BILLING AND ACCOUNTS ON PROPERTY TRANSACTIONS IN NIGERIA

TYPES OF FEES

Under Rule 52(1) of the Rules of Professional Conduct, 2007, a lawyer shall charge professional fees for his services which shall be reasonable and commensurate with the service rendered.

The types of fees are –

1.      Scale fee – These are fees charge for non-contentious work.

2.      Fixed fee – These are fees charge with a fixed rate for a specific work.

3.      Appearance fee – These are fees charged by legal practitioners for appearing in court.

4.      Hourly rate fee – These are fees charged for every hour a legal practitioner renders his service or services.

5.      Percentage fee – These are fees charge with a given percentage based on the value of transaction.

6.      Contingent fee – These are fees charged for recovery of debt whether it is contentious or non-contentious. It is prohibited under Common Law – Abdallah v. Barlat (1931) 1 WACA 137; Wright v. Legal Practitioner Disc. Committee (1940) 7 WACA 17. However, it is permissible under section 50 of the Rules of Professional Conduct, 2007, as long as it is not vitiated by fraud, mistake or undue influence, or contrary to public policy, or not in a criminal case.

RULES AND PRINCIPLES GUIDING BILL FOR PROFESSIONAL SERVICES

A legal practitioner under the various Land Instrument Preparation Laws and also under the Legal Practitioners Act, 1975, has exclusive right to prepare documents dealing with transfer of interest in land in Nigeria and it is a punishable offence under the Laws and Act for a person other than a legal practitioner to prepare such documents.

Section 22(1)(d) of the Legal Practitioners Act, 1975 provides thus:

“Subject to the provisions of this section, if any person other than a legal practitioner prepares for or in expectation of reward any instrument relating to the grant of probate or letters of administration, or relating to or with a view to proceedings in any court of record in Nigeria,

He is guilty of an offence and liable, in the case of an offence under the above paragraph to a fine of an amount not exceeding N200 or imprisonment for a term not exceeding two years or both such fine and imprisonment, and in any other case to a fine of an amount not exceeding N100.

From the above, it means that any person aside a legal practitioner who prepares an instrument will be guilty of an offence and liable to a fine of N200 or N100 or imprisonment of 2 years.

Instrument in relation to immovable property means any document which confers, transfers, limits, charges or extinguishes any interest in the property.

Where a solicitor prepares a document, and acts in property transfers, the client is to pay the legal practitioners his adequate remuneration for services rendered.

A solicitor can either be paid his fees in advance or he is to rely on terms of any agreement between him and the client. In situations where he has not received his fees, and there was no agreement between both parties, the solicitor is required to submit his bill of charges – F.B.N Plc. v. Ndoma-Egba (2006) All FWLR (Pt. 307) 1012 at 1034.

The major method of billing by solicitors in Nigeria is gearing, which “… normally starts with the payment of a consultation fee and or a deposit on account and thereafter a full and final bill of charges is presented to the client or agreed upon between the two parties.

A solicitor is prohibited from doing the following where he is charging and enjoying his fees –

1.      Share legal fees with a non-lawyer. Rule 3(1)(c) & Rule 53 of the Rules of Professional Conduct provides for this with its exceptions.

2.      Enter into an agreement for, charge or collect an illegal or clearly excessive fee. A fee is clearly excessive when after a review of the facts, a person of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee for the services rendered or to be rendered.

3.      Where the services to be rendered is based on a retainership, a solicitor who accepts a retainer shall not in the case of a general retainer, advise on or appear in any proceedings detrimental to the interest of the client paying the retainer during the period of the retainer; and in the case of a special retainer, accept instructions in any matter forming the subject matter of the retainer which will involve advising or arguing against the interest of the client paying the retainer.

RETAINERSHIP

Rule 43 of the Rules of Professional Conduct has to do with retainer. It is a payment made to the legal practitioner by a client, and could be general or special.

1.      GENERAL RETAINER – This exists where a legal practitioner is instructed to handle all problems in an area of law or on every area of law during an agreed period of time.  Under the general retainer, the legal practitioner is precluded from accepting to advice in or appear in any proceedings detrimental to the interest of the client paying the retainer during that period.

2.      SPECIAL RETAINER – This exists where the legal practitioner is instructed to handle a single matter, for example, where a legal practitioner is instructed to represent a client in a lease transaction to draft the lease agreement and obtain Governor’s consent.

CHARGING FEES

A legal practitioner cannot charge arbitrary fees, but only fees that are in the provisions of the law. The fees a legal practitioner can charge are regulated by the Legal Practitioners Act, 1975 and the Rules of Professional Conduct.

The Legal Practitioners Remuneration Committee is empowered by Section 15 of the Legal Practitioners Act, 1975 to make orders regulating fees of legal practitioners.  In furtherance of the power, the Committee passed the Legal Practitioners (Remuneration for Legal Documentation and Other Land Matters) Order 1991.  The Order contains remuneration of legal practitioners in land matters and other legal documentation matters.

CONTENTS OF A BILL OF CHARGES

The Legal Practitioners Act, 1975 provides that a bill of charges must contain the following –

1.      The Principal items to be charged.

2.      Particulars of the principal items.

3.      The date on which the principal items were incurred.

4.      The signature of the solicitor issuing the bill on behalf of the firm.

5.      The date on which the bill of charges was issued. The bill must be served personally or by reregistered post or left at the client’s last address known to the legal practitioner.

