In Nigeria, one of the modes through which people acquire land is by part Payment of the purchase price to the vendor, with a promise to pay the balance sum at a latter date. In some other cases, it has become a common practice among property development Companies to offer landed properties to their clients, with an option for part payment for the land and the balance sum spread over a given period.
Besides, it is also common that some land owners who are in desperate need of cash to solve pressing needs might also offer their land to any Purchaser who is willing to pay part payment for the land, with an undertaking to pay the balance at an agreed time.
Reasons for Part Payment for Land:
- Verification of Title to the Land: The process for acquisition for land in major cities in Nigeria, such as Lagos, Port Harcourt, Abuja etc can be daunting, as some funny elements are willing tools in the hands of the devil, to defraud unsuspecting and innocent purchasers of land. In response to this, some purchasers have adopted the option of affording the vendor part payment for the land, which would afford them time to investigate title to the land, while at the same time giving assurance to the vendor of their seriousness to buy the land. They might do this by starting a little improvement on the land, such as moulding of blocks, little fencing to see if another person would claim title or ownership of the said land.
- Inadequate Finance to Pay Full Price: it is common among small and medium income earners, to opt for the option of part payment for land, as they might lack the capital for a one-off payment. It is thus a form of savings for them, to give part payment and pay the balance over a given period.
- Marketing Strategy by Property Developers: The city of Lagos is awashed with bill boards by property development companies offering land to their customers on the option of part payment of the full price of the land. You would see advert like “Own a property in Ibeju-Lekki for 8Million naira, pay N800,000,00 (Eight Hundred Thousand naira, and pay the balance in 36 months”. A lot of persons have heeded to these calls over time.
Legal Effects of Part Payment for Land in Nigeria
To drive home the point, we shall take solace in the case of Odusola .v. Rickets (1997) 7 NWLR (Pt. 551)1. In that case, the landowner sold 4 plots of land to the purchaser in 1965. The purchaser made a part payment of the agreed sum and he was let into possession and he developed one plot of the land, with a promise to pay the balance at a latter date. The landowner repeatedly demanded for the balance sum all to no avail.
In 1971, the vendor (seller) sold one of the undeveloped plots to another person, who is the defendant in this case. On realizing this fact, the first guy who had made part payment came with the balance sum in 1976. He then sued to eject the second guy from the land, as according to him, he made a part payment to cover the whole plots and thus the land belonged to him.
This argument was rejected by the Supreme Court which held thus:
“payment of purchase price coupled with possession gives the purchaser an equitable title and he is entitled to seek an order of specific performance…but where the purchase price is not fully paid, the purchase will have no right to enforce specific performance…”
Now from this example above, the legal effect of part payment for land in Nigeria are as follows:
- Ownership of the Land still belongs to the Vendor until the full price for the land is paid: Even though, the vendor (seller) allows you into the place and even starts building, ownership do not transfer to the purchaser, until the last kobo is paid.
- Where the purchase defaults in payment of the balance on the agreed date, the purchaser can legally and validly sell the property to another serious buyer, despite the fact that the first purchaser has made a part payment.
- All the first purchaser is entitled to where the vendor upon his default decides to sell to another purchaser, is a refund of the sum paid as part payment and no more.
- Time is of essence in this type of arrangement. Where the contract states a particular date upon which the balance would be paid, failure to pay gives the seller (vendor) to repudiate or cancel the contract.
- Where time for payment of the balance was not stated after the initial part payment, the court would consider what time is reasonable in the circumstance.
Things to Do in Emabarking on this arrangement
- It would well be a good idea to consult a lawyer who understands the terrain to always peruse the terms of the contract, that would enable the purchaser enough allowance to fulfil your obligations after part payment for the price
- The lawyer could also insert a term in the contract, that gives some more graces in cases of unavoidable defaults on the part of the purchaser.
- on the part of the seller, it would also be wise to impress on his lawyer to state with exactitude the date upon which the balance sum is to be paid. In that case, it makes it easy for him to cancel the contract and re-possess his land.
- A “second purchaser” of such a land must also ensure that his lawyers thoroughly peruse the terms of the contract, to know if the other purchaser had defaulted
Now in the conclusion of this matter. While a land owner is desperately in need of cash and offers his land with an option for part payment, the seller must be well guided to go through the process by a lawyer, so as not to get his fingers burnt. This is so because, it is most likely, that after accepting the part payment, a buyer with a bigger price might come up. At such a point, all the buyer prays for is that the first buyer defaults, so as to enable him sell at a better price.
This advice also goes to persons accepting offers for part payment by property developers in Nigeria. There are usual hidden terms and conditions, that would make it possible for a defaulting purchaser to lose everything. It is thus advised to get the assistance of a Property lawyer to help scrutinise the agreement, before the part payment is made. Best of luck!!
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This post first appeared on LAND ISSUES THAT CAN GET YOU INTO BIG TROUBLE PT 2, please read the originial post: here