Nigerian Real Estate Investing offers attractive opportunities for wealth creation, rental income, and capital appreciation. From residential developments in fast-growing cities to commercial properties in business hubs, real estate remains one of the most resilient asset classes in Nigeria. However, alongside these opportunities are significant legal risks that can result in costly disputes, loss of property, or invalid transactions if not properly managed.
This article explains the most common legal pitfalls associated with Nigerian real estate investing and how investors can avoid them through proper documentation, compliance with land laws, and professional guidance. Whether you are a first-time buyer or a seasoned investor, understanding these risks is critical to protecting your investment.
Why Legal Awareness Matters in Nigerian Real Estate Investing
Unlike many jurisdictions where land ownership is straightforward, property transactions in Nigeria are governed by a complex mix of statutory law, customary practices, and administrative approvals. Issues such as title risk in Nigeria, land fraud in Nigeria, and non-compliance with the Land Use Act remain widespread.
Investors who fail to understand these realities often discover problems only after funds have been committed. Legal awareness is therefore not optional. It is a core part of successful Nigerian real estate investing.
1. Failure to Conduct Proper Property Due Diligence
One of the most common and costly mistakes is inadequate property due diligence in Nigeria. Many disputes arise simply because investors rely on verbal assurances or incomplete documentation.
Key Due Diligence Checks
- Verify ownership at the relevant Land Registry
- Confirm there are no encumbrances such as mortgages, government acquisition, or court disputes
- Ensure the property has valid and authentic documentation
Critical Title Documents to Verify
- Certificate of Occupancy (C of O)
- Deed of Assignment
- Survey Plan
Skipping due diligence exposes investors to title risk in Nigeria and fraudulent claims.
2. Defective or Unverified Ownership History
Even where documents exist, investors must investigate the chain of ownership. A seller can only transfer a valid title if they themselves have a good title.
Common risks include:
- Sales by unauthorized family members
- Community land sold without full consent
- Multiple historical transfers that were never perfected
Tracing ownership history helps confirm that the seller has legal authority to sell.
3. Ignoring the Land Use Act Requirements
The Land Use Act of 1978 is central to Nigerian real estate investing and remains a major source of legal risk.
Governor’s Consent Requirement
Under the Act, all land is vested in the Governor of each state. Any transfer of interest in land requires the Governor’s consent. Failure to obtain consent can render the transaction void or unenforceable.
This governor’s consent requirement applies to:
- Sales
- Assignments
- Mortgages
- Transfers to companies or joint ventures
Overriding Public Interest
Land can also be revoked for overriding public interest, such as infrastructure projects. Investors must confirm that land is not under acquisition or earmarked for government use—an important Land Use Act risk Nigeria.
4. Purchasing Property Without Registered Title Documents
Many investors complete transactions without registering their Deed of Assignment. This is a major legal pitfall.
Consequences of Non-Registration
- Weak legal protection in disputes
- Difficulty proving ownership
- Inability to use the property as loan collateral
Registration at the Land Registry is what perfects the title and gives priority against third-party claims.
5. Falling Victim to Land Fraud in Nigeria
Land fraud in Nigeria remains widespread, particularly in high-demand areas.
Common Fraud Schemes
- Double sales, where one property is sold to multiple buyers
- Forged title documents
- Unauthorized sales by community or family representatives
Risk Reduction Measures
- Insist on original documents
- Conduct independent registry searches
- Use qualified legal practitioners for verification
Fraud prevention starts with documentation and independent confirmation.
6. Overlooking Zoning and Land Use Restrictions
Buying land without confirming its approved use can derail investment plans.
Zoning Risks
- Residential land used for commercial purposes without approval
- Agricultural land sold as residential
- Development restrictions imposed by planning authorities
Non-compliance can result in fines, demolition, or the refusal of building approvals.
7. Inadequate Legal Representation
Some investors attempt to cut costs by avoiding professional legal advice. This often leads to poorly drafted agreements, missed approvals, and invalid documentation.
A qualified real estate lawyer can:
- Conduct title investigations
- Draft and review contracts
- Ensure compliance with land laws
- Identify hidden risks early
The cost of legal advice is minimal compared to the cost of losing property.
8. Failure to Address Tax Obligations
Real estate transactions attract statutory taxes and fees.
Key Tax Obligations
- Stamp Duty on conveyancing documents
- Capital Gains Tax on disposal of property
- Property-related levies imposed by state authorities
Failure to comply can result in penalties or invalidate registration processes.
9. Disregarding Dispute Resolution Clauses
Property disputes are common and often prolonged. Investors should always include dispute resolution mechanisms in contracts.
Best Practices
- Mediation or arbitration clauses
- Clear jurisdiction provisions
- Proper execution by all parties
Well-drafted clauses reduce litigation risk and costs.
10. Ignoring the Importance of Survey Plans
Survey plans define property boundaries and location. Purchasing land without a verified survey exposes investors to boundary disputes and encroachment claims.
Common Survey Pitfalls
- Outdated or fake surveys
- Unregistered survey plans
- Overlapping boundaries
Always engage a licensed surveyor and verify surveys with the Surveyor-General’s office.
11. Poorly Structured Joint Ownership Arrangements
Joint purchases without clear agreements often lead to disputes.
Agreements should clearly state:
- Ownership percentages
- Contribution structure
- Exit and dispute resolution mechanisms
Written agreements are essential in joint Nigerian real estate investing.
12. Relying on Verbal Agreements
Verbal agreements have little or no legal value in property transactions. All real estate agreements must be in writing and properly executed.
Without written documentation, enforcement becomes extremely difficult.
13. Failure to Obtain Development Approvals
Developing property without the required permits exposes investors to enforcement actions.
Required Approvals May Include
- Building permits
- Planning approvals
- Environmental Impact Assessments (for large projects)
Non-compliance can result in demolition or sealing of the property.
14. Overlooking Compensation Rights Under the Land Use Act
Where land is compulsorily acquired, Section 29 of the Land Use Act provides for compensation. However, only properly documented owners can enforce this right.
Failure to perfect the title may result in loss of compensation entitlement.
15. Not Understanding the Five Ways to Prove Title
Nigerian courts recognize five methods of proving land ownership, as established in Idundun v. Okumagba:
- Traditional evidence
- Production of valid title documents
- Acts of ownership over time
- Long possession and enjoyment
- Ownership of adjacent land
Inability to establish title using one of these methods can defeat ownership claims.
Conclusion
Nigerian Real Estate Investing can be highly profitable, but only when legal risks are properly managed. Most property losses arise not from bad investments, but from avoidable legal mistakes – poor due diligence, defective titles, non-compliance with the Land Use Act, and inadequate documentation. By understanding these common pitfalls and addressing them early, investors can safeguard their capital and enjoy sustainable returns.
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Navigating property laws in Nigeria can be complex, but the right legal guidance makes all the difference.
At Scotts Legal, we provide expert support in property acquisition, title investigation, registration, and property management, helping real estate investors make confident, compliant, and secure decisions.
For consultations and inquiries, send us a message – here.