6.      The matters to which the bill of charges relate; and

7.      The name of the client to whom the bill of charges is being issued.

PROCEDURE FOR RECOVERY OF PROFESSIONAL FEES

Section 16(1) of the Legal Practitioners Act provides that, subject to complying with certain conditions, “a legal practitioner shall be entitled to recover his charges by action in any court of competent jurisdiction” – Mabogunje v. Odutika (2003) 1 NWLR (Pt. 802) 570; Abubakar v. Manulu (2001) 8 NWLR (Pt. 714) 717.

The fee owed by a client to a solicitor is called ‘debt’ which is recoverable. The procedure for recovering such fees is neither exclusive nor exhaustive since apart from court action, the solicitor may decide to recover his fees by any of the methods of persuasion, mediation, conciliation, or negotiation. The reason being it is advisable to always seek for alternative dispute resolutions before litigation (court action).

The disadvantages of using litigation instead of alternative dispute resolutions are –

1.      It strains the relationship with the client.

2.      It discourages potential clients from briefing the solicitor since they may be afraid of being sued by the solicitor in the event of them being involved in the same situation.

3.      It consumes time, energy and resources for both the client and the solicitor.

In recovering charges, a solicitor may charge 10% per annum as interest on his disbursement and cost.

According to section 16(2) of the Legal Practitioners Act, three important and mandatory things which a solicitor must do to recover his charges from a defaulting client may arise which are –

1.      He must prepare a bill of charges which should set out the particulars of the principal items of his claim.

2.      Service of bill on the client.

3.      He must allow a period of one month to expire from the date of delivery before the action is commenced.

BILL OF CHARGES

The solicitor must prepare a bill for the charges containing particulars of the principal items included in the bill and signed by the solicitor (if it is a firm, by one of the partners or in the name of the firm) – section 16(2)(a) of the Legal Practitioners Act.

There is no specification on how the prepared bill of charges should look like, but it should most likely be in the form of an invoice or statement containing the charges, and must be signed by the solicitor preparing the bill.

The rule on preparing detailed particulars of charges may be summarised as follows –

1.      A solicitor should endeavour to prepare a detailed bill of charges with all the particulars of work done, cost, expenses and disbursements.

2.      Where the bill of charges does not contain the particulars, it should be objected to by the client otherwise he will be deemed to have waived his right.

3.      Where the bill does not contain detailed particulars and it is objected to, the court will hold that the bill does not comply with the requirement of the Legal Practitioners Act, and cannot sustain an action for recovery of professional charges.

The following should constitute the particulars of the principal items of the bill of charges –

1.      The bill of charges should be headed to reflect the subject matter. If it is in respect of litigation; the court, the cause and the parties should be stated.

2.      The bill of charges should contain all the charges, fees and professional disbursements for which the legal practitioner is making a claim. Professional disbursements include payments which are necessarily made by the legal practitioner in pursuance of his professional duty such as court fees, witness fees, etc, if paid by him.

3.      Charges and fees should be particularized, for example –

a)      Perusing documents and giving professional advice;

b)      Conducting necessary (specified) inquiries or using a legal agent in another jurisdiction for a particular purpose;

c)      Drawing up the writ of summons and statement of claim or defence;

d)     Number of attendances in court and the dates;

e)      Summarised statement of the work done in court, indicating some peculiar difficult nature of the case (if any), so as to give an insight to the client as to what he is being asked to pay for; and

f)       The standing of the solicitor at the bar in terms of years of experience and/or rank with which he is invested in the profession – Savannah Bank of Nig. Plc. v. Opanubi (2004) All          FWLR (Pt. 222) 1587 at 1610.

4.      It is required to give sufficient information in the bill to enable the client to obtain advice as to its taxation and for the taxing officer to tax it. It is therefore necessary to indicate against each of the particulars given in the bill of charges a specific amount, taking into account the status and experience of the legal practitioner and the time and efforts involved.

SERVICE OF BILL ON CLIENT

The bill of charges must have been served on the client personally or left for the client at his last known address or sent by post addressed to the client at his last known address – section 16(2)(a) of the Legal Practitioners Act.

The reason is to give the client an opportunity to settle the bill of charges, if the charges are unobjectionable.

There are three (3) ways by which the service may be effected –

1.      By personal service. This means that the bill of charges may be physically and personally handed to the client.

2.      By leaving it at the client’s last known address. This address may be the last business or residential address known by the client rather than being assumed.

3.      By post to the client’s last known address.

A PERIOD OF ONE MONTH MUST EXPIRE AFTER DELIVERY

After delivery of the bill to the client by whatever means mentioned above, the period of one month beginning with the date of the delivery of the bill must expire before an action is instituted to recover the charges.

One month in this context does not mean thirty days or thirty-one days, rather it means a calendar month. Section 18 of the Interpretation Act states that ‘month’ means calendar month reckoned to the Gregorian calendar. A calendar month is a complete month in the calendar and in computing it; one must look at the present calendar rather than counting days. A calendar month ends upon the same day in the next ensuing month having the same number as that on which the computation began, that is, the corresponding day in the next month. But if the next ensuing month has not the same number as that on which the computation began, then the calendar month ends on the last day of the next ensuing month, for example March 31 to April 30.

There are, however, circumstances which may make the court reduce or lessen the period of one month within which a solicitor is expected to wait after service of the bill, before the commencement of the action against the client – section 16(3) of the Legal Practitioners Act. These are –

1.      That the solicitor delivered a bill of charges to the client;

2.      That on the face of it, the charges appear to be proper in the circumstances; and

3.      That there are circumstances indicating that the client is about to do some act which would probably prevent or delay the payment to the legal practitioner of the charges.

