There is a difference between part payment and payment of deposit, when what was paid is deposit it means that the contract/ transaction has not been concluded, its still at the transaction stage. At this stage the vendor is entitled to rescind and sell to another person.

Deposit is sum paid at the contracts stage of sale of land to show commitment on the part of the prospective purchaser. It also indicates that the transaction is not gratuitous.

Where the purchaser pays deposit and then fails to pay the balance on the date agreed, the purchaser would be liable to lose the deposit while the vendor is entitle to rescind being the innocent party in the absence of any contrary stipulations in the contract. Note that where deposit is paid it shows that the transaction is still on-going and not yet concluded.

 On the other hand parties could agree that the initial payment made by a prospective purchaser should be called a part payment. Where what was paid is a part payment, the general implication is that the transaction is over and concluded and that the purchaser/assignee is only indebted to the assignor/vendor. Accordingly if the purchaser fails to pay the balance on the agreed date, the purchaser would not lose the part payment and the vendor is not entitled to rescind from the contract on that basis. He is only entitled to enforce payment of the debt owed to him.

Note that even where what was paid is part payment the circumstances of the transactions might suggest that a contrary intention is implied. An open contract cannot be an end of discussion neither can it suggest transaction concluded. Regardless of what is written…

 

Capacity in which the vendors solicitor may receive payment of deposit

Deposit is usually paid by the purchaser to the vendor or vendor solicitor. While receiving payment of deposit from the purchaser or purchaser’s solicitor, parties may agree that the vendor’s solicitor may receive the deposit in one of two capacities:

• As an agent, or
• As a stakeholder

 

Legal implication of the vendor’s solicitor receiving payment of deposit as an agent

1. Where the vendor’s solicitors receives payment of deposit as an agent it means he received directly on behalf of the vendor
2. The vendor is immediately entitled to the deposit - so the money can be applied the way he wants.
3. If the vendor’s solicitor receives the deposit in such a case and misappropriates it or any part of it, the vendor is directly liable to the purchaser to repay the money. However note that in such a case the vendor in turn has 3 different remedies against the solicitor namely
4. The vendor can sue him in a civil court to recover the money – commence a civil action
5. The vendor can report him to law enforcements agents as it amounts to stealing by conversion - so he can initiate criminal proceedings against the solicitor.
6. The vendor can report him to appropriate professional disciplinary bodies in the legal profession such as the LPDC, NBA, Supreme Court and CJN.
7. The deposit is to be paid into client account. The money must not be mixed with personal money. Regardless of whether it is misappropriated or not, there must be a separate client account, money should not be paid into the lawyers personal account.

As an agent he also needs to render account and pay interest that accrues.

 

Legal implication of the vendor’s solicitor receiving payment of deposit as a stakeholder

1. The vendor’s solicitor is like an interpleader, a trustee in respect of that money received for both parties (for the innocent party ultimately; so not for the vendor or purchaser). Note that stakeholder here has a different meaning from the everyday language. 5 conditions must be satisfied: 1) that the money/property is in his possession   2) there are competing people fighting for the money/property 3) he is not one of those fighting 4) neither is he colluding with anyone 5) he is ready to abide by any order the court gives and is ready to give it anybody who is ultimately rightfully entitled to it at the end of transaction. This way the money becomes safe and secure. So to avert a situation where money is fraudulently disseminated before transaction is concluded
2. He is not liable to give the money to any of the parties until the end of the transaction at which point he becomes liable to give it to only the party who is rightfully entitled to it
3. When receiving the money as a stakeholder he must pay the money into the client/trust account
4. The money must not be mixed with the chambers money or personal money .i.e so it cannot be paid into the chambers account or personal account, merely paying it into such account is a misconduct regardless of whether it misappropriated or not
5. Must not take any portion out of the money neither can it be used. Where the money is misappropriated by the stakeholder (LP) the lawyer is personally liable to repay the money because he did not receive it on behalf of anyone rather he received it as interpleader
6. Where money is received as a stakeholder the lawyer is not liable to pay any interest on it.

Let it be written down

 

Sale of land has 5 stages

Stages/ steps in sale of land

• Pre-contract stage
• Contract stage
• Post-contract stage
• Completion (conveyance)
• Post completion

 

POST –CONTRACT: Deducing title; root of title; procedure for investigation; writing a search report.

COMPLETION: procedure for completion; particulars of instructions required to draft deed of assignment; drafting of deed of assignment; Effect of completion

POST COMPLETION: perfection of title; effect of failure to perfect title; documents required to prefect title

 

 

POST CONTRACT STAGE (deducing title & investigation of title)

Three major things take place at this stage

1. The vendor deducing his title
2. Purchaser or his solicitor investigating title
3. Writing of search report

 

How does vendor deduce title?

