ICLG - Real Estate Laws and Regulations - Nigeria Chapter covers key topics relating to practical points and commercial terms in leasing, investment, development, and financing.
1.1 Please briefly describe the main laws that govern real estate in your jurisdiction. Laws relating to leases of business premises should be listed in response to question 10.1. Those relating to zoning and environmental should be listed in response to question 12.1. Those relating to tax should be listed in response to questions in Section 9.
Section 43 of the 1999 Constitution of Nigeria serves as the fundamental law that guarantees the right of every citizen in Nigeria to own and acquire immovable property anywhere in Nigeria. Other main laws include:
1.2 What is the impact (if any) on real estate of local common law in your jurisdiction?
The real estate industry has benefitted immensely from local common law as it is one of the most litigated and disputed areas of law. The decision of the courts has, by and large, settled and reinforced legal principles on real estate.
1.3 Are international laws relevant to real estate in your jurisdiction? Please ignore EU legislation enacted locally in EU countries.
International laws do not have a direct impact on real estate in Nigeria; however, the courts will apply received English law in the rare instance of an absence of local laws to govern the specific subjects.
2.1 Are there legal restrictions on ownership of real estate by particular classes of persons (e.g. non-resident persons)?
Yes, Section 43 of the 1999 Constitution provides that every citizen of Nigeria shall have the right to acquire and own immovable property anywhere in Nigeria. Section 1 of the Land Use Act, 2004 vests all real estate in the territory of each state in Nigeria in the governor with a mandate to act as trustee of the real estate and administer the same for the use and common benefit of all Nigerians. Both seek to grant real estate rights to citizens while excluding foreigners. Non-Nigerians/Foreigners registered entities may, however, own real estate through corporate entities registered in Nigeria. The National Council of States by Section 46(a) of the Land Use Act also regulates the transfer of any interest in land to non-Nigerians. Section 7 of the Land Use Act, 2004 restricts the ownership of real estate to persons under the age of 21 years, except where a guardian or trustee has been appointed for that purpose.
3.1 What are the types of rights over land recognised in your jurisdiction? Are any of them purely contractual between the parties?
Rights recognised in Nigeria are: 1) Statutory Rights of Occupancy (Proprietary rights); 2) Customary Rights of Occupancy; 3) Possessory Rights; 4) Easements; 5) Tenancies; 6) Leases; 7) Licences; 8) Mortgages; 9) Liens; and 10) Pledges. Some rights, such as Tenancies, Leases, Licences, Mortgages, Liens and Pledges, are purely contractual between the parties.
3.2 Are there any scenarios where the right to land diverges from the right to a building constructed thereon?
No, Nigerian case law reiterates that ownership rights to land extend to the buildings constructed on the land; this is reiterated by the Latin maxim “quicquid plantatur solo, solo cedit”.
3.3 Is there a split between legal title and beneficial title in your jurisdiction and what are the registration consequences of any split? Are there any proposals to change this?
Yes; where the official recognition of ownership in land title documents issued by the government is vested in a person while another is vested with the right to enjoy and use the land alongside any income or profit generated from the land, there is a split. In these circumstances, the legal owner holds the property in trust for another person or entity who is the beneficial owner, for example, in a family setting where family land is held in trust for the benefit of specific members of the family. The legal title holder is the registered title holder with the land registry; the beneficiary is not reflected in any of the title documents, the consequence being that there is no public notice of ownership by the person holding beneficial title besides the relevant trust document between the legal title holder (trustee) and the beneficiary. There are currently no proposals to change this.
4.1 Is all land in your jurisdiction required to be registered? What land (or rights) are unregistered?
By virtue of Section 2 of the Lagos State Land Registration Law, 2015, which is similar to the land registration laws of other states in Nigeria, all lands are required to be registered. However, land rights in leases not exceeding three years do not require registration.
4.2 Is there a state guarantee of title? What does it guarantee?
No, there is no state guarantee of title in Nigeria. The registered titleholder of real estate will be regarded as the legal owner of the land. However, this is not absolute. If there is a dispute over the title, the records at the state lands register will serve as proof of ownership but the same can be upturned by an appropriate judicial process.
4.3 What rights in land are compulsorily registrable? What (if any) is the consequence of non-registration?
The compulsorily registrable rights in land in Nigeria are: 1) a titleholder of registered documents in land must register the same within 60 days of obtaining the state governor’s consent; 2) a power of attorney dealing with the alienation of an interest in land; 3) a person with the power to assign an interest in land; 4) all acquisitions, revocation, and excision carried out in accordance with the Land Use Act, 2004; 5) any succession to land under a will or intestacy after production of a certified true copy of the grant or letter of administration; and 6) any instrument purporting to transfer interests in land.
Any person with unregistered land rights holds an equitable interest and runs the risk of being challenged successfully by a registered titleholder; the first in time to register a title has the stronger right.
4.4 What rights in land are not required to be registered?
Leasehold rights of no more than three years are not required to be registered.
4.5 Where there are both unregistered and registered land or rights is there a probationary period following first registration or are there perhaps different classes or qualities of title on first registration? Please give details. First registration means the occasion upon which unregistered land or rights are first registered in the registries.
There are neither probationary periods following first registration nor classes or qualities of title on first registration; once a title is registered for the first time at the registry, the titleholder is recognised as such immediately.