The place of institution of action is the State High Court. But it must be the High Court where the legal practitioner in question usually carries on his practice or usually resides or in which the client in question usually resides or has his principal place of business or, in the case of a legal practitioner authorized to practice by warrant, the High Court of the State in which the proceedings specified in the application for the warrant were begun – section 19(1) of the Legal Practitioners Act.

A summary of the above procedure is as follows –

1^st step – The legal practitioner prepares a bill of charges.

2^nd step – The bill of charges is signed by the legal practitioner (if it is a firm, by a one of the partners or in the name of the firm).

3^rd step – The bill of charges must be served on the client personally or by post to his last known address.

4^th step – The legal practitioner must wait for one month before proceeding to court.

5^th step – Where the client defaults in paying the fees, the legal practitioner takes writ against the client at the High Court where the firm operates.

WHEN FEES MAY BE TAXED

Section 17 of the Legal Practitioners Act provides for the application for the taxation of bills of charges delivered by the legal practitioner to the client.

Section 17 provides that as a general rule, where an application for the taxation of a bill of charges is made to the court by a client within one month from the date on which the bill of charges was delivered to him, the court shall order the bill to be taxed and that no action to recover the charges shall begun until the taxation is completed.

However, where a direction for providing for security is given under section 16(3) and security is not given in accordance with the direction, an order for taxation shall not be made.

Section 17(2) also provides that the court may, if it thinks fit on an application made after one month of the delivery of the bill of charges by the legal practitioner or the client (except where he had failed to give security as directed), order that the bill be taxed and also order that until the taxation is completed, no action to recover the charges mentioned in the bill shall be begun and any such action already begun shall be stayed.

However, section 17(3) of the Legal Practitioners Act provides that no such order shall be made –

(a)    in any case, after the period of twelve months from the date on which the bill in question was paid;

(b)   except in a case where the court determines that there are special reason for making such an order, if twelve months have expired since the date of the delivery of the bill or if judgment has been given in an action to recover the charges in question.

PROCEDURE FOR TAXATION

Section 18 of the Legal Practitioners Act provides for the procedure for taxation.

Section 18(1) provides thus –

“The taxation of a bill of charges shall be in accordance with the provisions of any order in force under section 15 of this Act; and where no such order is in force or any item falling to be taxed is not dealt with by the order, the charges to be allowed on taxation of the item shall not exceed such as are reasonable having regard to the skill, labour and responsibility involved and to all circumstances of the case”.

The procedure for taxation is governed by the rules of court and the taxation takes place before a taxing officer who may be the Chief Registrar of the Court, or any other suitable person appointed by the Court for the purpose.

The taxing officer may, where he deems it appropriate, refer the taxation to the court, he shall so refer it, and the court may –

a)      Proceed itself to tax the bill and notify to the taxing officer the amount declared and stated in his certificate; or

b)      Refer the taxation back to the taxing officer with its discretion in the matter.

On completion of the taxation of a bill, the taxing officer shall forthwith declare the amount due in respect of the bill and shall file in the records of the court a certificate signed by him stating that amount; and any party to the taxation shall be entitled, on demand, to have issued him free of charge an office copy of the certificate – section 18(4) of the Legal Practitioners Act.

If any party to the taxation is dissatisfied with the determination other than the amount notified by the court, he may within 21 days from the date of determination or filing, appeal to the court – section 18(5) of the Legal Practitioners Act.

If the amount determined by the court as charges is less than the amount of the bill by one-sixth of the bill or more, then the legal practitioner is liable to pay the cost of the taxation; otherwise, it is the client that will pay the cost – section 18(7) of the Legal Practitioners Act.

ETHICAL ISSUES

1.      Rule 48(2) of the Rules of Professional Conduct – A lawyer shall not enter into an agreement for, charge or collect an illegally or clearly excessive fee.

2.      Rule 3(1)(c) of RPC – A lawyer shall not share legal fees with a non-lawyer.

CALCULATING PROFESSIONAL FEES

For example, you acted for Chief Adebayo in the sale of property in Ibadan which was sold for N100,000; and for him and the bank in the mortgage transaction with Zenith Bank of his property in Lagos for N100,000; and for him and the lessee in the lease of his property at Kaduna for a rent of N100,000 per annum. The lessee paid for one year.

Using the scale, calculate fees for each transaction.

Transaction conducted	For the 1st N1,000 per N100	For the 2nd and 3rd N1,000 per N100	For the 4th and each subsequent N100 up to N2,000 per N100	For the remainder without limit per N100
Vendor’s legal practitioner for conducting a sale of property by public auction when the property is sold	N22.50k	N5.62k	N3.75k	N2.80k
Mortgagor’s legal practitioner for deducing	N22.50k	N22.50k	N11.25k	N2.50k
Mortgagee’s legal practitioner for investigating title to leasehold property, preparing and completing mortgage	N22.50k	N22.50k	N11.25k	N2.50k

SCALE II (LEASES)

Transaction	Amount
Where the rent does not exceed N100	N37.50k on the rental but not less than N25.00k in any case
Where rent exceeds N100 but does not exceed N1,000	N37.50k in respect of 1st N100 of rent	N25.00k in respect of each subsequent N100 of rent or part thereof
Where the rent exceeds N1,000	N37.50k in respect of 1st N100 of rent	N25.00k in respect of each N100 of rent or part thereof up to N1,000	N12.50k in respect of every subsequent N100 or part thereof