Deducing title means to prove your title, this is to show that the title is genuine and they have the right to convey and the property is free from encumbrances. To show that they have a good root of title.Vendor has to prove his root of title (ie, that he has a good root of title) - Vendor or vendor’s solicitor has the duty/responsibility of deducing title. For the purpose of deducing title the solicitor to the vendor will need to provide the abstract of title and epitome of title – he uses these two to deduce title. These are the same documents the purchasers solicitors will collect from the vendor to investigate title. 

Deducing title is different from investigation of title. Titles should be deduced for at least 40 years for states in the Conveyancing act jurisdiction and at least 30 years if the property is under property and Conveyancing law jurisdiction. LRL (Lagos) is at least 40 years as well because where there’s a lacuna in the Land Registration law the Conveyancing act applies.

Note the effect of s. 162 of the Evidence Act, 2011. See Johnson v. Lawanson (1971) 1 ANR 56; Owoada v. Omitola (1988) 5 SCNJ 1

 

Deducing title under LRL, 2015 Lagos

Under the LRL, 2015, deducing of title is necessary in Lagos State; RTL has been expressly repealed by the LRL, 2015.Since LRL is silent on number of years, CA may apply. So it is at least 40 years

 

Root of title – A root of title is a document or transaction conferring title on a person (i.e. person purporting to be owner of title).This could be either good or bad. Deducing title is to show/ prove that the vendor has a good root of title.

Receipt of purchase is a bad root of title, that’s why it can’t be deemed as part payment and completion of the transaction stage.

Root of title is the foundation upon which the title depends. It is usually in form of a document.

Document or transaction purporting to be a good root of title must satisfy the certain conditions (elements of a good root of title):

1. Must transfer both legal and equitable interest in the property
2. Must sufficiently describe the property so as to make it easily ascertainable
3. Must not be subject to a higher interest. E.g. a deed of lease is subject to the higher interests of the landlord so its not a good root of title
4. It must have nothing on the face of it to cast suspicion or doubt on it authenticity

 

Examples of good root of title: duly perfected deed of assignment, duly perfected deed of legal mortgage, vesting order of court duly perfected, assent, duly perfected deed of gift, registered title (duly perfected certificate of title or land certificate) under RTL, assent (by personal representatives), duly perfected certificate of purchase given by sheriff of court.

Examples of a bad root of title: formal contract of sale of land, receipt of purchase , lease/tenancy agreement, equitable mortgage, power of attorney – even power of attorney coupled with consideration doe not confer title on Donee. See s.143 PLC; s.8 CA, unregistered deed of assignment, certificate of occupancy.

 

Ordinarily a certificate of occupancy does not constitute a good root of title unless 1) it was issued for grant of statutory occupancy 2) where apart from it there is another means of proving title to property – Ogunleye v Oni, Osho v Foreign Finance. In these instances a C of O would constitute a good root of title.

Read Osho v foreign finance

 

Reasons for investigation: to ensure that the vendor has the right to convey, that the property is free from encumbrances and you’d enjoy quiet possession

 

LPA makes a separate provision concerning the RPC rule that a lawyer can still be charged for negligence in a pro bono case.

Note:read udofia v state – its a criminal law case that illustrates the duty of defence counsel in a criminal case

 

Patent defects are the obvious defects that are easily discoverable. Investigation of title and searches are targeted at latent defects, this is the major purpose of investigation at the post-contract stage. Latent defects are defects that are hidden and cannot be found out unless discreet specific searches and investigation are carried out.

 

A vendor or his solicitor is not bound or liable to answer questions/requisitions from the purchaser’s solicitor pertaining to patent defects, because these things can be easily discovered. But they are bound to answer all questions relating to latent defects.

Accordingly where the vendor or his solicitor refuses/fails/neglects to answer a question on a patent defect the purchaser cannot rely on such refusal to rescind from the transaction, it is not a breach of contract.

On the other hand, where the vendor or his solicitor refuses/neglects/ fails to answer questions from the purchaser’s solicitor’s relating to latent defects, the purchaser is entitled to rely on such refusal to rescind and repudiate the contract because it amounts to breach of contract. 