4.6 On a land sale, when is title (or ownership) transferred to the buyer?
Usually, this is influenced by the terms of the sale and purchase contract between the buyer and seller. Title in the land will transfer to the buyer upon complete payment of the purchase price and any other condition for completion of the sale. However, only equitable title is passed to the buyer until the title is registered at the land registry and only then will the buyer become the legal titleholder of the land.
4.7 Please briefly describe how some rights obtain priority over other rights. Do earlier rights defeat later rights?
A registered title holder obtains priority over other unregistered rights in a land. The titleholder who registers first has the stronger claim to the land as the benefit of an earlier registration must be preserved. This is even the case where there are competing registered interests in land; the earlier in registration takes precedence over the later, except where proof of fraud or impropriety is successfully made.
5.1 How many land registries operate in your jurisdiction? If more than one please specify their differing rules and requirements.
The federal land registry covers registration of all lands in the Federal Capital Territory, Abuja, and all federal lands owned by the federal government or its agencies, within any state in Nigeria. Each state in Nigeria is empowered to establish a land registry to cover the registration of lands within the state allowing State registries in each state.
In addition to the above, there are also other registries that cover the registration of land within specific private or public sector development areas in addition to any statutorily required registrations (i.e. federal and/or state registration). An example is the Federal Housing Authority (FHA), which administers registrations within national housing programmes. Another example is the Lagos State Development and Property Corporation (LSDPC) Registry, which records registration information of ownership and transfer of real estate within any LSDPC area.
5.2 How do the owners of registered real estate prove their title?
Titles are proven with the presentation of a registered title document, which may include a certificate of occupancy issued by the federal and/or state land registry or a deed bearing the consent of the governor or minister to the transfer of title to land to the title holder. The registered title document will usually bear the registration reference, which can be used to conduct a search at the relevant land registry.
5.3 Can any transaction relating to registered real estate be completed electronically? What documents need to be provided to the land registry for the registration of ownership right? Can information on ownership of registered real estate be accessed electronically?
Currently, transactions relating to registered real estate cannot be completed electronically in Nigeria. However, the Lagos State land registry is currently running a pilot electronic registration system, which may become open to the public.
The requirements to register ownership rights in Nigeria will depend on the type of right being registered and the land registry involved; however, the same will mainly include: a deed; an application form for the consent of the governor or minister; a survey plan, locational sketch of the real estate, and coloured photo of the real estate showing adjoining properties with a time and date stamp; evidence of lodgement of the record copy of the survey plan with the surveyor general of the state or federation; a certified true copy of the seller’s title, letter of consent from the seller, proof of identity of the purchaser and payer tax identification number; and evidence of payment of the requisite statutory fees. If the registration is over a land owned under customary law, the applicant’s family/community will be required to provide any documents that prove traditional history, acts of ownership over the land, acts of long possession and enjoyment over the land as well as a survey plan.
Yes, information on ownership of registered real estate may be accessed electronically in some states. It is usually a centralised database accessible only at a single location, i.e. the land registry. In Lagos State, for example, the electronic registry database can be accessed only by visiting the land registry.
5.4 Can compensation be claimed from the registry/registries if it/they make a mistake?
While there is no legal provision for compensation in the case of a mistake made by the registry, it is possible to file a civil suit to claim damages if there is enough evidence to prove negligence on the part of the registry that caused damage or loss.
5.5 Are there restrictions on public access to the register? Can a buyer obtain all the information he might reasonably need regarding encumbrances and other rights affecting real estate and is this achieved by a search of the register? If not, what additional information/process is required?
There are no statutory restrictions on public access to the register.
Yes, a buyer can obtain the information needed regarding the rights and encumbrances affecting real estate by conducting a search at the land registry.
However, an investigative survey by a registered surveyor may be required in certain cases to confirm that the information on the survey plan is accurate and matches the actual location of the real estate. The investigation will also reveal if the real estate is subject to government acquisition.
Information regarding the physical occupation of the land is not provided at the registry, so a potential buyer will usually visit the land as well.
6.1 Which parties (in addition to the buyer and seller and the buyer’s finance provider) would normally be involved in a real estate transaction in your jurisdiction? Please briefly describe their roles and/or duties.
Solicitors: they represent the buyer or seller and in some cases both. The buyer’s solicitor conducts the due diligence on the real estate and will usually prepare the transfer of title documents, which is shared with the seller’s solicitor. The seller’s solicitor responds to any queries from the due diligence and reviews the transfer of title documents.
Real Estate Agents: agents represent the buyer or seller or both and broker the real estate transaction between the buyer and seller for an agreed commission.
Surveyors: a surveyor may be engaged to provide verification of the coordinates of the real estate and to confirm if the real estate is subject to government acquisition. This is usually required when dealing with real estate in certain locations or based on the information obtained from the land registry.
Architects: where the land has a building, an architect may also be engaged to review the building plan to confirm it has been approved by the physical planning and development authority and that the building is a parallel of the approved building plan. Deviation from the approved plan may attract fines, penalties and, in extreme cases, demolition of the building.