Fees for acting for Chief Adebayo in the sale of the property

1^st step

¹⁰⁰⁰/₁₀₀ x ^22.50/₁ = 10 x 22.50 = N225.00k

2^nd step

²⁰⁰⁰/₁₀₀ x ^5.62/₁ = 20 x 5.62 = N112.40k

3^rd step

¹⁷⁰⁰⁰/₁₀₀ x ^3.75/₁ = 170 x 3.75 = N637.50k

4^th step

⁸⁰⁰⁰⁰/₁₀₀ x ^2.80/₁ = 800 x 2.80 = N2,240.00k

5^th step

Add the total of step 1, 2, 3 and 4, that is, N225 + N112.40 + N637.50 + N2240 = N3,214.90k

Fees for acting for both parties in the Mortgage

A.        Fee for mortgagee (Full payment)

1^st step

¹⁰⁰⁰/₁₀₀ x ^22.50/₁ = 10 x 22.50 = N225.00k

2^nd step

²⁰⁰⁰/₁₀₀ x ^22.50/₁ = 20 x 22.50 = N450.00k

3^rd step

¹⁷⁰⁰⁰/₁₀₀ x ^11.25/₁ = 170 x 11.25 = N1,912.50k

4^th step

⁸⁰⁰⁰⁰/₁₀₀ x ^2.50/₁ = 800 x 2.50 = N2,000.00k

5^th step

N225 + N450 + N1912.50 + N2000 = N4,587.50k

B.        Fees for mortgagor (Half payment)

1^st step

¹⁰⁰⁰/₁₀₀ x ^22.50/₁ = 10 x 22.50 = N225.00k

2^nd step

²⁰⁰⁰/₁₀₀ x ^22.50/₁ = 20 x 22.50 = N450.00k

3^rd step

¹⁷⁰⁰⁰/₁₀₀ x ^11.25/₁ = 170 x 11.25 = N1,912.50k

4^th step

⁸⁰⁰⁰⁰/₁₀₀ x ^2.50/₁ = 800 x 2.50 = N2,000.00k

5^th step

N225 + N450 + N1912.50 + N2000 = N4,587.50k

Divide the Sum Total by 2 (because it is half payment) = ^N4,587.50/₂ = N2,293.75k

The amount the solicitor is entitled for acting for both mortgagee and mortgagor in the above transaction is N6,881.25k (that is, the total amount of the full payment of the mortgagee, and the total amount of the half payment of the mortgagor – N4,587.50k + N2,293.75k = N6,881.25k).

Fees for acting for both lessor and lessee

A.        fee from Lessor (Full payment)

1^st step

For 1^st N100 = N37.50k

2^nd step

For 1^st N1000

⁹⁰⁰/₁₀₀ x ²⁵/₁ = 9 x 25 = N225.00k

3^rd step

For balance of rent above N1000

⁹⁹⁰⁰⁰/₁₀₀ x ^12.50/₁ = 990 x 12.50 = N12,375.00k

4^th step

Add up the entire sum in step 1, 2, and 3 above, that is, N37.50 + N225 + N12375 = N12,637.50

B.        Foe fees from Lessee (one quarter of lessor’s fee)

1^st step

For 1^st N100 = N37.50k

2^nd step

For 1^st N1000

⁹⁰⁰/₁₀₀ x ²⁵/₁ = 9 x 25 = N225.00k

3^rd step

For balance of rent above N1000

⁹⁹⁰⁰⁰/₁₀₀ x ^12.50/₁ = 990 x 12.50 = N12,375.00k

4^th step

Add up the entire sum in step 1, 2, and 3 above, that is, N37.50 + N225 + N12375 = N12,637.50

Divide the Sum Total by 4 (because it is one quarter of lessor’s fee) = ^N12,637.50/₄ = N3,159.38k

The amount the solicitor is entitled for acting for both Lessor and Lessee in the above transaction is N15,796.88k (that is, the total amount of the full payment of the mortgagee, and the total amount of the half payment of the mortgagor – N12,637.50k + N3,159.38k = N15,796.88k).

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SALE OF LAND (1) LEGAL RESTRICTIONS OR LIMITATIONS TO SALE OF LAND

A good legal restriction on sale of land in Nigeria is the Land Use Act of 1978. It has the following restrictions –

1.      Before a party can sell land to another which is subject to statutory right of occupancy, the consent of the Governor of such State is required – sections 22 and 26 of the Land Use Act.

2.      A person under the age of 21 (twenty-one) cannot be granted a statutory right of occupancy or subletting of a statutory right of occupancy by the Governor of a State – section 7 of the Land Use Act.

3.      Without the approval of the National Council of States, a non-Nigerian cannot be granted a statutory or customary right of occupancy – section 46(1) of the Land Use Act.

4.      Where it is a land belonging to a community (communal land) or family land, the consent of the principal members and heads of the communal land or family must be obtained before there can be a valid sale – Adeleke v. Iyanda (2001) 6 SCNJ 101; Odekilekun v. Hassan (1997) 12 SCNJ 114.

5.      Covenant in a lease may also restrict the sale and transfer of land.(click on the pictures on left or right hand sides for more insights)

6.      The Nigerian Coal Authority Act, Cap. 95, LFN 2004, also provides that the corporation shall not alienate... or charge any land vested in the land ... without the prior approval of the Minister – section 12(4) of the Act. In Rockonoh Property Co. Ltd. V. NITEL Plc (2001) FWLR (Pt. 67) 885 at 910, the court observed that “it must be accepted that the absence of the necessary ministerial approval or consent is a serious defect which affects the title sought to be conferred by the relevant instrument”.

7.      Town planning laws and regulations may also restrict the alienation of certain lands where the purposes for which they are intended to be used are contrary to the purposes of town and planning laws. For example, an industrial place designated for such purpose should strictly be abided to rather than using it for something else.

