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23 Jan

PL-PRACTICE WEEK 6 CONTRACT OF SALE AND REGISTERED CONVEYANCING 1

WEEK 6 – CONTRACT OF SALE AND REGISTERED CONVEYANCING 1

:: LEGAL RESTRICTIONS OR LIMITATION TO SALE OF LAND:

  1. Legislative Restrictions:
  2. LUA: bestows allodial title in land (hitherto vested on the land owners) on the governor of the State and he holds it in trust for NigeriansAbioye v Yakubu. What the Land Owners have is a Right of Occupancy which requires governor’s consent[1] for valid alienation[2]-See Section 22 and 23 LUA Kachalla v Banki. Section 1 LUA which converts hitherto unlimited rights to right of occupancy)-Abioye v Yakubu. Then Section 22 requires governor’s consent to be sought for alienation of interest in land-Savanah Bank v Ajiloh.
  3. Illiterates Protection Law and Statute of Frauds, Conveyancing Act, Property and conveyancing law, etc dealing with formal and substantive requirements like writing, execution, etc.

Section 7 (requires parties to any alienation to have attained 21 years (unless guardian or trustee acts on his behalf), Section 46 which disentitles non-Nigerians from being granted a right of occupancy except with approval of the National Council of States.

  1. Town Planning Laws and Regulations. Lagos State Urban and Regional Planing Law.
  2. Contractual Restriction: these can come in form of agreements or covenants. E.g. Covenant not to assign lease (with or without consent), covenant that mortgagor shall not part with possession without consent of mortgagee.
  3. Customary Law Restriction: e.g. Family land cannot be alienated without consent of Family head and principal members-Ekpendu v Erika.
  4. Properties held by ministries and statutory bodies may require additional consent of the Minister or authority in charge before alienation-Rockonoh Property Co. Ltd v NITEL Plc.
  5. Fraud, Misrepresentation, etc.
  6. Liz pendens: where the court requires that the subject matter be preserved pending determination of litigation.

:: STEPS OR STAGES IN THE SALE OF LAND: International Textile Industries Nigeria Ltd v Aderemi.

Leases are usually prepared by the Lessor’s Solicitor because the lessor has reversionary interest to protect[3].

The stages are;

Solicitor for both parts should be diligent in obtaining instructions, negotiating, searching, inspecting, vetting, etc. and ensure the best interest of the client is preserved throughout the transaction.

  1. Pre-Contract Stage: Receive Instructions: details of property, parties, agents, fixtures, easements, profits, restrictive covenants, consideration, nature of title on the land (whether vitiated or there exists a Court dispute, etc), whether family land, survey plan, consent, exact nature of transaction, title (documents, title deeds, etc. be ascertained…), completion date, deposits, costs/Solicitor’s fees. Parties negotiate. Pre-Contract Inquires are sent to elicit more information (like boundaries, disputes/adverse rights, covenants and restrictions on land, reversionary interests, facilities, insurance provisions, etc. ) upon which the purchaser’s decision would be premised. The vendor may not reply but he should not misrepresent-Walker v Boyle.
  2. Contract Stage: which may be either of the three. The Sale agreement is Prepared in duplicate by vendor’s solicitor and copy sent to purchaser’s solicitor and then purchaser for signature where everything appears good. Due investigation and deduction of title should also be conducted here.
  3. Post-Contract Stage: deed Of conveyance is prepared by Purchaser’s Solicitor with two copies sent to vendor’s solicitor for amendment and approval. When approved, the conveyance is engrossed in at least 5 copies (1 for Min of Land, 1 for Stamp Duty, 1 for Registration, 2 as original and counterpart).
  4. Completion Stage: the procedure for completion of Sale of Land is thus; the vendor’s lawyer sends a completion statement (also called financial statement[4]) to the purchaser. The purchaser’s lawyer drafts the deed of assignment/conveyance and sends it to the vendor for possible amendment, after which balance is paid and the deed is executed. The purchaser collects the original title documents, keys to the property, tax receipts, and a letter of introduction if tenants live on the property.

Post-Completion Stage: Purchaser’s solicitor obtains governor’s consent[5], stamps the deed of conveyance[6], registers the document[7] and hands them over to his client (purchaser) bill of charges may also be sent here.

DOCUMENTS REQUIRED FOR GOVERNOR’S CONSENT: – Consent Application Letter/Form, Purchase receipt, 6 copies of survey plan (signed by licensed surveyor), Vendor’s 3years TCC, CTC of Deed of Assignment, receipts of consent and development fee. If the mortgagor is a company include memo–art, Form CAC 8, board resolution, and CTC certificate of incorporation.

STATE THE TYPES OF CONTRACT OF SALE OF LAND: The contract may be:

Oral: which is generally unenforceable (Section 4 SOF 1677) except it is an alienation under Customary Law in the presence of witnesses and full purchase price has been paid and there has been sufficient acts of part performance-Odusoga v Ricketts, Kachallah v Banki. Section 5(3) Law Reform (Contract) Act.

Although courts in their equitable jurisdiction may (whether under customary law or not) in the interest of justice order specific performance[8] where there has been part performance by one party relying on the other party’s representations.

Open: a written note, receipt or memorandum which only provides for parties, price and property. Signed by the party to be charged. Gaji v Paye E.g. Receipt, written offer, several documents connected together, etc.