Engineers: it may be prudent to engage a Council for the Regulation of Engineering in Nigeria (COREN) certified engineer to assess the structural stability of the building. The engineer will evaluate the construction and provide recommendations to address any potential issues or violations and may also advise the buyer not to purchase the real estate. The recent instances of collapsed buildings highlight the prudence in conducting a thorough structural stability test before purchase.
6.2 How and on what basis are these persons remunerated?
Solicitors are remunerated in line with the Legal Practitioners Remuneration (for Business, Legal Service and Representation) Order, 2023. In practice, solicitors charge a percentage of the purchase price, usually 5% or 10%. It is not uncommon for charges to be below 5% where the purchase price is quite significant.
Real estate agents charge a commission between 1–10%. The popular rate is 5% or 10%; it is not uncommon for real estate agents to charge a pre-agreed fixed fee in extremely complex and protracted sale transactions.
Surveyors, architects and engineers would charge a fixed fee to provide their services depending on the size and location of the real estate. Their respective professional scale of fees may also guide the fees charged.
6.3 Is there any change in the sources or the availability of capital to finance real estate transactions in your jurisdiction, whether equity or debt? What are the main sources of capital you see active in your market?
The main sources of capital for real estate projects are private investors and financial institutions. The choice between equity and debt is guided by the project requirements. High interest and inflation rates alongside the general economic downturn have slowed down debt finance and increased joint venture arrangements between real estate owners, property developers, and private investors.
6.4 What is the appetite for investors and/or developers to invest in your region compared to last year and what are the sectors/areas of most interest? Please give examples.
Investors and developers have continued to invest in the country’s real estate sector, particularly in the densely populated cities of Lagos and Abuja, due to the housing deficits in these cities. Also, Nigeria has had a general economic downturn with great inflation and devaluation of the Naira but the prices of real estate in Nigeria have been able to weather the economic situation in the country.
6.5 Have you observed any trends in particular market sub sectors slowing down in your jurisdiction in terms of their attractiveness to investors/developers? Please give examples.
The emergence of COVID-19 in 2020 led to a decrease in commercial advancements, as many companies have implemented alternative work arrangements to facilitate remote work for their employees. Consequently, the expansion of office spaces for numerous businesses in Nigeria has significantly decelerated.
7.1 What (if any) are the minimum formalities for the sale and purchase of real estate?
A deed of assignment, partition or sublease is required to transfer interest in real estate to a purchaser. A sale and purchase agreement may be utilised to capture specific terms and conditions of the sale, especially where there is a non-simultaneous exchange of the purchase price and title in the real estate; for example, where the purchase price is paid in instalments, or the sale is conditional.
7.2 Is the seller under a duty of disclosure? What matters must be disclosed?
No, there are no statutory duties of disclosure except for latent defects known to the seller. Buyers have the responsibility to investigate and conduct thorough due diligence of the real estate title prior to purchase. However, sellers can be placed under contractual obligations to disclose through the addition of specific representations and warranties in the contract to be signed by the seller.
7.3 Can the seller be liable to the buyer for misrepresentation?
Yes, if the buyer is able to prove that he/she was induced into entering the contract by the misrepresentation and has suffered a loss by doing so, then the seller can be held liable. If the seller has made a representation or warranty to that effect in the contract, this will be considered a breach of the contract, which can be the subject of a civil suit to recover damages or demand specific performance.
7.4 Do sellers usually give any form of title “guarantee” or contractual warranties to the buyer? What would be the scope of these? What is the function of any such guarantee or warranties (e.g. to apportion risk, to give information)? Would any such guarantee or warranties act as a substitute for the buyer carrying out his own diligence?
Very much so; the deed and the sale and purchase agreement often include contractual warranties and representations on the superiority of the title being transferred. The representations could extend to cover pertinent facts that the buyer is relying on to enter the contract and operate to give clear information and indicate liability. The common law principle of caveat emptor would, however, prevent a substitution of the buyer’s due diligence, as a buyer must be careful to know the full details about the real estate being bought so as to acquire good title; an exception will apply, however, if the buyer carries out usual and proper due diligence and did not discover a defect in the title.
7.5 Does the seller retain any liabilities in respect of the property post sale? Please give details.
Liabilities expressly set out in the contract for the seller post-sale will apply. Generally, the contracts would include liabilities for transferring a defective title or if the existence of an encumbrance on the title is discovered or for any outstanding payments of any charge, levy or tax due on the real estate prior to the date of sale.
7.6 What (if any) are the liabilities of the buyer (in addition to paying the sale price)?
The buyer is liable for paying its legal costs for preparing the contractual documents and the necessary fees required to obtain the consent of the governor or minister to the sale of the real estate.
8.1 Please briefly describe any regulations concerning the lending of money to finance real estate. Are the rules different as between resident and non-resident persons and/or between individual persons and corporate entities?
