, abi now, what is good for the goose is good for the gander. Then again you guys will agree on price so Mr Vendor cannot come and be doing back and forth, gazumping up and down. Finally the CSL can help you deal with chattels (more on the importance of this later). And so on and so forth.
Now that we have reviewed the three types of contracts, what exactly are the hallmarks of this contract of sale charade? They are the following:
Completion date: The completion involves getting Governor’s Consent, stamping and registration. If you remember Savannah Bank v. Ajilo, this phenomenon allowed a mortgagor go scots free without paying his debt. While there are judicial precedents that suggest such will not repeat itself again, won’t it be nice to state who will do the needful and even give the person a deadline, life is not hard. Also if you say ‘within reasonable time’ who knows how the courts will interpret that one?
Deposit clause: So the hallmark of the C4SL is that Mr Purchaser will drop small something as a sign of commitment. This money, as harmless as it is, will be received in different forms and different capacities by the vendor and these differences mean different things:
FORM: The money may be deposit or part payment. Deposit is forfeitable while the part payment is NOT forfeitable. This means the deposit is just to show that you are committed but part payment is like you are paying part of the money required of you. So if things fall through, you gats collect your part payment now, you are not running a charity.
CAPACITY: The vendor’s solicitor will receive the deposit/part payment, either as an agent or stakeholder. As an agent, he will be acting for the vendor, and for his interest alone. So if the contract falls through, the purchaser can hold the solicitor-agent’s shirt for the money. However as a stakeholder, which is the best capacity, the solicitor is not an agent of anybody, he holds the money in trust, he will be personally liable for any misappropriation and the best part, he pays the money to the innocent party in the event of a breach/ he pay the money to the entitled party at the end of the contract. As a lawyer the solicitor keeps the money in his trust or client account. The stakeholder is like an interpleader, he is not liable to pay interest.
Exchange: This one is such an event we’ll talk about it specially below.
Fixture and fittings: Say it after me Quic quid plantatur… (you know when land law was still shaking someone). If you are not selling your AC with the land do well to delineate what you are selling. And if you are selling, do well to find a way to include the price in the purchase price because if you sell them separate you will have to execute a bill of sales which is another wahala.
Insurance: If y’all want an insurance policy, state the details and who will be responsible and how the money will be applied.
Passage of Risk: Risk normally passes once the C4SL has been exchanged, but in case you guys still want it to be with oga vendor.
Payment of balance: So the point is: paying part doesn’t mean you will now owe the balance forever, try and stipulate when exactly you will like to receive alert as a vendor. #NOTIME
Possession before completion: Under the law, the purchaser gets possession only after completion. But if you guys have other plans, like possession after exchange of the contract, go ahead and put it here.
Vendor’s capacity: Be clear on whether the person you are buying land from is really the owner or whoever he says he is. Before you go and buy lawsuit.
Stages of the C4SL
Pre-contract stage: At this stage, you make inquiries into the nature of the land, check whether it is suitable for whatever use you want to put it to, check whether there are tenants. This part is important because of some things called PATENT DEFECTS. Those are defects in the land which you can see e.g. a bad gate or terrible paint job. The law provides that the vendor is not liable to you for those type of defects. But he will be liable for LATENT DEFECTS (those you can’t readily see e.g. faulty internal electric wiring).
Contract stage: This stage is the main the main where you draw up the contract, whether open, formal or oral (what is there to draw up in an oral contract).
Post contract stage: This is the point at which we Deduce and investigate title. The deducing is done by the vendor. It is simply him explaining how the land got into his hand, from the time God created land (according to the Biblical account in Genesis) to this very moment that he is now selling it to the purchaser. In deducing, the vendor uses an ABSTRACT or EPITOME of title:
Abstract is set out in Tabular form itemising each transaction over the land preceding the current one, showing parties, the year it was carried out etc. The epitome is an advanced form as it will be accompanied by copies of relevant documents for the transactions listed in the abstract.
So where the abstract goes:
|Date of transaction||Nature of transaction||Parties to the transaction||Original / CTC /Photocopy||Number of documents||Will original be handed over upon completion|
|3 May 1998||Power of Attorney||The Alake Family (Donors) and Mr John Alake (Donee)||Photocopy||1||No|
The epitome will have the photocopy of the Power of Attorney.
After the vendor sends this abstract of title, the purchaser may have a few questions on the transactions, maybe there is a time gap he doesn’t understand, or the property appears to have changed addresses and a proper reason for this is not given, maybe somebody’s name is mentioned without connecting it to the property, and so on and so forth. He will raise these questions if any in a Requisition of Title. So the requisition is like a query. The vendor of course is expected to respond with appropriate explanations.
