Due diligence refers to the degree of care that a prudent person would exercise, which is a legal relevant standard for establishing liability. In our context of usage in this article, it is simply investigating the authenticity of a property before purchasing it. The emphasis here is on conducting searches.
The importance and value placed on land and landed properties cannot be over emphasized. The value of land is like that of fine wine that gets better with years. It is one of the best choices for investment. Probably because it does not require maintenance like other form of investments and it never depreciates in currency (value). As such it requires that adequate care is taken, that is due diligence is carried out so one does not end up purchasing litigation.
Land matters are not easy to resolve especially when money has crossed hands with the wrong people. It could drag on for years even after the life time of the first parties and most times it does not end well, as there are deaths in some cases and in others a long history of bad blood amongst family members.
So it is safer to get experts to conduct a due diligence search before you engage in any transaction relating to land. The extra cost which most people want to avoid is actually cheaper than the sum that will be expended in litigation.
IMPORTANCE OF CONDUCTING DUE DILIGENCE (SEARCH).
- Where one fails to conduct due diligence and goes ahead to purchase a property such buyer is bounded by that transaction when the property is found to be defective.
- It serves as constructive notice. Where due diligence is conducted, and there are issues latter the seller will be liable.
- It saves the headache and expenses of litigation.
- It saves you from been defrauded by people with false title.
- It gives you knowledge of the history of the property and its owner.
- It gives the buyer the opportunity to examine the documents of title for possible requisitions.
PLACES WHERE DUE DILIGENCE SEARCH CAN BE CONDUCTED ARE:
- Land Registry. (Compulsory)
- Court Registry. (if the property had been subject to litigation)
- Probate Registry. (when property of deceased is involved, to know whether the Executors have obtained probate to the Will or Letters of Administration has been given to the administrators).
- Corporate Affairs Commission. (when a company is involved) To know whether the company has corporate personality, has registered any charge or mortgage relating to the property. Also to know if People dealing with the purchaser are authorized. To achieve this, look at the particulars of directors (constructive notice and indoor management rule). The power of directors or company is restricted with respect to the transaction look at Memorandum and Articles of Association of the Company (restrictive clauses)
- Physical inspection of the property to discover if there is any patent defect (as vendor is not under obligation to disclose them, only latent defect); physical condition of the property, easement, boundaries of the property, whether other person is in possession (tenant). Note that if what is to be revealed by physical inspection was done, there is no duty on part of vendor, the rule is CAVEAT EMPTOR
- Traditional history investigation where necessary: This investigation is important in sale of family or community property to determine whether consent has been obtained from relevant persons.
- Another place of importance to conduct search is the city planning authorities such as Lagos State Physical Planning Permit Authority (LASPPPA), Federal Capital Development Authority (FCDA), Ministry of Physical Planning and Urban Development, Federal Ministry of Lands – Housing And Urban Development etc. This is to ensure that the said property does not fall under government acquisition and not subject to demolition for overriding city plans.
- Also Law enforcement Agencies is another place to conduct a search where there is information of the involvement of such institutions. For example Economic and Financial Crimes Commission (EFCC), Independent and Corrupt Practices Commission (ICPC), etc. as real property investment may be a proceed of crime or a subject of investigation for fraud and money laundering.
When these inquisitions have been made it is important to raise requisition where necessary so you don’t work with speculations and get into trouble.
Another important advice is always make sure that your due diligence reports are documented. You may fall back to it in bad weather. Lastly make sure you always involve an expert. In this instance a lawyer. To be forewarned is to be forearmed.
For more inquiries on due diligence, feel free to call Ibejulekkilawyer on 08034869295 or send us an email at firstname.lastname@example.org
Disclaimer: The above is for information purposes only and should not be construed as a legal advice. Ibejulekkilawyer.com (bloc) shall not be liable to any person(s) for any damage or liability arising whatsoever following the reliance of the information contained herein. Consult us or your legal practitioner for legal advice.