Real estate lending in Nigeria is not subject to industry-specific regulations; loans taken to finance real estate projects are governed by general financial regulations and contractual terms. The Central Bank of Nigeria (CBN), however, regulates the financial sector and makes regulations that impact real estate financing. The Security & Exchange Commission also has rules that govern Real Estate Investment Trust schemes, which can be set up for the purposes of financing real estate transactions. With respect to mortgages, the Property and Conveyancing Law, 1958 and Conveyancing Act of 1881 are the main regulations. States retain either of the regulations or enact a version for application within the state; for example, the Mortgage and Property Law of Lagos State. The Mortgage Institutions Act, 1989 and Banking and other Financial Institutions Act also regulate mortgage institutions. The Federal Mortgage Bank is also a regulator of mortgages and is empowered to make recommendations to the Minister of Finance to make such regulations as may be necessary for the implementation of the National Housing Fund Act, 1992. The regulations apply to both resident and non-resident persons, as well as individual persons and corporate entities, though with certain variations or specific requirements for different categories of borrowers. For instance, the guidelines may outline criteria for credit risk assessment, maximum loan-to-value ratios, and other terms for real estate lending. There might be distinctions in requirements based on whether the borrower is an individual or a corporate entity. Also, regulations might differ in terms of down payment requirements, interest rates, and permissible loan amounts for residents versus non-residents. Additionally, specific regulations may exist for foreign investors or non-resident individuals/entities seeking to invest in Nigerian real estate. These regulations could include provisions related to capital repatriation, foreign exchange controls, or approvals from regulatory bodies.
8.2 What are the main methods by which a real estate lender seeks to protect itself from default by the borrower?
Financial institutions will usually secure real estate loans with the real estate to be purchased serving as collateral for the loan. If the borrower defaults, the lender has the legal right to foreclose on the real estate to recover the unsettled loan. In Nigeria, the lender will also exercise equitable title over the real estate on behalf of the borrower and after issuance of the legal title, and the lender will hold the same until the loan is paid off; a charge is also registered against the real estate at the relevant land registry. In some cases, lenders may require personal guarantees from the borrower or third-party guarantors. Personal guarantees make the borrower and/or guarantor personally liable for the debt, providing an extra layer of security. This is commonly the case where the borrower is a corporate entity, and the personal guarantees are required of the individual owners or directors of the entity. A lender may stagger the disbursement of the loan, such that the borrower needs to reach a construction milestone before additional funds are disbursed by the lender. Here, the lender limits the risk of default to only the amount disbursed rather than the entire loan.
8.3 What are the common proceedings for realisation of mortgaged properties? Are there any options for a mortgagee to realise a mortgaged property without involving court proceedings or the contribution of the mortgagor?
In Nigeria, the realisation of mortgaged properties typically involves a legal process, and court proceedings are often necessary. Judicial foreclosure is the most common method to realise a mortgaged property in Nigeria. It is unlikely that the mortgagee realises the mortgaged property without input from either the court or the mortgagor. A mortgagee may appoint a receiver to intercept and apply the proceeds of the sale to discharge the mortgage debt where the mortgagee fears that the mortgagor may jeopardise the security. The court may also appoint a receiver to take control of the mortgaged property and administer it in a manner that serves both parties’ interests. A mortgagee may also realise a mortgaged property and avoid a lengthy court process where a mortgagor has voluntarily agreed to transfer the real estate to the mortgagee through a deed in lieu of foreclosure. However, the consent of the mortgagor is crucial to this arrangement and any agreement must be properly documented. Some mortgage agreements may also include a power of sale clause that allows the mortgagee to sell the property without the involvement of the court, provided certain conditions are met.
8.4 What minimum formalities are required for real estate lending?
The minimum formalities required to establish a legally binding loan agreement and safeguard the lender’s security interest in the asset being financed are as follows:
8.5 How is a real estate lender protected from claims against the borrower or the real estate asset by other creditors?
Priority is crucial in determining the order of repayment in the event of foreclosure or sale of real estate, so lenders often aim to have the first legal mortgage position on the real estate. More importantly, the lender ensures registration of the lien, mortgage or charge with the appropriate land registry or government agency. Registration provides a notice of the existence of the mortgage, lien or charge and ensures that it is the primary and first-ranking charge on the real estate, ahead of any subsequent mortgages, charges or liens.
8.6 Under what circumstances can security taken by a lender be avoided or rendered unenforceable?
8.7 What actions, if any, can a borrower take to frustrate enforcement action by a lender?
The borrower may file legal challenges or counterclaims against the lender, alleging issues with the loan agreement or the lender’s conduct. This can lead to legal delays and additional court proceedings. It could frustrate the lender’s position significantly due to the time-consuming and longwinded Nigerian judicial system; for example, a borrower could seek court-issued injunctions to prevent the lender from taking specific enforcement actions, such as foreclosure or a property sale. Injunctions can delay the process and require legal proceedings to resolve. If the lender obtains a favourable court judgment or order, the borrower may appeal the decision, further prolonging the enforcement process, and, again, the longwinded judicial process and paperwork presents a potent dose of frustration to the lender.
Allegations of irregularities or fraud in the creation and registration of the security may be introduced by a borrower to challenge the validity of the security. Sometimes, the borrowers may call on regulatory bodies, such as the CBN, to investigate and review the lender’s actions, alleging violations of banking regulations. The borrowers can seek temporary restraining orders from the court, which can prevent the lender from taking immediate enforcement actions while the legal validity of the debt or security is being determined. Filing for bankruptcy or initiating insolvency proceedings can temporarily halt enforcement actions, as the court takes over the borrower’s assets and liabilities. The lender must then participate in the insolvency process to seek repayment. To make the lender’s recovery position more challenging, borrowers may proceed to negotiate with other creditors to consolidate or restructure their debts. As frustrating as the options may be to the lender, it is important to emphasise that taking these actions does not guarantee success for the borrower, and many of these tactics can be successfully opposed and reviewed.