8.      The Land Development (Provision for Roads) Law, Cap. L57, Laws of Lagos State, 2003 states that the sale of any land which is the prescribed authority has directed to be reserved for roads development, shall be null and void.

9.      Doctrine of ‘Lis Pendis’ meaning ‘pending law suit’ which is to signify the power and control of a court of law while legal proceeding is pending; the effect of which is to restrict the sale of any interest in land – Ezomo v. N. N. B. Plc. (2007) All FWLR (Pt. 368) 1032.

This doctrine would apply in cases where it can be shown by a party that at the time of such sale or purchase of the property, there is a –

i.                    Pending suit in respect of the property;

ii.                  The action or the lis was in respect of real property;

iii.                The object of the action was to recover or assert title to a specific real property; and

iv.                The party concerned was aware or ought to be aware of the pending suit – Bua v. Dauda (2003) FWLR (Pt. 172) 1892.

STEPS OR STAGES IN THE SALE OF LAND

In International Textile Industries Nigeria Limited v. Aderemi (1999) 8 NWLR (Pt. 614) 268, where the court held that it is only after a binding contract for sale is arrived at that the need to pursue the procedure for acquiring title will arise. That is when obtaining of the necessary consent to alienate the property becomes an issue in order to make alienation valid.

It was also in the above case that stages of transfer of interest in land where divided into two distinct stages viz:

1.      The contract stage (ending with the formation of binding contract for sale); and

2.      The conveyance stage (culminating in the legal title vesting in the purchaser by means of the appropriate instrument under seal).

THE NEED FOR PRE-CONTRACT ENQUIRIES

These are enquiries which we will raise with the seller’s solicitors upon receipt of contract documentation. The main aim of pre-contract enquiries is to obtain the fullest information to enable the purchaser to decide whether or not to sign the contract.

Thus, it is expected that a purchaser should investigate certain matters concerning a property before buying them in order to enable him decided if he should enter the contract or not before binding himself by any contract. The reason is that the vendor is not bound by any duty to disclose to the prospective purchaser such facts that the purchaser could merely discover by inspection of the property (This is the rule of ‘caveat emptor’ meaning ‘buyer beware’).

In practice, the purchaser or his solicitor, on his behalf, physically inspects the property in order to discover if there is any defect in the property. However, this should not be extended to investigation of title, which is done at the stage where searches are conducted.

Pre-contract enquiries are usually contained in a standard printed form prepared by a solicitor. Though it varies from one firm to another, but it should contain the following –

1.      Boundaries of the property;

2.      Disputes over the property;

3.      Notices in respect of the property;

4.      Guarantees in respect of the property;

5.      Services supplied on the property;

6.      Facilities of the property;

7.      Any adverse rights and restrictions on the property;

8.      Outgoings charged on the property;

9.      Method of sale of the property;

10.  Details of lease, lessor, headlessor, and licenses;

11.  Covenants and their breaches;

12.  Service charges;

13.  Insurance provisions;

14.  Reversionary title or interest;

15.  Any other additional inquiries in which the special circumstances of each transaction requires.

The vendor should try as much as possible to answer questions correctly raised by the purchaser in the pre-contract enquiries form, though, he is not under any obligation to reply. When acting for the vendor, he could answer the questions by qualifying his answer with the phrase “so far as the vendor is aware” – Gilchester Properties v. Gomm (1948) 1 All ER 493.

The vendor should not misrepresent facts else he will be liable to damages for misrepresentation after the contracts have been exchanged. In Sharneyford Supplies Ltd. v. Edge (1987) All ER 588, the vendor was held liable for a false reply granted to an inquiry on whether there was vacant possession of the property. Also, in Walker v. Boyle (1982) WLR 495, the vendor was held liable for misrepresentation of facts because he gave a lie that there was no boundary dispute on the land when in fact there was a long-standing dispute.

From the foregoing, the following could be said to be the need for pre-contract enquiries –

1. The main reason why enquires are necessary before contract is based on the principle of Caveat Emptor. (The purchaser cannot rescind the contract because of non disclosure of patent defects which he could have discovered on a reasonable inspection of the land).
2. Search will reveal encumbrances on land.
3. A physical inspection will eliminate constructive notice.

4.      It will reveal easement and restrictive covenants which he ought to have found out at contract stage if he had done a diligent search.

TYPES OF CONTRACT OF SALE OF LAND

There are basically 3 (three) types of contract of sale of land. They are –

1.      Oral contracts;

2.      Open contracts; and

3.      Formal contracts.

ORAL CONTRACTS

This is a common method of acquiring land under native law. However, it is inconsistent with section 4 of the Statute of Frauds 1677, and other laws of similar effect which requires that there must be a memorandum or some note in writing in respect of contracts for the sale of land, otherwise such contract shall be unenforceable.

Though such contracts are unenforceable, it is not void. But where there is sufficient evidence of part performance, equity will decree specific performance. Though, it is risky for a purchaser to rely on the doctrine of part performance for the enforcement of a contract of sale of land because specific performance is a discretionary remedy.

The reason for the intervention of equity in granting specific performance is to help the plaintiff where he was assisted by the defendant to partly perform the contract, and to prevent the defendant from pleading that the contract was not in writing.

In International Textile Industries Nigeria Ltd. v. Aderemi (supra), the court stated thus:

“The ground on which the courts hold that part performance takes a contract out of the Statute of Frauds is that when one of the two contracting parties has been induced or allowed by the other to alter his position on the faith of the contract, as for instance by taking possession of land and expending money in the building or other like acts, there would be fraud in the other party to set up the legal invalidity of the contract on the faith of which he induced or allowed the person contracting with him to act and expend his money.”