Investigation of title: The purchaser’s lawyer does not have to sit around after the abstract and epitome. He can go right ahead finding out about this piece of real estate he’s about to get his hands on. The lawyer of course will have to closely study the title documents, he would visit the lands registry/corporate affairs commission/probate registry/court registry, physically inspect the property, and then investigate traditional history. The lawyer will respond with the SEARCH REPORT preferably on his letter head. The contents of the search report are:
- Date of letter
- Date of search
- Place (s) of search
- Name of Owner
- Title of owner
- Description of the property
- Encumbrance (if any)
- Name, signature and address of the solicitor
In Abuja it is simpler, just:
- Write an application to the Abuja Geographical Information System (AGIS) with particulars of the property
- The application should be forwarded along with a letter of consent from the owner
- Then you pay search fees
- Then the Officer of the AGIS conducts the search and completes the search report.
Exchange of contract this is a physical act of exchanging the executed contract between parties along with the exchange of deposit. It is at this point the contract becomes binding and all the goodies attached to a C4SL begin to accrue to the parties. The stages are distinct and defined:
- Vendor’s solicitor prepares the contract
- Purchaser’s solicitor goes through, vets and confirms
- Purchaser’s solicitor obtains the deposit/part payment from his client
- Contract is engrossed (big word for duplication)
- Parties execute at the vendor’s solicitor’s office
- The vendor’s solicitor gets the money and then issues a receipt. At this point the vendor will also handover the abstract and epitome, purchaser’s copy of the contract
There’s so much talk about vendor’s solicitor and purchaser’s solicitor, what if they are the same person i.e. parties are using one lawyer. Then according to Smith v. Mansi there won’t be a need for Exchange.
Completion stage: At this stage the purchaser’s (now assignee) solicitor will draft the deed of assignment, which is the legal document. The Vendor’s (now assignor) solicitor (he seems to be doing a lot of work in this sale of land business) drafts a COMPLETION STATEMENT which states:
- The outstanding sum
- Exact date for the Purchaser to take possession
- Schedule of documents to be delivered to the Purchaser on completion
- At least 5 copies of the deed of assignment and plans
- Prior original title documents, except if it cannot be parted with. For instance it is unreasonable to ask for the original of a POA because the land you are about to buy is most likely not the only land under the POA and the attorney would definitely need it to deal with those other lands
- Notice of assignment of insurance policy, if any
- Receipt of payment of purchase price
- Letter of introduction to the tenants in possession, if any
- Receipts of payment of all outgoings
- Receipt for payment for chattels (remember you can sell it along with the land)
- Notice of assignment of insurance policy, if any
- Keys to the property, if it is developed
The completion process is also in stages (note how the designation of the parties change)
- Assignee’s solicitor prepares the Deed of Assignment and sends it to the assignor’s solicitor for vetting
- Assignee’s solicitor engrosses of the Deed of Assignment
- Assignor’s solicitor prepares completion statement and sends to assignee’s solicitor
- Assignee or his solicitor, pays the balance of the purchase price.
- Both parties execute the deed
- Assignor delivers the original title documents to assignee.
- Assignee’s solicitor does a quick and final check of the original title documents by comparing them with the photocopies because you never know who is trying to be shady.
YAAY!! You are officially a home-owner.
Post completion stage: To perfect a C4SL or not to perfect?
Let’s get it straight first, perfection entails Governor’s consent, stamping and registration, in that order.
Governor’s consent in a C4SL is not by force, i.e. there are no legal consequences AWOJUGBAGBE v. CHINUKWE LIGHT INDUSTRIES. Its absence does not nullify the transactions between the parties.
Stamping is necessary because section 58 of the Stamp Duties Act subjects a C4SL to a fixed stamp duty.
Registration depends on whether the land registration law of the state considers a C4SL as a document to be registered Ogunbambi v. Abowaba (In the whole of Nigeria only the West considers the C4SL a registerable document; also Okoye v. Dumez suggests that it is registerable in the East but their law is silent on it)
But at this post-completion stage we should have already drafted the deed, so it is the deed we will perfect. And that one is a must oh, there are several authorities to warn you on that.
Consequences of not perfecting
- For the consent: The transfer of legal title is void Savannah Bank v. Ajilo etc.
- For the stamping: You can’t tender it in evidence, you can’t even register it, and then if you don’t do it on time (30 days) there is penalty
- For the registration: You can’t tender it in evidence in court, you title will lose priority to other people that registered, there’s also a penalty for those that don’t register within 60 days.
Whew! This topic sef? 😒. How did you find it?