8.8 What is the impact of an insolvency process or a corporate rehabilitation process on the position of a real estate lender?
Several variables, such as the particular legal framework, the nature of the insolvency, and the borrower’s financial situation, can affect how an insolvency or corporate rehabilitation process affects the position of a real estate lender. A key player in Nigeria’s financial system is the Asset Management Corporation of Nigeria (AMCON), which is primarily responsible for managing and resolving the non-performing loans (NPLs) and distressed assets of banks and other financial institutions. Concerns about distressed real estate assets and loans are addressed in large part by AMCON. Here are some potential impacts of these processes on real estate lenders:
8.9 What is the process for enforcing security over shares? Does a lender have a right to appropriate shares in a borrower given as collateral? If so, can shares be appropriated when a borrower is in administration or has entered another insolvency or reorganisation procedure?
Equitable or legal mortgages can be used to create security over shares and whether a security is held over a share in an equitable or legal manner will affect how that security is enforced. For the enforcement of security over shares created via a legal mortgage, the lender can either foreclose or exercise the power of sale. In the event that the mortgagor defaults, an authorised lender may foreclose legally, granting him ownership of the shares. Following the completion of the process, the mortgagor’s equity of redemption is eliminated and the title to the shares becomes fully vested in the lender. The procedure for foreclosure on security over shares is the same process that is applicable to mortgages generally. Without going to court, the security may be enforced through a sale. The lender may use the statutory power of sale in cases where the loan agreement is sealed. If a lender has the express authority to sell, they may do so; however, the enforcement of the security will still be possible even in the absence of such an express power. If the redemption date has passed or if no repayment date is specified and the mortgagor has not complied with the reasonable notice provided by the lender demanding repayment within the specified timeframe, then the power of sale may be implied. For the enforcement of security over shares created via an equitable mortgage if the mortgagor defaults on payment, an equitable lender of shares may enforce the security by selling the shares. The kind of equitable mortgage created determines the mode of sale. The lender may, if appropriate, fill in the blank and register the document in his own name when an equitable mortgage is supported by a “blank transfer” executed in his favour. He can then use his power of sale to give the buyer legal ownership of the asset. Any equitable mortgage of shares may be enforced by judicial sale or by foreclosure of the mortgagors’ title over the shares in the event that there is no registered blank transfer.
Nigeria currently does not recognise appropriation as an enforcement right. A mortgagor may redeem the shares by repaying the loan until sale or foreclosure.
9.1 Are transfers of real estate subject to a transfer tax? How much? Who is liable?
Yes, Capital Gains Tax (CGT) is chargeable on the gains accruing on the disposal of assets in accordance with law. It is calculated at 10% of the gains and is payable by the vendor/seller of the real estate. CGT is due on assignment and leases excluding mortgages or other charges. Persons subject to payment of CGT include companies, partnerships, individuals and personal representatives. In practice, however, the purchaser pays CGT together with other assessments charged on the transfer of the real estate during the registration process of the purchaser’s title. Also, depending on the state and location of the real estate, CGT in Lagos State is about 0.5% of the fair market value of the real estate. Stamp duties imposed on and raised from stamps charged on instruments and other legal documents attract flat or fixed rates. It is payable at the registration of the transfer deed and the buyer of real estate is responsible for the payment.
9.2 When is the transfer tax paid?
In Nigeria, persons who have disposed of a chargeable asset are required to compute their capital gains tax liability, file an assessment return, and pay the tax no later than 30 June, and 31 December of that year.
9.3 Are transfers of real estate by individuals subject to income tax?
The transfer of real estate by individuals is not subject to personal income tax. However, at the registration of title stage, buyers are provided with an income tax assessment sum, which should be paid by the buyer and seller. This is essentially a tax collection mechanism to ensure that people pay income taxes and is assessed based on the income tax that ought to have been paid for someone able to afford the fair market value of the real estate. The buyer would usually provide evidence of either previously paid income tax that covers or exceeds the sum assessed or an income tax exemption status or would proceed to make the payment assessed, and in some cases, the buyer would challenge the sum assessed.
9.4 Are transfers of real estate subject to VAT? How much? Who is liable? Are there any exemptions?
Transfer of real estate is not subject to value-added tax in Nigeria.
9.5 What other tax or taxes (if any) are payable by the seller on the disposal of a property?
No other taxes are levied on a seller on the disposal of a property in Nigeria, save from CGT.
However, in practice, upon the registration of title by the buyer, the buyer is given a list of charges, which includes an income tax assessment sum for the seller of the property. As indicated in question 9.3, the tax authority exploits the registration of title process to ensure that people pay income taxes. Where the buyer had engaged the services of a diligent solicitor, the provision of evidence of income tax payment would have been a condition of the sale. Where this is lacking, the buyer would be required to contact the seller for the same and would proceed to pay the sum assessed for the seller, where the seller is uncooperative or unavailable.
9.6 Is taxation different if ownership of a company (or other entity) owning real estate is transferred?
When there is a transfer in the ownership of a company that owns real estate, tax implications arise if the shares of the company are sold at a profit; the company would be subject to capital gain tax on such profit.