Thus, the following are instances where the courts can specifically enforce a contract base on part performance –

1.      There is proper oral evidence to prove or establish the terms of the oral contract.

2.      The contract must be specifically enforceable, in the sense that it is not a contract for personal service.

3.      The act constituting part performance must be unequivocal and consistent with, or referable to the contract alleged to be breached.

4.      The plaintiff has wholly or in part of the oral agreement with the confidence that the defendant would do the same.

In Mohammed v. Klargester Nigeria Ltd. (2002) FWLR (Pt. 127) 1087 at 1095, it was stated that a claim for specific performance cannot be granted where the vendor sold a property that is family property and is jointly inherited and owned with other persons, since a court cannot compel a person to do that which is impossible for him to do.

However, where the sale of land is conducted under native law and custom of a particular community, such sale may be undertaken orally and a written document may not be required.

The minimum requirements for oral contracts are –

1.      Payment of the purchase price;

2.      Possession by the purchaser; and

3.      The presence of witnesses during the transaction – Adedeji v. Oloso (2007) All FWLR (Pt. 356) 610 at 640; Ogunmuyiwa v. Odukoya (2009) All FWLR (Pt. 454) 1526.

OPEN CONTRACT

An open contract is one that provides for only the minimum requirements of the Statute of Frauds. It –

1. Describes the property clearly.
2. States the parties clearly.
3. States the price. In Jodi v. Salami (2009) All FWLR (Pt. 458) 385, the court held that there can never be a sale of land on credit; that even where a person is in possession, there is no sale except the purchase price is paid.

An open contract is not oral, it is contained in note or memorandum in writing with the basic requirements of a contract of sale of land. It is called an open contract because all the other relevant terms and conditions which will give business efficacy to a contract for sale of land are implied by statutes, common law, equity and by conveyancing practice and custom, that is, it is implied that the vendor must show a good title within reasonable time and execute a conveyance to the purchaser on payment of purchase price.

In an open contract, it is implied by law that the vendor shall prove his title to 30 (thrity) years by virtue of section 70 of the PCL; and 40 (forty) years by virtue of section 1 of the Vendor and Purchaser Act.

A vendor can convey as: Trustee, Family head, and Administrator/Personal Representative of an Estate, Mortgagee, Beneficial owner etc.

In instances where a vendor conveys as a beneficial owner for valuable consideration, 6 (six) covenants are implied by law.  These are –

1.                  Right to convey.

2.                  Quiet enjoyment.

3.                  Freedom from encumbrances.

4.                  Further Assurances (that is, the seller ensures the buyer that he will do everything to obtain the Legal title of land in question).

5.                  That the lease is valid and subsisting.

6.                  That the rent has been paid and the covenants of the lease performed.

FORMAL CONTRACT

Formal contracts are a detailed contract of sale of land which provides for other agreed terms in details in addition to the parties, property and price. Thus, it sets out the rights and duties of the parties.

It is divided into 2 (two) namely –

1.      The particulars of sale dealing with matters affecting the property – This has to do with its nature, area (size), defects, benefits charges and liabilities to which it is subject.

2.      The conditions of the sale dealing with contractual terns which set out the terms by which the parties are to be bound – Terrance v. Bolton (1872) LR EQ 124.

The contract needs not be made in any particular way provided the parties intend to enter into a legally enforceable contract and there is agreement upon the essential terms for valuable consideration.  The contract needs not be in writing, a written evidence of it is sufficient – Re Holland (1902) 2 Ch. 360, the note or memorandum must be signed by the party to be bound.  This is to prevent fraud and perjury and to make it impossible for a contract for sale of land to be alleged on only oral testimony of witnesses who may just be perjuring. The statute aims to prevent any action unless the defendant had signed some paper containing the terms of the contract. The equitable doctrine of part performance was an intervention of equity to create and exception to the statutory requirement.

ADVANTAGES OF FORMAL CONTRACT

1.      The purchaser protects himself by having more time to investigate the title being transferred before the execution of the deed of conveyance.

2.      The death of either party to the transaction does not terminate the contract as their personal representatives can proceed with the transaction and complete the sale – Yusuf v. Dada (1990) 4 NWLR (Pt. 146) 657.

3.      None of the parties can withdraw from the contract in the last minute without being liable for breach of the terms of the contract.

4.      The terms of the contract having been expressly agreed to, the position and rights of the parties are express and not implied, which may otherwise make their positions uncertain.

5.      Fixtures and fittings may be transferred under a formal contract and need not be reflected in the deed of conveyance of the land.

6.      The vendor cannot unilaterally and subsequently increase the purchase price since this has already been fixed in the contract.

7.      Parties may take special advantages under the contract by providing for specific matters they may not otherwise be able to do.

8.      It is easier to enforce the terms of the contract.

EXCHANGE OF CONTRACT

This is the procedure for making a contract binding. However, while a deed takes effect upon delivery, a contract takes effect when it is exchanged – Awojugbagbe Light Industries Ltd v. Chinukwe (1995) 4 SCNJ 162; (1995) 4 NWLR (Pt. 390) 379. Exchange of contract is the vital factor which brings the contract into existence – Eccles v. Bryant (1948) Ch. 93.

Exchange of contract is defined in the English case of Domb v. Isoz (1980) Ch. 548 at 557 thus –

“… each party shall have such a document signed by the party in his possession or control so that, at his own need, he can have the document available for his own case. Exchange of a written contract for sale is… effected so soon as each part of the contract, signed by the vendor or purchaser… is in the actual or constructive possession of the other party or his solicitor”.

