STAGES IN CONTRACT OF SALE OF LAND
PRE-CONTRACT ENQUIRIES (PRELIMINARY STAGE)
At this stage it is important for the purchaser to investigate thoroughly matters concerning the property. This is because there is no duty on the part of the vendor to disclose to a prospective buyer such facts that the buyer could discover by mere inspection of the property. The legal implication is that he will be precluded from turning around to say he wasn’t aware of such defects. But any false representation by the vendor concerning these matters will entitle the purchaser to claim damages for misrepresentation or breach of contract.
For the sake of emphasis, a purchaser must endeavor to physically inspect the property so as to discover all patent defects in the property. A patent defect includes any defect which is visible to the eyes. The position is not the same where the defects are latent.
SEARCHES AND INVESTIGATION OF TITLE
This is the procedure by which a party interested in the purchase of land investigates the title of the vendor. It is also the carrying out of the required due diligence in relation of land transactions. In David v Sasegbon, the Supreme Court stated that a purchaser who did not take the trouble to investigate the title of the vendor at the land registry where he would have discovered the existence of any encumbrance would have himself to blame for not doing so.
Search is the primary thing to do when it comes to a piece of land in respect of a document that is registered with the land registry. In Onagoruwa v Aderemi, the court held that registration is like a mirror where all encumbrances can be revealed against a particular piece of land. Search is implied into every contract of sale of land that the vendor shall convey good title to the purchaser.
ABSTRACT (EPITOME) OF TITLE
This is talking about the history of the property (esp root of title) which is best known to the vendor. Immediately after the exchange of contract, the vendor delivers to the purchaser the abstract or epitome of title.
The epitome of title is a written history arranged in a chronological order containing a review of the previous owners, liens, encumbrances, mortgages or any other matter that affects the ownership of the property. It is to know the transactions that have taken place in respect of the land.
Outside a traditional form of abstract of title, oral evidence is admissible in land registry. The traditional form of an abstract of title includes: a. Date of document b. nature of event c. parties d. whether abstract is delivered or photocopy e. document number f. whether original document would be handed over on completion.
Advantages of Abstract of Title
a. It reveals to the purchaser if there is any defect in the vendor’s title
b. It helps the purchaser in raising requisition of title
c. It is very useful to the purchaser’s solicitor when he is writing the report on title.
Documents which can be examined by the purchaser
a. Conveyance dealing with absolute ownership of land. The purchaser is meant to check ownership of land at least for up to thirty years or most times forty years to assert title to the land. S. 162 EA provides that a document which is twenty years or more is presumed to be valid and regular.
b. Leases and Assignments. If the title transferred is a lease, it must conform to the provision statute of frauds and PCL. All assignments must be made by Deed.
c. Mortgages and Leases. Once there is a legal mortgage, there is a presumption of legal title. Documents to look for include Deed of Release which must also be registered.
d. Power of Attorney: Where sale is by Power of Attorney, it must be made by Deed. It is important to look at the nature of the Power of Attorney whether it is couple with interest.
e. Registered Title: The purchaser is expected to verify whether the land has a registered title under the Registration of Title Law.
REQUISITION OF TITLE
Where a purchaser is not satisfied after examining the above documents, he can file a requisition of title which is a query or objection to the documents of title. Requisition of title must be raised on time. However, Requisition doesn’t present an opportunity to ask frivolous and unnecessary questions which could be answered by mere inspection of the property by the purchaser. The following may be raised under requisition of title: a. defect of title b. inconsistency between the contract description of property and that delivered.
There must be a clear and unambiguous response to the query within a reasonable time. Where the purchaser is satisfied with the vendor’s reply, he may accept the title expressly or impliedly. Where the buyer is not satisfied, the transaction may be put on hold and the deposit or part-payment refunded.
EXCHANGE OF CONTRACTS
This refers to the procedure for making the contract binding on the parties. Exchange becomes necessary to bring the contract into existence in law. There are two possible situations; where the parties act by separate solicitors and where the parties act by the same solicitor.
Where the parties use separate solicitors, the vendor’s drafts the contract incorporating the special conditions as agreed by the parties. The draft contract is sent to the purchaser’s solicitor for amendments and comments (if any). This process continues until both parties are satisfied and the contract is engrossed in at least two copies. Each of the parties will sign their copy of the contract. Traditionally, the exchange of the signed copies of the contracts should take place at the vendor’s. Until the exchange of their respective signed copies, notwithstanding that the contracts are signed, it is not binding. In Eccles v Bryant & Pollock, the court held that a customary method of bringing a contract of this kind into existence is by exchange of the two parts of the contract and until such exchange takes place, notwithstanding that both parties have signed, there exists no contract.
Where the parties act by the same solicitor, a solicitor should avoid adverse influences and conflict of interest except by express consent of all concerned given after full disclosure of the facts (S. 17, Rules of Professional Conduct 2007). However, in practice there are a few situations where one solicitor may act on behalf of both parties:
a. When the terms of the contract have been full negotiated and agreed upon, the same solicitor may be called upon to formalize the agreement.
b. When the transaction is of little legal consequences, the parties may avoid extra expenses.
c. When the title to the property is sound and there’s no likelihood of conflict between the parties. For example, transactions between relatives, a parent company and its subsidiary, a settler of trust and the trustees.
In the above situations, it is usual to use one-copy contract which becomes binding when both parties sign it unconditionally. There is no need for exchange because a person can’t exchange a contract made with himself (Smith v Mansi).
PERFECTION OF CONTRACT
1. Stamping of the contract:
By S. 58 Stamp Duties Act, a contract of sale of land is chargeable to fixed stamp duty which may be paid by affixing adhesive (post-office) stamp. Where a contract of sale is not stamped, the document will not be accepted for registration neither would it be admitted in court to prove title.
2. Requirement of Governor’s consent:
By the combined provisions of sections 22 & 26 Land Use Act 1978, the alienation of a right of occupancy without the Governor’s consent first had and obtained renders such transfer or alienation null and void.
It is now settled law in Nigeria that the provisions of the Act do not apply to contracts of sale (Solanke v Abed; Okunneye v FBN; ITI v Aderemi).
Whether or not a contract of sale of land is a
registrable instrument depends on if the contract of sale is an instrument under the land registration law applicable in the place where the property is located (Akingbade v Elemosho).