However, a threshold of N100 million annual cumulative worth of shares must have been disposed at a profit to attract CGT. If the profit from the sale of shares is reinvested to acquire shares in the same company or another Nigerian registered company within the same tax assessment year, any portion of the accrued gain not reinvested will be subject to the applicable tax rate of 10%. Shares transferred between an approved borrower and lender in a regulated security lending transaction will also not be subject to CGT.
9.7 Are there any tax issues that a buyer of real estate should always take into consideration/conduct due diligence on?
No; however, it is advisable for the buyer to request an income tax clearance certificate from the seller as this will be required upon registration (see the response to question 9.3); this minimises any potential liability for the buyer.
10.1 Please briefly describe the main laws that regulate leases of business premises.
In Nigeria, there is usually no distinction in the laws that apply to business leases or residential leases. In Abuja, the Recovery of Premises Act (Abuja) 1990 applies to leases while the Tenancy Law of Lagos State 2011 is applicable to all areas in Lagos excluding Apapa, Ikeja GRA, Ikoyi and Victoria Island. The Rent Control and Recovery of Premises Law of Lagos State 1997 is applicable to these areas. The Recovery of Premises Law, Laws of Bendel State 1976 on the other hand regulates business leases in Edo and Delta State. Other states also have equivalent legislations regulating business leases.
10.2 What types of business lease exist?
Business leases are popularly known as commercial leases in Nigeria. The types of leases depend on the use of the real estate, tenure or mode of creation.
Parole lease: this is an oral lease with a duration of not more than three years, it must reserve the best rent and exclusive possession of the property must be given to the lessee.
Written lease: this is essentially in writing; it is easier to enforce the terms of a written lease by specific performance in addition to the remedy of part performance.
Lease by deed: this is a type of lease required for leases above three years and must be made under seal. In Nigeria, all conveyances of land or any interest therein are void unless they are by deed.
10.3 What are the typical provisions for leases of business premises in your jurisdiction regarding: (a) length of term; (b) rent increases; (c) tenant’s right to sell or sub-lease; (d) insurance; (e) (i) change of control of the tenant; and (ii) transfer of lease as a result of a corporate restructuring (e.g. merger); and (f) repairs?
10.4 What taxes are payable on rent either by the landlord or tenant of a business lease?
Withholding tax is payable on the consideration of a lease and the tenant is under an obligation to deduct the same and remit to the appropriate tax authority. In practice, landlords will include a clause in the contract stating that the rent is exclusive of all taxes, which leaves the tenant with the responsibility to remit withholding tax in addition to the rent. That being said, the payment of withholding tax on rent is honoured more in contravention.
10.5 In what circumstances are business leases usually terminated (e.g. at expiry, on default, by either party etc.)? Are there any special provisions allowing a tenant to extend or renew the lease or for either party to be compensated by the other for any reason on termination?
A commercial lease can be terminated by expiration of term, proper service of a valid notice to quit to the tenant by the landlord, forfeiture, the tenant transferring the remainder of its interests in the lease to the immediate landlord, and merger. A tenant can renew their lease if the lease agreement includes an express provision for renewal. The option-to-renew clause grants the tenant an automatic right to renew the lease. The provision must state the time at which the tenant can exercise such right to renew the lease, the mode of notice, conditions to be fulfilled and the terms of the new lease.
10.6 Does the landlord and/or the tenant of a business lease cease to be liable for their respective obligations under the lease once they have sold their interest? Can they be responsible after the sale in respect of pre-sale non-compliance?
Generally, neither the landlord nor the tenant will be liable for their obligations in the lease agreements once they sell their interests. They can, however, be responsible after the sale in respect of pre-sale non-compliance where certain terms survive termination. The lease may also include a clause indicating that termination will not affect any rights, remedies, obligations or liabilities of the parties that have accrued up to the date of termination, including the right to claim damages in respect of any breach of the agreement that existed at or before the date of termination. This clearly imposes an enforceable contractual right.
10.7 Green leases seek to impose obligations on landlords and tenants designed to promote greater sustainable use of buildings and in the reduction of the “environmental footprint” of a building. Please briefly describe any “green obligations” commonly found in leases stating whether these are clearly defined, enforceable legal obligations or something not amounting to enforceable legal obligations (for example aspirational objectives).
Green leases are rare in Nigeria. Sustainable real estate is relatively new in Nigeria and mostly involves the use of technologies that reduce building costs and save energy. In an investor-developer relationship, it is not unusual for the investor to make the achievement of sustainable real estate goals a condition of investment.
10.8 Are there any trends in your market towards more flexible space for occupiers, such as shared short-term working spaces (co-working) or shared residential spaces with greater levels of facilities/activities for residents (co-living)? If so, please provide examples/details.
As the real estate market continues to experience rapid growth in Nigeria, building owners often maximise spaces and gain profits from shared workspaces rather than depend on income from just one individual or organisation.
Co-working spaces have become an affordable alternative to renting or buying commercial office space. Regus and Workstation International Co-work Limited are examples of real estate organisations that provide co-working spaces in Nigeria; there are many more who also provide meeting and conference room facilities.
The high cost of renting or buying a residential property has also contributed to the rise of co-living spaces. It has become a popular trend in Nigeria’s real estate market. Spleet, Fibre and Fine & Country are examples of co-living providers in Nigeria.