There is said to be a exchange of contract where –

1.      The parties have signed the contract.

2.      The signed contract is in the actual possession or constructive control of the parties.

Where there is physical exchange, that is, hand to hand there will not be any problem as to if there is an exchange of contract. However, constructive exchange is required for exchanges which are made by post, telephone or email.

WHERE THE PARTIES INSTRUCT THE SAME SOLICITOR

To avoid conflict of interest, solicitors should not act for both parties in a transaction for sale of land. However same solicitors are advisable in the following circumstances –

1.      Where the terms of the contract have been fully negotiated and the parties agree to such an arrangement.

2.      Where the transaction involves a small amount of money.

3.      Where the title to the land is sound and there is no likelihood of conflict of interest.

4.      Where the parties are established associated companies.

5.      Where there are no other solicitor within the vicinity which the client can reasonably be expected to consult.

Where both parties act by the same solicitor (one-copy contract), there is no need for exchange of contract. In such instance, there is said to be an exchange in contract where both parties to the transaction have signed the contract document. The ‘exchange’ in this situation has been said to be ‘artificial nonsense – Smith v. Mansi (1962) 3 All ER 857. This is due to the fact that there is no physical exchange.

PROCEDURE FOR EXCHANGE OF CONTRACT

1.      Vendor’s solicitor prepares the draft.

2.      The vendor’s solicitor sends draft to purchaser for comment and approval by purchaser or his solicitor.

3.      If the purchaser agrees, he returns the draft back to the vendor’s solicitor.

4.      The vendor’s solicitor prepares copies and sends to the purchaser’s solicitor who signs it.

5.      The purchaser or his solicitor returns the signed copies with deposit of purchase price.

6.      The vendor accepts deposit and signs.

7.      The vendor hands over signed document to the purchaser signifying exchange

EFFECT OF EXCHANGE OF CONTRACT

These are –

1.      An equitable interest is vested in favour of the purchaser and a subsequent purchaser of the estate acquires it subject to the equity of the original purchaser.

2.      So long as the purchaser is not in default of the terms of the contract, he can prevent the transfer of his estate to a subsequent purchaser by way of action in court.

3.      He can also sue the vendor specifically to perform or complete the transfer.

4.      He can sue against voluntary waste, which depreciates the property.

5.      The purchaser can transfer his equity to another person.

6.      The vendor by implication is made a trustee of the purchaser in respect of the equity of the purchaser.

7.      Until completion, the vendor is entitled to the rents and profits on the land, though he must account to the purchaser.

8.      A lien is created in favour of the vendor over the property for payment of the balance by the purchaser.

9.      The death of one of the parties does not affect the contract.

KACHALLA v. BANKI & Ors. (2006) All FWLR (Pt. 309) 1420

FACTS OF THE CASE

The appellant claimed against the respondents before the High Court of Borno State, a declaration that he is the bona fide owner of the disputed property; a declaration that the sale of property is null and void and should be set aside and that the property be restored to him; a declaration that the judgment debtor before the trial court has no interest or right in the appellant’s property; an order of perpetual injunction restraining all the respondents from interfering with the appellant’s property including their agents, servants, and privies; an award of N5,000.00 (five thousand naira) as damages against the respondents for trespass as well as costs in the suit.

Pleadings were filed and exchanged between parties and the suit proceeded to trial. At the hearing, the parties testified and called witnesses to testify in favour of their respective cases. Documentary evidence was also relied upon. At the close of the addresses of counsel, judgment was delivered. The trial judge dismissed the claims of the appellant having found them devoid of substance.

Aggrieved, the appellant appealed to the Court of Appeal, which dismissed his appeal. Aggrieved still, the appellant lodged a further appeal at the Supreme Court.

HELD

On rule as to priority where there are competing interests on land –

It was stated that in property law, many different questions of priority may arise, these may concern rival conveyances of property or as in the instant case, competing interests in the holding of the right of occupancy. The fundamental rule is that competing interests will generally rank according to the order of their creation. Thus, where a person pays for land and obtains receipt for the payment followed by his going into possession and remaining in possession, equitable interest is created for him in the land such as which can defeat the title of a subsequent legal estate purchaser with knowledge of the equitable estate in the land.

Per Kalgo, JSC stated thus:

“This action concerned the sale to or purchase of one landed property by two different people. That is, the appellant and the 2^nd respondent. According to the evidence at the trial, the appellant bought the property from the sales agent (PW1) at N1,200,000.00 (One million, two hundred thousand naira) on 16^th March, 1994. He paid the purchase price and was given a receipt, a deed of assignment and the certificate of occupancy on the land. He was then put in possession of the property. He could not register his interest in the property with the lands authority due to some intervening circumstances.

On the 18^th April, 1995 the 2^nd respondent bought the same property at an auction sale for the sum of N520,000.00 (five hundred and twenty thousand naira). From the above, it is very clear that the appellant bought the property on 16^th March, 1994 and the 2^nd respondent bout the same on 18^th April 1995 over one year later. There is no doubt therefore that the sale to the appellant was first in time and ordinarily he should have priority over that of the 2^nd respondent… The fact that the 2^nd respondent bought by auction on the purported execution of a judgment of a court, does not give him any priority over that of the appellant.

On interest protected by the Land Use Act, 1978 –

It was stated that there is no doubt that a distinction exists between a legal estate or fee simple as opposed to an equitable interest in land, but that distinction cannot apply in a situation such as in the instant case, where the disputed land is governed by the provisions of the Land Use Act in which the maximum interest any person can hold is a right of occupation, the legal estate or legal interest is vested in the Governor of the State. The tenor of the Land Use Act was to nationalize all lands in the country by vesting its ownership in the State. The maximum interest preserved in private individual hands is a right of occupancy. Thus, in the instant case, the interest the appellant acquired cannot be inferior to the interest acquired by the 2^nd respondent.