 

Procedure for investigation of title/ Steps to be taken by a purchaser’s solicitor during investigation

1. The purchaser or his solicitor collects epitome and/or abstract of title from the vendor or his solicitor.
2. Examination of abstracted documents
3. Conduct search in the following places depending on the circumstance– land registry (mandatory – for all), probate registry (this is necessary whenever the property involved was inherited), court registry, CAC registry (this is necessary when a company is the vendor, it is necessary for the purchasers solicitor to visit CAC to find out if the directors have the power to do what they’re doing and verify information; the principal reason to visit CAC is to find out if the company is registered – has legal personality ) etc. You don’t have to visit all the places to conduct a search, just the relevant ones, however land registry is mandatory in every circumstance.
4. Physical inspection of the property – The major reason for physical inspection is to discover physical effects

• Note the need for physical inspection: caveat emptor; patent defects; physical condition; easements; boundaries; whether other person is in possession etc.

1. Investigation of family/traditional history/ background (if need be)
2. Raise requisitions (these are questions raised for the vendor’s solicitor to remove any ambiguity)where necessary
3. Write a search Report

Note: students must be able to draft a standard search report. Also practice how to draft a deed of assignment.

 

 

There are two types of search report 1)when they say draft a search report with a covering letter you must draft two of them (the search report and the covering letter), 2) a standard search report  

 

Contents of a standard search report in Property Law Practice

• It must be on a lawyers letter-headed paper, which must disclose the following: name of the firms, status of the firm (e.g. legal practitioners& consultant, solicitors and barristers), physical and other address, phone number, email, website
• Reference number – “Our ref”, or “Your ref”
• Date of the report in the correct format, which is either “December 12, 2017” or “12 December 2017 “- without any punctuation at all.
• The name and address of the client – the purchasers. Where it is a company just write the head e.g. managing director first bank plc.Don’t write the name of the person even if you know it.
• Salutation – Dear sir/ madam. When “dear sir” is used you must end with “yours faithfully”, but when the person is addressed with their name i.e. Mr Uduemezue the ending will be “yours sincerely”.
• The heading – e.g. “Report of search in respect of the property registered at 44/44/444”. Don’t let your heading be too long.
• Introductory paragraph: there are two types of introductory paragraphs – with cover letter and without cover letter
• Date of search: this is the date the search was conducted and logically it must precede the date of the search report
• Place of search: here you write the places visited e.g. land registry Ikeja Lagos, probate registry Igbosere Lagos
• Particulars of the owner of the property: note not name of the vendor. The name of the owner must be indicated in manner that he will be easily ascertainable
• Nature of the interest/title of the owner: what type of title e.g. right of occupancy
• Particulars of the property: this must include both location and registration particulars. Particulars of the property must include three things. 1)Description e.g. block of 4 flats, 3-storey building; 2) location e.g. no 10 Ajah road; and 3)registration details : registered at 12/13/133
• Encumbrances if any e.g. legal mortgage
• Advise/comment/opinion: this is where the lawyer would state whether or not they should go ahead with the transaction based on the investigation.
• Conclusion/concluding part: this includes Your signature which comes immediately after “yours faithfully”, your name must be below the signature. The position in the firm may then follow.

Note: A legal practitioner must sign a search report; a non lawyer cannot sign a letter written by the firm because he is not part of fee earners. In law firm there are two categories of employees, the support staff and fee earners (lawyers are the fee earners). All letters must be signed by legal practitioner in a law firm. 

 

COMPLETION

Completion is marked by transfer of possession from the assignor to the assignee.Completion may be conducted by the parties personally or by their agents or even by post. Completion is done in vendor`s solicitors office. Pls note Rule 22 RPC, 2007: it shouldn`t be in purchaser`s or vendor`s house

 It is at this stage they prepare and execute the conveyance. The features of this stage:

• Legal interest will pass to the purchaser/assignee at the conclusion of the completion stage subject to perfection
• By law possession will pass to the purchaser
• Preparation and execution of the conveyance
• Transfer of all original documents by the assignor to the assignee

 

Procedure for completion in sale of land/ steps taken during completion

• The vendor solicitor will prepare the completion statement and send it to the purchasers solicitor
• The purchaser solicitor will prepare the conveyance (deed of assignment) based on the agreement/understanding between the parties. Note that during the contract stage it is the vendors solicitor that prepares the contract of sale and during the completion stage it’s the assignee’s solicitor that will prepare the deed of assignment
• The purchaser’s solicitor after preparing the deed of assignment will send draft deed of assignment to the vendors solicitor for vetting.
• Engrossment – when both parties and solicitors have agreed on the content of the deed of assignment, they will reproduce the final copy for as any parties or witnesses as they are.
• Meeting at the vendor’s solicitor office for completion. See rule 22 RPC - the meeting must not take place in the house of the vendor or purchaser.