11.1 Please briefly describe the main laws that regulate leases of residential premises.
In Nigeria, there is usually no distinction in the laws that apply to business leases or residential leases. Please see the response to question 10.1
11.2 Do the laws differ if the premises are intended for multiple different residential occupiers?
No, the laws are the same.
11.3 What would typical provisions for a lease of residential premises be in your jurisdiction regarding: (a) length of term; (b) rent increases/controls; (c) the tenant’s rights to remain in the premises at the end of the term; and (d) the tenant’s contribution/obligation to the property “costs”, e.g. insurance and repair?
Length of time: a residential lease would indicate the length of the term of the lease. It must be ascertainable either expressly or implicitly as to a fixed-term lease under the fixed tenancy or tenant by will from the contractual document.
Rent Increase: the landlord may include a provision to increase the rent in the lease agreement subject to an option to renew; however, where there is no option to renew the clause and after the determination of the lease both parties desire to enter another fixed tenancy, such rent increase must be agreed before execution of the lease agreement. The Tenancy Law expressly prohibits an arbitrary or unilateral rent increases by landlords.
Tenant’s right to sell or sub-lease: there is usually an express provision in the lease agreement preventing the tenant from assigning or subletting their interest in a lease to a third party without the consent of the landlord and where this provision is lacking, the tenant may assign or sublet his interest except prevented by law. For example, in Lagos State, the Tenancy Law expressly prohibits a tenant from assigning or subletting any part of the premises without the landlord’s consent.
Insurance: both landlord and tenant have insurable interests and certain factors are considered to determine who is to insure between the parties. For example, where the real estate is being used as collateral for a loan, the bank usually directs the landlord to insure the real estate against damage or destruction. If the real estate is being used for a lengthy period, say five years and above, or the tenant maintains a high-risk business, the tenant would insure in this case. However, a covenant to insure may be implied by statute as is the case in Lagos State where the requirement of insurance is implied in all leases.
Change of control of the tenant: concerning a change of control of the tenant or the transfer of a lease as a result of a corporate restructuring (e.g. merger), these are not standard provisions included in the lease agreement, though the same is anticipated by the parties; in this case, either party would discuss relevant clauses with the other party and include agreed terms in the contract.
Repairs: the responsibility for repairs is often included in the lease agreement. In the absence of such covenant to repair, the tenant should repair on account of the implied covenant to use the real estate in a tenantable manner. In Lagos State, the landlord has an implied duty to keep and maintain external parts of the leased real estate, e.g. roof and walls etc. Standard practice leaves the responsibility for all external and structural repairs with the landlord, while the tenant is responsible for all internal maintenance and repair. If the disrepair follows from the operation of wear and tear, the tenant is not responsible for any such repair.
11.4 Would there be rights for a landlord to terminate a residential lease and what steps would be needed to achieve vacant possession if the circumstances existed for the right to be exercised?
The landlord (lessor) has legal rights to terminate a residential lease based on the terms agreed between the parties. Instances such as the effluxion of time, abandonment, breach of any covenant, or where the premises are required by the landlord for personal use or substantial repairs, are also reasons for a landlord to terminate a residential lease.
Steps to be taken to achieve vacant possession are as follows:
12.1 What are the main laws which govern zoning/permitting and related matters concerning the use, development and occupation of land? Please briefly describe them and include environmental laws.
The Land Use Act 2004 and Constitution of the Federal Republic of Nigeria 1999 are the main laws governing the use, development and occupation of land in Nigeria.
The Nigerian Urban and Regional Planning Act 1992, Cap N138 LFN 2004 establishes the National Urban and Regional Planning Commission, which prescribes planning responsibilities and development plans for the federal, state, and local governments, respectively. States also exercise physical planning responsibilities and enact planning laws for the state.
The National Environmental Standards and Regulation Enforcement Agency (NESREA) Act 2007 established the National Environmental Standards and Regulation Enforcement Agency (NESREA), which is responsible for the protection and development of the environment.
The Environmental Impact Assessment Act 1992 requires an assessment of public or private projects likely to have a significant impact on the environment. States enact state-wide environmental management and protection laws.
The Harmful Waste (Special Criminal Provisions) Act, 2004 prohibits carrying, dumping or depositing harmful waste in the air, land or waters of Nigeria without lawful authority.
12.2 Can the state force land owners to sell land to it? If so please briefly describe including price/compensation mechanism.
In Nigeria, the state is not authorised to force landowners to sell their land to it. However, the state has the power to revoke a landowner’s right of occupancy for public interest. If a landowner’s right of occupancy is revoked for public interest reasons, the state is required to provide compensation to the landowner. The compensation is calculated based on the value of the land at the time of the revocation of the right of occupancy, and any improvements made on the land are taken into account in the calculation. To legitimately effect a compulsory acquisition of property, the relevant procedure for acquisition must be strictly followed by the state; failure to do so may vitiate the acquisition.
12.3 Which bodies control land/building use and/or occupation and environmental regulation? How do buyers obtain reliable information on these matters?