The Supreme Court allowed the appeal and held that the plaintiff (appellant) is the bona fide owner of the property which is the subject matter of the suit.

ODUSOGA v. RICKETTS (1997) 7 NWLR 1

FACTS OF THE CASE

The appellants were defendants in an action instituted by L. L. Rickets now deceased, as plaintiff, now respondent. The respondent claimed as follows:

(i)                 A declaration that the plaintiff is the beneficial owner of the property situate, lying and being at Thomas Drive and forming part of a larger area of land covered by a deed of conveyance registered as No. 9 at page 9 in volume 1547 of the Lands Registry, Lagos and that the plaintiff is entitled to a certificate of occupancy of the same property (hereinafter called ‘the land in dispute’);

(ii)               N1,000.00 (one thousand naira) damages for trespass committed by the defendants, servants and agents on the said piece or parcel of land on or about the 29^th day of April, 1980.

(iii)             Perpetual injunction restraining the defendants, servants and/or agents from further acts of trespass on the land in dispute.

The land in dispute is a portion of the land (4 plots) sold by the administrators of the estate of Babatunde Jemi-Alade deceased in 1965 to the respondent. Mr. Ricketts paid part of the purchase-price to the vendors but failed to pay the balance. He went into possession and surveyed the land, (the entire 4 plots). He however, developed only a part of it leaving the part now in dispute undeveloped. He built on the portion of the land developed by him but left the undeveloped part vacant. He bought the 4 plots of land for E950.00 (nine hundred and fifty pounds) but made a part payment of E700.00 (seven hundred pounds) for which he was given a receipt. This was in 1965. He did not pay the balance of the purchase price despite repeated demands from the vendors.

In 1971, one Mr. S. O Adenuga went on the land in dispute. He was challenged by the respondent, Mr. Ricketts. Mr. Adenuga, disclosed to Mr. Ricketts that he was supervising the building on the land on behalf of Madam Asimowu Odusoga the 1^st appellant. The respondent sued Mr. Adenuga and Mrs. Ebun Bucknor the sole surviving administratrix of Jemi-Alade in suit No. LD/414/72 for damages for trespass. It was disclosed in the course of the proceedings that Mrs. Ebun Bucknor had sold the land in dispute to the 1^st appellant in the present proceedings following the failure of the respondent to pay the balance of the purchase price of the 4 plots of land sold to him in 1965. The respondent was non-suited in the action. Thereafter, he instituted the proceedings leading to this appeal against the appellants claiming as herein-before mentioned.

Pleadings having been ordered, filed and exchanged the action proceeded to trail. At the conclusion of trail and after addresses by learned counsel for the parties, the learned trial Judge in a reserved judgment, found that the respondent was in possession of the land in dispute at the time that the appellants came on it to build. He also found that although the respondent paid a part of the purchase price in 1965, he did not pay the balance of the purchase price of the land sold to him, until 1976. He found also that the land in dispute was conveyed to the 1^st appellant in April 1972 by Mrs. Ebun Bucknor the sole administratrix of the estate of Jemi-Alade the original owner of the land and two members of Jemi-Alade family. The learned trial judge also found that the deed of conveyance executed in favour of the respondent in 1976 by Mrs. Ebun Bucknor after the respondent paid the balance of the purchase price was ineffective to pass the title to the land in dispute to the respondent in that by the earlier conveyance in 1972 in  favour of the 1^st appellant, the estate of Jemi-Alade had divested itself of any title to the land in dispute that could be passed to the respondent. He finally found that the 1^st appellant had better title to the land in dispute and consequently dismissed the respondent’s claim in toto.

The respondent was dissatisfied with the decision of the learned trial judge and appealed to the Court of Appeal. The Court of Appeal allowed the appeal, reversed the decision of the trail court and granted the respondent’s claim. The appellants were dissatisfied with the judgment of the Court of Appeal and appealed to the Supreme Court.

HELD

On ingredients of valid sale of land under customary law –

It was stated that to constitute a valid sale of land under customary law, three essential ingredients are required, namely:

a)      Payment of the purchase price;

b)      Purchaser is let into possession by the vendor; and

c)      In the presence of witnesses.

On effect of failure to pay the full purchase price of land under customary law –

It was stated that where the purchase price of land under customary law is not fully paid there can be no valid sale, notwithstanding that the purchaser is in possession. That possession cannot defeat the title of the vendor.

On whether vendor can resile from contract of sale after part-payment made under customary law –

It was stated that where part-payment of the purchase price was made and the balance is tendered within the stipulated time or, in the absence of a stipulated time, within a reasonable time, the vendor cannot resile from the contract of sale and the purchaser in possession will be entitled to a decree of specific performance.

On effect of payment of purchase price and possession of land –

It was stated that at common law, payment of purchase price coupled with possession gives the purchaser an equitable title and he is entitled to seek an order of specific performance to compel the vendor to convey legal title to him. But where the purchase price is not fully paid, the purchaser will have no right to enforce specific performance.

On right of vendor where purchaser fails to pay balance of purchase price of land –

It was stated that where the purchaser has made a part-payment of the purchase price is in default of payment of the balance, there is right in the vendor to rescind the contract of sale and re-sell the property.

On priority of deeds of conveyance coming from the same source –

It was stated that where the deeds of conveyance are validly executed and come from the same source to transfer the interest in a property, the first in time takes priority.

The Supreme Court allowed the appeal, and set-aside that of the Court of Appeal.