During the completion meeting at the solicitor’s office the following things will take place:

1. Payment of balance of the purchase price
2. Execution of the deed of assignment by the parties and their witnesses. After this stage the parties are referred to as assignor and assignee
3. Assignor or his solicitor will then hand over the following document and items to the assignee or his solicitor
4. Receipt for the balance paid for the full purchase price. Note that issuance of this receipt is not mandatory because the receipt clause in the assignment has acknowledged receipt so whether he gives it or not does not vitiate it. Once a deed is executed the parties are bound by the contents.
5. Copies of the duly executed deed of assignment (usually 4/5 copies for purposes of perfection)

• All original title documents relating to the property including survey plan, certificate of occupancy. Note however that instances may arise where the assignor may not be under any obligation to release all original title documents, this is usually the case where the title documents cover more properties than the one where the present assignee is buying. Where such is the case a clause is inserted which is “acknowledgement of safe custody and undertaking for production”

1. Evidence of payment of all outgoings including water rates, electricity bills, waste management rates, land use charge, radio and television rates, tenement rates etc.
2. Survey plan
3. Letter of introduction to tenants where tenants are in possession.

• If the property is developed, access key to the entrance

 

• The assignee’s solicitor will conduct a quick check of the documents received/ examine the documents to ensure the documents are original and to confirm the epitome and abstract of title.

 

POST COMPLETION STAGE

This is otherwise known as perfection and the order for perfection is:

• Governor’s consent
• Stamping (within 30 days)
• Registration (within 60 days)

 

Failure to obtain governor’s consent

See the case of kachalla v Bankii

• It renders the transaction void see the case of Savannah bank v Ajilo.
• The person is a holder of an equitable title and not a legal interest

If the deed of assignment is not perfected, it is not a good root of title, a deed of assignment is only a good root of title when it has been duly perfected. SeeSavannah bank v Ajilo , s22 and 26 of land use act, UBN v OWONI boys, Ogunleye  v Oni 

 

 

Effect of failure to stamp

• Pay penalty for late stamping
• The deed will not be admissible in court to prove title .It can be admitted to prove there was a transaction but cannot be admitted as evidence to prove title
• Cannot be accepted for registration

 

Effect of failure to register

• Pay penalty for late registration
• The document will not be admissible in court to prove title. It may be admissible to prove other things but not title. It is not a good root of title.
• The assignee may lose priority.

 

Perfection is the end of discussion

 

Particulars of information/instructions required to draft a deed of assignment

• Name & address of parties
• Particulars of witnesses
• Particulars of the property – this includes 3 things: nature of the property, location of the property and particulars of registration
• Consideration – this goes to how it is to be paid and whether or not it has been paid and if it has not been paid the terms on which it would be paid.
• Capacity of assignor
• Quantum of interest conveyed – this is referred to as habendum
• Other terms/ conditions agreed upon (if any)
• Whether any party is illiterate, blind, corporate body etc.

Include phone number and email as part of the particulars. So name, address occupation phone number and email.

 

Documents required to process governors’ consent

• Covering letter/forwarding letter(in lawyers letter headed paper)
• Duly completed application of governors consent Form 1 C
• 3 years tax clearance of all the parties
• 5 copies of duly executed deed of assignment (title deed)
• Evidence of payment of ground rent (if not developed)
• Evidence of payment of tenement rate and all relevant outgoings(if developed)
• Evidence of payment of development levy
• Receipt of payment of consent fees, charting & endorsement fees
• Approved building plan (if property is developed)
• Survey plans
• CTC of the title documents

 

Note that this differs from state to state but these are the general documents

 

Where a corporate body is involved the additional documents for perfection of title are:

• CTC of certificate of incorporation
• CTC of memorandum & articles of association
• CTC form of particulars of directors (Form CAC 1.1/ copy of form showing particulars of directors
• Tax clearance of directors (at least 2 of the directors)
• Evidence of updated annual returns
• Any document disclosing the authorised share capital of the company

 

Effect of failure to register if it in Lagos state

 

Submission of survey plan in Lagos is mandatory

Submission of a survey plan is a condition precedent to registration of any document under the land registration law 2015 – s12(3)

Outside Lagos it would depend on the circumstances - as a general rule it is compulsory for it to be submitted but in two instances it would not be necessary: 1) where the deed of assignment has a schedule and the particulars of the property is sufficiently described therein 2) where a survey plan had been earlier submitted or registered in respect of property, and the present transaction makes sufficient reference to that earlier registered survey plan there would be no need.

However in Lagos it is mandatory.