DEDUCING OF TITLE

After the exchange of contract, the purchaser becomes entitled to the property in equity and the vendor is deemed to hold the land in trust for him till he pays, and all conditions therein fulfilled. The essence of this is to deduce a good root of title from the vendor.

In MEPC Ltd. v. Christian-Edwards (1978) 3 All ER 795, it was stated the reason for this is because before the contract is exchanged, there is no obligation on the vendor to establish that he is the owner of the title which he intends to convey, but once the contract has been exchanged, he is under duty to do so.

HOW A VENDOR CAN DEDUCE TITLE

However, the obligation on the vendor to deduce title depends on whether the title is registered under the Registration of Titles Law (RTL) or not.

Where the title is registered, the vendor has no obligation to deduce his title because the purchaser has the right to inspect the register of titles in order to discover the vendor’s right. On the other hand, where the title is not registered, but registered as an instrument or deed, the vendor shall deduce his title.

A good title is that which dates back to a certain number of years and it is the duty of the purchaser to make the search.

The following should be noted –

1.      In the former Northern and Eastern Regional State, the requirement is 40 years – section 2 of Vendor & Purchaser Act 1874.

2.      In Abia State, the period has been reduced to a period of 30 years as the “period of commencement of title which a purchaser of land may require” – section 70(1) of Abia State Law of Property.

3.      In the former Western Regional State, a vendor is required to deduce his title for a period of 30 years – Section 70(1) of Property & Conveyancing Law (PCL).

4.      In Lagos State, the right of an owner of land ceases after 12 years of adverse possession. But it must first be established that the owner has been dispossessed or has discontinued possession – Majekodunmi v. Abina (2002) FWLR (Pt. 94) 1358.

The requirements of these years are intended to help the vendor in deducing his title, and he has been in occupation of land for such years, he is to satisfy the purchaser to have the effect of passing the original rights of the landlord of the land to the occupiers.

According to the combined effect o sections 17 and 21 of the Limitation Law of Lagos State, facts or statements recited in a document, which is 20 years old, raises the presumption of regularity of the documents and the person named in the document will not be prevented from denying such facts.

One means of deducing title is by the vendor producing the abstract/epitome of title, which are both documents of summary evidence of the history and types of the title of the vendor. In Oakden v. Pike (1865) Ch. 620 at 622, the court defined abstract of title as a document which contains with sufficient clearness and sufficient fullness the effect of every instrument which constitutes part of the vendor’s title.

Abstract of title is a précis (summary) of contents and of events affecting the land in course of devolution from original owner or grantee to the current vendor. Thus, it contains a review of previous owners, liens, encumbrances, mortgages, easements, or any other matters that affect the ownership of the property.

Epitome of title is a schedule of events or transactions affecting the land arranged in a chronological order of devolution accompanied with copies of documents of title. That is, it contains a schedule of documents and events which constitute the title and is accompanied by photocopies of the documents.

The solicitor should satisfy himself if the abstract/epitome of title has the following matters –

1.      It commences with a proper root of the title.

2.      Particular documents are in law capable of having their supposed effect whether the parties had the power to buy, convey, or otherwise deal with the property.

3.      That there are no subsisting encumbrances except those that are disclosed in the contract.

4.      That all abstracted mortgages and charges have been duly discharged.

5.      That all the documents are in order in respect of execution, consent requirement, stamping and registration.

ADVANTAGES OF ABSTRACT/EPITOME OF TITLE

1.      It reveals to the purchaser if there are any defects in the vendor’s title.

2.      It helps the purchaser in raising requisitions on title.

3.      It is very useful to the purchaser’s solicitor when he is writing the report on title.

DISADVANTAGES OF THE ABSTRACT/EPITOME OF TITLE

1.      There are possibilities of making errors in preparing the abstract.

2.      Preparing abstracts is longer than making photocopy.

3.      More time is spent in examining the abstract against the original.

WHAT CONSTITUTES A GOOD ROOT OF TITLE

This is a document of title which is sufficient in itself without any extrinsic evidence to establish the title to the land.  In Re Cox & Neve’s Contract (1891) 2 Ch. 109 at 118, a root of title was defined as the “point at which the title can properly commence”.

It should be noted that for a vendor to prove good title, he must deduce his title, that is he must show that himself and his predecessors-in-title have been in possession for a period of thirty (30) years if the property is in the Western States of Nigeria that apply the PCL – section 70 of PCL; or for a period of forty (40) years if the property is in the States that apply the CA.