Formal: deal with parties, price, property and other terms/conditions mutually agreed upon by the parties. Like[9] deposit, part payment-balance n interest, economic plants, insurance, covenant and reservation, existing restrictions (e.g. existing tenancy), survey, possession before completion, forfeiture of deposit upon default, The Capacity in which the vendor is conveying the property. (Whether as beneficial owner[10], mortgagee, trustee, settlor, PR), fittings, fixture, (don’t inflate to evade stamp) possession before completion (Odutola v Papersack Nig Ltd), insurance before completion etc.

ADVANTAGES OF CONTRACT OF SALE;

It is advantageous as there is more investigation, binding obligations (which cannot be unilaterally avoided or terminated by death) are created, default implications of law are avoided as parties cater for specifics, fixtures and fittings may be transferred here and left out in the deed thereby reducing stamp duties, prevents unilateral increase in purchase price, easier to enforce.

Note void terms in the contract

:: EXCHANGE OF A FORMAL CONTRACT OF SALE OF LAND; PROCEDURE AND EFFECT.

A deed takes effect upon delivery while a contract takes effect upon exchange-Awojugbagbe Light Industries Ltd v Chinukwe.

A contract for sale of land takes effect/comes into existence/becomes binding once it is signed (by the parties) in several copies and exchanged physically (into their actual or constructive possession)-Awajugbagbe Light Industries v Chinukwe.

Exchange may be like this: After negotiations, inquiries, consensus and deliberations on drafts… vendors solicitor prepares and forwards the contract document to purchaser’s lawyer who will sign and send the signed and stamped contract (with a cheque or payment for the deposit) to the vendor’s lawyer[11], who then sends the vendor’s part duly signed with a receipt for the deposit to purchaser’s solicitor.

A solicitor may act for both parties if title is sound, terms are clearly agreed, interest are not likely to conflict, price of property is decent, no other lawyer in vicinity is desirable to either party

If one lawyer represents both parties, exchange will occur once they sign on the contract document. Exchange over the telephone instruction to the solicitor was accepted in Domb v Isoz.

EFFECT OF EXCHANGE OF CONTRACT:

Once contract has been exchanged and governor’s consent gotten, the property is at the risk of the purchaser. Exceptions in Section 72 PCL; – The purchaser acquires an equitable interest; -death of either party would not affect/truncate the transaction and personal representatives should complete it; – Vendor becomes trustee (specific performance); – Vendor has lien over property for the balance of purchase price. Edosa v Zacalla, International textiles Industries Nigeria v Aderemi-Notwithstanding the phrase subject to contract.

CAPACITY OF SOLICITOR TO ACT FOR BOTH PARTIES: discussed above.

ETHICAL ISSUES AND SKILLS INVOLVED.

EXPLAIN THE NEED FOR PRE-CONTRACT ENQUIRIES

ODUSOGA V RICKETTS [1997] 7 NWLR (PT.511) 7; KACHALLA V BANKI (2006) ALL FWLR (PT.309) 1420 (EMPHASIZE USUAL COVENANTS).

 

[1] Governor can delegate his consent powers see for example Land Use Act (Delegation of Powers) Notice 1992 which authorises AG and Commissioner of Justice to grant consent.

[2] In Brosseette Manufacturing Nig Ltd v M/S Ola Olemobola, court held that failure to get consent does not void the transaction but makes the deed an escrow pending the grant of consent.

[3] Generally the person that engages the Legal Practitioner should pay-Section 11 LTL though can be negated by agreement.

[4] As it (in clear, precise and comprehensible) details financial movements like sums paid, disbursements, solicitor’s charges, amount outstanding, etc. Completion Statement may be 3: that prepared by seller’s solicitor for seller, seller’s solicitor for buyer’s solicitor or buyer’s solicitor for buyer. Completion Statement helps in calculating financial obligations and enable the party know if he can conclude the transaction, assists in computation of taxes and ensures accountability.

[5] Else alienation is inchoate in extreme cases the transaction will be deemed void Section 26 LUA, Savannah Bank v Ajilo

[6] Charged ad valorem and must be paid within 30 days from execution else not registrable or admissible to prove same-Section 22 and 23 SDA.

[7] Within 60 days of the date of execution. This indicates that he title is encumbered. Non-registration makes inadmissible to prove title in court and loss of priority. Priority in tehsense that interest rank in the order of creation and the first to register has priority-Kachalla v Banki. The original and counterparts of duly executed and stamped deeds are forwarded to the deed registrar for registration and counterpart is kept in the registry.

[8] Specific performance may not be given where it would be impossible e.g. Family Land needs consent of the family head.

[9] These are also the main terms/contents of a Formal Contract

[10] If he sells as beneficial owner, it is implied that he has a good right to convey the property which isfree from encumbrances, and the purchaser shall have quiet possession else indemnity. Where contract is a lease, it is presumed that the lease is valid, subsisting, rents and covenants have been observed.

[11] The vendor’s lawyer should accept any deposit for land as a stakeholder (not as an agent) so he won’t bear the burden of interest Sorrel v Finch. As a stakeholder he stands for both the purchaser and vendor, paying the money to whomever of them that does not default or breach the contract. Also as a stakeholder he may keep the interest accruing from the deposit, but he is personally liable for the deposit itself.

Isochukwu

Quite eccentric really

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