The National Environmental Standards and Regulation Enforcement Agency is the regulatory agency for enforcing environmental standards, regulations, laws, policies, and guidelines. There are also governmental bodies responsible for controlling the use of land and buildings in various states in Nigeria. For instance, in Lagos State, the Lagos State Urban and Regional Planning and Development Law of 2010 established three physical planning and development agencies: the Lagos State Physical Planning Permit Authority (LASPPPA) is responsible for processing and issuing planning permits in Lagos State; the Lagos Building Control Agency (LASBCA) is responsible for monitoring and enforcing building control regulations; and the Lagos State Urban Renewal Agency (LASURA) is vested with the responsibility to implement state policy on urban renewal and the upgrade of slums in Lagos.
12.4 What main permits or licences are required for building works and/or the use of real estate?
Development permits and building plan permits are required. They evolve over time and will require a visit to the relevant authority prior to construction works.
12.5 Are building/use permits and licences commonly obtained in your jurisdiction? Can implied permission be obtained in any way (e.g. by long use)?
In Nigeria, building permits and licences are required from the relevant authority prior to the construction of a building either by a developer or landowners.
Implied permission to use a property in a certain way (residential, commercial industrial, religious, etc.) may be implied by long use only where the state ratifies it by making a change of use for property in the area. For example, it is common for the state to reclassify a residential area to a commercial area due to the long use of said area for commercial use by an increasing number of property owners.
12.6 What is the typical cost of building/use permits and the time involved in obtaining them?
Building permit timelines vary among states in the federation. In Lagos, the process typically takes a minimum of 60 days. To streamline and expedite the application process, the relevant agency (the LASPPPA) introduced an online portal for e-permit applications. The intention was to reduce the application timeline by at least 20 days. Despite these efforts, some applicants continue to submit physical applications at the registry due to the portal’s inefficiencies. The cost of a building permit is not fixed and would be calculated based on several factors, which include the location of the land, size of the land, type of building envisaged for construction, value of the building, number of residents the building will serve, number of floors in the building, etc.
12.7 Are there any regulations on the protection of historic monuments in your jurisdiction? If any, when and how are they likely to affect the transfer of rights in real estate or development/change of use?
Historic monuments are protected under the National Commission for Museums and Monuments Act 2004 and the Nigerian Urban and Regional Planning Act, 1992 (URPA). A museum or monument may only be demolished, altered or extended if the Control Department created under the URPA gives a written consent for the execution of works on the building upon obtaining consent from the National Commission for Museums and Monuments.
Consent of the governor or minister will be required when there is a transfer of interest; there is the Listed Sites (Preservation) Law of Lagos State, which provides that no property, site, or monument location to which the law applies as a listed site under grades I, II and III shall be altered, demolished or improved upon – except as is necessary, owing to normal wear and tear or minor repairs – without the prior issuance of listed site consent of the governor in accordance with the provisions of the law.
12.8 How can, e.g. a potential buyer obtain reliable information on contamination and pollution of real estate? Is there a public register of contaminated land in your jurisdiction?
Section 55 of the Environmental Impact Assessment Act provides for the maintenance of a public registry for the purpose of facilitating public access to records relating to environmental assessments. A potential buyer may obtain information from the public registry maintained under this Act. Also, any person requiring clarification on environmental issues may also visit the Federal Ministry of Environment or any relevant state environmental agency for environment-related information.
12.9 In what circumstances (if any) is environmental clean-up ever mandatory?
Non-compliance with environmental laws, including the National Environmental Standards and Regulations Enforcement Agency (NESREA) Act, the Environmental Impact Assessment Act, National Environmental (Construction Sector) Regulations, and pertinent state environmental laws and waste-management regulations, can trigger enforcement actions. In such instances, the NESREA, relevant state environmental regulatory agencies, or a court of competent jurisdiction may issue a mandatory environmental clean-up order against defaulters.
12.10 Please briefly outline any regulatory requirements for the assessment and management of the energy performance of buildings in your jurisdiction.
Building Energy Efficiency Guidelines for Nigeria give practical advice to professionals in Nigeria on how to design, construct, and operate more energy-efficient buildings. The National Building Energy Efficiency Code also specifies the minimum energy required to achieve energy efficient buildings. The code, when implemented, has the capacity to save 40% of current energy usage in buildings. It sets the minimum efficiency requirements for new buildings to achieve reductions in energy use and gas emissions over the life of the building.
13.1 Please briefly explain the nature and extent of any regulatory measures for reducing carbon dioxide emissions (including any mandatory emissions trading scheme).
The Climate Change Act, 2021 was enacted to provide a framework to mainstream climate change action, provide for carbon budgeting and establish the National Council on Climate Change. It is the only climate change law in West Africa. It provides for a climate change fund and applies to public and private persons as well ministries, departments and agencies. It charges the Federal Ministry of Environment and Ministry of Budget and National Planning to set carbon emissions budget, whilst the National Council sets the National Climate Change Action Plan. There are currently ongoing plans to launch a carbon tax and budget policy.
13.2 Are there any national greenhouse gas emissions reduction targets?
Yes, a net-zero target is set for 2060.
13.3 Are there any other regulatory measures (not already mentioned) which aim to improve the sustainability of both newly constructed and existing buildings?
There are none at this time.
14.1 Please detail any laws that govern real estate in your jurisdiction which were introduced in response to the effect of the Coronavirus (COVID-19) pandemic and which remain in place.
There are no laws to this effect.
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