Notwithstanding the above rule, where title is recited in the conveyance for twenty (20) years and above at the time of the contract, there is presumption of correctness of event so recited – section 130 of the Evidence Act.

Also, title in the registration district does not require deducing as entries in the register are sufficient proof of title – Onagoruwa v. Akinremi (2001) 13 NWLR (Pt. 729) 53.

Elements of a good root title are:

1.                  It must establish both the legal and equitable ownership of the land.

2.                  It must adequately describe the property.

3.                  It must clearly state or describe the owner.

4.                  Nothing on the face of it to cast doubt on its authenticity (integrity).

5.                  It must not be subject to a higher interest.

EXAMPLES OF A GOOD ROOT OF TITLE

1.      A conveyance.

2.      A deed of legal Mortgage.

3.      A deed of gift.

4.      Registered title.

5.      Court Vesting order.

6.      A deed of assignment which transfers the unexpired terms in the lease.

DOCUMENTS THAT MAY NOT CONSTITUTE GOOD ROOT OF TITLE

1.      A Will.

2.      A lease.

3.      Equitable mortgage

4.      Power of attorney.

5.      Certificate of occupancy.

6.      Unregistered deeds.

It should, however, be noted that a certificate of occupancy is issued in evidence of a grant of title to a person in a piece of land. It would therefore be a good root of title only in respect of statutory or customary grant of a right of occupancy pursuant to sections 5 and 6 of the Land Use Act. It would not be a good root of title with respect to a deemed grant under sections 34 and 36 of the Act; Ogunleye v. Oni (1990) 2 NWLR (Pt 135) 745, 752, 774 – 786; Olojunde v. Adeyoju (2000) SC 118, 135-136; Ozungwe v. Gbisi & Anor. (1985) 2 NWLR (Pt. 8) 528, 540.

INVESTIGATION OF TITLE

Investigation is the process of confirming the title of the vendor as deduced by him. It involves anything and everything that will reveal any defects in a property to be purchased.

The purchaser’s solicitor should investigate the title to the vendor after the vendor has deduced his title. Thus, the practice is that as soon as the purchaser receives the abstract/epitome of title, the purchaser should proceed to verify the authencity and genuineness of the documents relied on by the vendor to establish his title.

The major aim of investigation of title is to see if any defect exists in the title deduced by the vendor. It is usually done by way of searches conducted in all places and offices where there may be particulars or details of the property and also on the property itself.

VARIOUS WAYS OF INVESTIGATING TITLE

There is need to conduct a search on the title. Searches can be conducted in the following ways –

1.      Searches at the Lands Registry – The Land Instrument Registration Law of each State establishes a land registry for the State, where documents relating to land within the territory are kept, and it varies from one State to another. The procedure is that –

(i)                 A written application to conduct a search should be made to AGIS stating the particulars of the property.

(ii)               The application should be accompanied by a letter of consent by the owner of the title authorizing the purchaser’s solicitor to conduct the search of the file/property.

(iii)             The application must be accompanied with evidence (bank slip) of payment of search fee paid in a designated bank.

(iv)             The officials at AGIS would conduct the search and complete the search report which is signed by the Registrar of Deeds.

Thus, it is by completion of the relevant form in some States.

2.      Search at the Companies registry – This is situations where the vendor or past owner is a company incorporated under CAMA, apart from the searches at the land registry, there should be a further search at the Corporate Affairs Commission.

3.      Search at Probate registry – This is a search conducted to reveal whether or not probate has been granted and who are the personal representatives.

4.      Traditional evidence – This is a search conducted on the principal members of a family land or on the community and heads of the community where the property is subject to family or community ownership, to confirm that all relevant consents were obtained and that the title is neither void nor voidable.

5.      Physical inspection – This is a personal visit to the title in question in order to find out from neighbours if there is any issue, or to find out for yourself the actual size of the land and whether it conform to the dimensions of the land registry. For example, most landlords place the inscription – “THIS LAND IS NOT FOR SALE” or “CAVEAT EMPTOR”.

6.      Court judgments – This is a search conducted to see if the land is subject to any court litigation, and if any, the outcome of the dispute; or whether the vendor is a personal representative or beneficiary in a probate dispute which entitles him to convey the property.

COMPLETION PROCEDURE

This entails the procedure of preparing the deed of assignment or conveyance, and execution of the deed. It is usually preceded by a completion statement.

Completion is the final stage in the chain of events that started with the contract – Kilner v. France (1946) 2 All ER 83 at 86.

The completion stage means that the purchaser has accepted the title offered by the vendor, or at least, he has waived his right to any objection on title.

The procedure is:

1.      Preparation of deed of assignment/conveyance by purchaser’s solicitor.

2.      Vetting of deed of assignment by vendor’s solicitor.

3.      Engrossed copies (several original copies) to be made by purchaser’s solicitor.

4.      Payment of outstanding purchase price, if any.

5.      Execution of deed of assignment by both parties.

6.      Surrender of original title documents by vendor to purchaser (including keys, if developed); and notice of change of ownership to tenants if already occupied by tenants.

7.      Assignment of insurance policy.

FEATURES OF THE COMPLETION STAGE

1.      The payment of the balance of the purchase money.

2.      The execution of the purchase money.

3.      The delivery of title documents; and

4.      The acquisition of legal title by the purchaser

COMPLETION STATEMENT

This is also termed “financial statement”. It is prepared by the solicitors as a statement of the financial commitment of the parties and any other financial obligation they are expected to meet towards a successful completion of the transaction. Thus, it is a statement conveying the financial position of the parties to the transaction.

The completion statement curtails the financial movements in respect of the transaction (monies received, monies paid out, and monies left).

A completion statement should contain the following –

1.      The sum being paid or received in respect of the transaction;

2.      An accurate and full statement of all disbursements. For example, to valuers, surveyors, and other professionals, fees, taxes, and other expenses;

3.      The solicitor’s charges;

4.      The sum required to redeem any current mortgage; and

5.      The final amount to be paid before completion or to be paid after completion.

The completion statements must be clear, precise, and comprehensible. Though, the format varies from one firm to another.

However, there are three (3) types of completion statement which should be noted –

1.      Statement prepared by the seller’s solicitor for the seller informing him on how much will be left over on completion by way of net proceeds of the sale, which may be applied towards an allied purchase.

2.      Statement prepared by the seller’s solicitor for the buyer’s solicitor informing him on how much is expected to be paid over on completion.

3.      Statement prepared by the buyer’s solicitor for the buyer informing him of how much will be needed to complete the purchase of the property.

ADVANTAGES OF COMPLETION STATEMENT

1.      It helps the seller to decide in the first place on if he should sell as regards to the expenses that he will incur in the event that he sells and whether to suspend the sale until the property appreciates in value.

2.      It helps the purchaser to calculate his financial obligations as regards to if he can continue with the transaction to conclusion.

3.      It helps in accountability and reduces the chances of fraud being committed on the client.

4.      It helps in the computation of taxes.

What amounts to completion for vendor consists of –

1.                  Conveying with a good root of title the property contracted to be sold.

2.                  Delivering up actual possession and enjoyment.

Whilst, what amounts to completion for purchaser consists of –

1.                  Accepting the title.

2.                  Tendering the engrossed conveyance.

3.                  Obtaining a draft for the payment of the balance of purchase price.

4.                  Taking possession.

The conveyance will be executed at the time and place fixed. It is usually at the office of the vendor’s solicitor; and the conveyance will be duly attested.

After the execution there is the merger of the contract in the conveyance and thereafter, any action arising from the agreement between the parties with respect to the title will be founded on the conveyance.

ITEMS TO BE COLLECTED ON COMPLETION BY THE PURCHASER FROM THE VENDOR

1.                  At least five (5) copies of the duly executed deed (with survey plan attached as it is a requirement of law that survey plan be attached).

2.                  All prior original title documents which relate to the land.

The exceptions are:

(i)                 where the document relates to other land retained by the vendor e.g. a power of attorney relating to other land

(ii)               where it creates a trust which is subsisting

(iii)             where it relates to the appointment or discharge of a trustee of a subsisting trust in which case the vendor will give an undertaking to safe cost and acknowledgement of the purchaser’s rights to production of the document.

3.                  Receipt of payment of all outgoings.

4.                  Keys to the property, if developed.

5.                  Three (3) years Tax clearance certificate of vendor.

6.                  Duly executed form for Governor’s consent (called Form 1C in Lagos State).

7.                  Expired power of attorney, if any.

8.                  Approved building plan.

9.                  Notice of assignment of insurance policy where there is one.

10.              Solicitor’s fees.

WHERE VENDOR MAY NOT SURRENDER TITLE DOCUMENTS

It should be noted that where the vendor cannot for one reason or the other give title documents to the purchaser, he must give an undertaking that he holds the documents in safe custody and production for the purchaser. An example of where this can happen is where a power of attorney is to be executed in regards to four (4) properties, and the attorney is selling only one, he cannot give the purchaser his power of attorney (the document).

PERFECTION OF TITLE

Perfection of title is also termed “post completion”. After completion, the vendor’s solicitor is presumably discharged. But the purchaser’s solicitor still has a lot to do like application for Governor’s consent, payment of stamp duties and registration for conveyance. This is done in order to ensure compliance with relevant statutes and protect the legal validity of his client’s title in the property.

APPLICATION FOR GOVERNOR’S CONSENT

Section 22 of the Land Use Act prohibits alienation of statutory right of occupancy without the consent of the Governor. Thus, it makes it mandatory for the holder of statutory right of occupancy to seek and obtain the consent of the Governor of the State before alienation or sale of interest in land, otherwise the transaction shall be void – Savannah Bank (Nig.) Ltd. v. Ajilo (1989) 1 NWLR (Pt. 97) 305.

In Ugochukwu v. C.C.B Ltd. (1996) 6 NWLR (Pt. 456) 524, the Supreme Court held that it is the duty of a holder of the right of occupancy to seek consent of the Governor to alienate. Therefore, such a person will not be heard to subsequently claim that the consent obtained was void.

However, where the property is subject to a customary right of occupancy, the consent required is that of the local government where the land is situated – section 21 of the Land Use Act.

Section 21 of the Act provides thus:

“It shall not be lawful for any customary right of occupancy or any part thereof to be alienated by assignment, mortgage, transfer of possession, sublease or otherwise however… in other cases without the approval of the appropriate Local Government.

The purchaser should always endeavour to make sure the vendor signs the application letter for consent, in order to prevent the solicitor from denying the fact that he never applied for consent or instructed his (vendor’s) solicitor to do so.

The steps taken to apply for a Governor’s consent may vary from State to State –

In Federal Capital Territory, Abuja –

1.      A written application to the Minister of the Federal Capital Territory seeking for his consent to transfer the named property, stating the consideration for the transaction and the intended assignee.

2.      Inspection and valuation of the land is conducted and recommendation made by the relevant departments on whether consent should be granted or not, and the conditions for the grant of consent.

3.      Payment of the consent fee and other outstanding rents and charges on the property.

4.      Evidence of Tax payment (a Tax Clearance Certificate for three (3) years preceding the year of the transaction).

In Lagos -

1.      The application should be made on Land Form 1C obtainable at the Lands Registry, and the form should be signed by the purchaser and the vendor.

2.      The application form should be submitted with the following –

(i)                 A covering letter addressed to the Director of the Department of Lands and Housing.

(ii)               A certified cheque made payable to Lagos State Government for an amount equal to 7½ (seven and half) to 10 (ten) percent of the consideration passing between the two parties. This is an initial deposit for consent because after the property has been inspected and valued, the actual sum payable will be demanded as consent fee if the deposit does not cover the amount.

(iii)             Current tax clearance certificate of the two parties. In the case of a mortgage, only that of the mortgagor is required.

(iv)             Where one of the parties is a corporate body, the corporate body must supply the revenue certificate papers for its staff remitted to government and the current tax clearance certificates for the directors.

(v)               In the case of a developed property, there shall be a requirement for the building plan.

(vi)             Six (6) copies of the Deed of Assignment for which consent is sought and it shall include the following clause:

“The assignee herein mentioned hereby undertakes to pay all government levies inclusive of land charges that may be imposed from time to time by State Government”.

(vii)           Evidence of payment of ground rent and legal charges up to date.

(viii)         Receipt of payment of Economic Development Levy of the vendor and purchaser.

(ix)             Receipt of payment of charting fees.

(x)               Receipt of endorsement fees.

(xi)             A Certified True Copy (CTC) of the assignor’s land document obtainable from the Lands registry.

Whatever is the case, the application must be accompanied with copies of the deed of assignment with the consent clause endorsed on it in the following form:

I CONSENT TO THIS TRANSACTION

DATED THIS …………………………. DAY OF ……………………………… 20 ….

……………………………….

GOVERNOR

It should be noted that the above duty made by the Governor of a State can also be delegated to the Commissioner of Lands in the same State – U.B.N v. Ishola (2001)15 NWLR (Pt. 735) 47.

The Governor also has the discretion whether or not to consent, and he cannot be compelled to give his consent – Qudus v. Military Governor of Lagos State (1975) C.C.H.C.J 61; Queen v. Minister of Lands and Survey Ex parte Bank of the North Ltd. (1963) N.R.N.L.R 581.

In Savannah Bank (Nig.) Ltd v. Ajilo (supra), the Supreme Court held that failure to obtain the Governor’s consent rendered the transaction null and void. But in Awojugbagbe Light Industries v. Chinukwe (1995) 4 NWLR (Pt. 349) 379, the Supreme Court held that the law now is that the transaction is inchoate (that is, only partly in existence). Therefore, lack of consent will not void the transaction. This was also the case in Ezenwa v. Oko (1999) 14 NWLR (Pt. 637) 95; Savanna Bank Plc. v. Ibrahim (2000) 6 NWLR (Pt. 662) 58.

DOCUMENTS FOR SECURING GOVERNOR’S CONSENT

1)                  Covering letter for application.

2)                  Five (5) copies of duly executed deed.

3)                  Photocopy of CTC of prior deed(s).

4)                  Deposits on consent fees, charting, endorsement fee.

5)                  Current three (3) years Tax clearance certificate of the parties.

6)                  Where a corporate body is involved, then the evidence of PAYEE returns.

7)                  Evidence of payment of tenement rate (if developed); or statement in lieu in the case of undeveloped property. In Lagos State, evidence of payment of land use charges.

8)                  Receipt of payment Development levy.

STAMPING

Stamp duties are taxes imposed on certain transactions. For example, alienation of interest in land. However, penalty may be charged where document is outside thirty (30) days – section 23(1) & (3) of the Stamp Duties Act.

The Act permits the use of adhesive stamp, which must however be cancelled for it to be valid stamping to avoid the use of repeating a stamp already used so that there will not be loss of government revenue.

After the Governor grants consent, the solicitor must ensure that the stamp duties charged on the transaction is paid.

Failure to pay stamp duties makes the instrument –

1.      It will not be accepted for registration; and

2.      Inadmissible in evidence in court – section 22 of the Stamp Duties Act. In Ogbahon v. Registered Trustees CCCG (2001) FWLR (Pt. 80) 1496, a court may order payment of duties (despite lateness) to make the document admissible.

PROCEDURE AT THE STAMP DUTIES OFFICE

1.      The original of the instrument and copies are presented to the Stamp Duties Office for assessment of the duty payable.

2.      The solicitor pays the assessed duty either in a designated bank or the accounts department of the State Board of Internal Revenue and presents the evidence of payment to the Stamp Duties Commissioner. But it is paid to the Federal Inland Revenue Service (FIRS) where it is an incorporated body.

3.      The instrument is accordingly impressed with the stamp (usually in red ink) as evidence of payment of the duty. Between 2½ % and 3% of the value of the property is charged by many States of the Federation as Stamp Duties.

REGISTRATION

Registration is made in order to avoid fraud and problems arising from the suppression or omission of instruments when title is deduced. Although, section 25 of the Land Instrument Registration Law, Lagos provides that registration does not cure defects in the title – Folashade v. Duroshola (1961) All NLR 87.

But, section 2 of the Land Instrument Registration Law, Kaduna provides that the importance of registering the contract or conveyance which alienates interest in land is that it is a document affecting land in which one party confers, transfers, limits, charges or extinguishes in favour of another party a right or title to or interest in land.

The importance of registering documents that alienate land are –

1.      It is an indication that the title is encumbered. This is due to the fact that the presence and evidence of registration will put an intended buyer of land to be cautious and to ensure that the charges have been discharged.

2.      Where an instrument is not registered, it cannot be pleaded because it is inadmissible in evidence and the courts cannot give effect to it, that is, it cannot be used as a document of title to land – Akinduro v. Alaya (2007) All FWLR (Pt. 381) 1653; Atufe v. Oghomienor (2004) All FWLR (Pt. 224) 2061.

3.      It gives priority, that is, the first in time will prevail where there are rival instruments that are registered. This is what is called “he who is first has the strongest right” – “qui prior est tempore portoir est jure”.

PROCEDURE AT THE LAND REGISTRY

1.      The original and the counterparts of duly executed and stamped deeds are forwarded to the Deed Registrar for Registration.

2.      The Deed’s Registrar collects the deed and registers it in the Register of Deeds on a particular volume, on a particular page and giving it a particular number. For example:

“This instrument is registered as No. …….. at Page ………. In ……….

Volume ……… of the Lands registry in the office at …………”

3.      Upon the payment of the ad volerem fees at the designated bank, a receipt is issued and the instrument is registered.

4.      The original deed is giving back to the Purchaser of the land, while the counterpart is kept at the registry.

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