Beyond Certificates of Occupancy: The Legal Risks Hidden  in Real Estate Transactions

By Grace Onwuka

Introduction 

Few documents command as much confidence as the Certificate of Occupancy, popularly called the  C of O in real estate transactions. To many purchasers, lenders, developers and investors, the production  of a C of O is treated as the final proof that the property is safe. In practice, however, a Certificate of  Occupancy is not a magic wand. It is not immune from challenge. It does not cure fraud. It does not validate a defective root of title. It does not eliminate the need for Governor’s Consent, family consent,  survey verification, planning approvals, tax compliance, searches at the appropriate registry, or  investigation into possession, litigation and encumbrances. 

The danger in many real estate transactions is not that parties fail to ask for documents. It is that they ask for the wrong document and stop there. The better legal question is not merely, “Is there a C of O?”  The better question is: “What is the root of title behind the C of O, and are there any legal, equitable,  customary, statutory or regulatory defects that can defeat the transaction?” 

This article examines the legal risks hidden beneath apparently impressive title documents in real estate transactions. It argues that a Certificate of Occupancy should be treated as important evidence of title,  but never as a substitute for full legal due diligence. 

1. The Legal Nature of a Certificate of Occupancy 

The modern Nigerian land tenure system is built largely around the Land Use Act 1978. Section 1 of  the Act vests all land comprised in the territory of each State, except land vested in the Federal  Government or its agencies, in the Governor of the State, to be held in trust and administered for the  use and common benefit of Nigerians. Section 5 empowers the Governor to grant statutory rights of  occupancy in respect of land in urban areas, while section 9 provides for the issuance of Certificates of  Occupancy as evidence of such rights. 

A Certificate of Occupancy is therefore significant. It is an official document issued under statutory  authority. It may show that the holder has been granted a statutory right of occupancy. It may assist in  financing, sale, mortgage, development and proof of title. It may also strengthen a party’s position in  litigation. 

But its legal effect must not be overstated. It has repeatedly been held that a Certificate of Occupancy  is only prima facie evidence of title. It raises a rebuttable presumption. It does not automatically  extinguish pre-existing interests. It does not make a bad title good. 

In Ogunleye v. Oni (1990) 2 NWLR (Pt. 135) 745, the Supreme Court held that where a person had a  better pre-existing title before the commencement of the Land Use Act, a subsequent Certificate of  Occupancy issued over the same land could not defeat that earlier valid interest. The case remains a  warning that a C of O may be vulnerable where the grantor had no power to grant, where another person  already had a deemed right of occupancy, or where the process leading to issuance was defective.

Similarly, in Kyari v. Alkali & Ors (SC, 2001), the Supreme Court restated the principle that the  existence of a Certificate of Occupancy is merely prima facie evidence of title and no more. The court  also emphasized that registration does not validate a spurious, fraudulent or legally ineffective  instrument. 

The practical point is simple: a C of O is evidence, not invincibility. 

2. The Root-of-Title Problem: Nemo Dat Still Applies 

One of the oldest and most important principles affecting land transactions is nemo dat quod non habet:  no one gives what he does not have. A purchaser cannot acquire a better title than the vendor had. If the  vendor’s title is defective, the purchaser’s title may also be defective, regardless of how impressive the  transaction documents look. 

The Supreme Court in Idundun v. Okumagba (1976) 9–10 SC 227 identified five recognized ways of  proving ownership of land in Nigeria: 

1. traditional evidence; 
2. production of documents of title; 
3. acts of ownership numerous and positive enough to warrant an inference of ownership; 4. acts of long possession and enjoyment; and 
4. proof of possession of connected or adjacent land in circumstances making it probable that the  owner of such connected land is also the owner of the land in dispute. 

This case is important because it shows that title is not proved by a single document in isolation. A  deed, survey plan, allocation letter, Governor’s Consent or C of O may be relevant, but the court will  still examine whether the chain of title is credible. 

In real estate transactions, therefore, the purchaser must investigate the history of the land. Who first  owned it? Was it family land, communal land, government land, acquired land, excised land, or private  land? How did it pass from one owner to another? Were the transfers valid? Were consents obtained?  Were the necessary parties joined? Were instruments registered? Were there pending disputes? 

A transaction is only as strong as the weakest link in the chain of title. 

3. Governor’s Consent: The Risk of an Unperfected Transaction 

A major hidden risk in Nigerian real estate transactions is failure to perfect title. Under section 22 of  the Land Use Act, the holder of a statutory right of occupancy shall not alienate that right by assignment,  mortgage, transfer of possession, sublease or otherwise without the consent of the Governor first had  and obtained. Section 26 provides that any transaction or instrument which purports to confer or vest  any interest contrary to the provisions of the Act shall be null and void. 

The strictness of this requirement was famously considered in Savannah Bank (Nig.) Ltd v. Ajilo (1989)  1 NWLR (Pt. 97) 305, where the Supreme Court held that the consent requirement applied to alienation  of land interests and that failure to obtain the Governor’s Consent could have serious consequences for  the validity of the transaction.

However, Nigerian courts later recognized practical commercial realities. In Awojugbagbe Light  Industries Ltd v. Chinukwe (1995) 4 NWLR (Pt. 390) 379, the Supreme Court held that a mortgage  transaction was not necessarily void merely because the instrument was executed before Governor’s  Consent was endorsed, provided the consent was subsequently obtained in accordance with the law.  The decision softened the harshness that could arise from a rigid reading of section 22. 

More recently, Yakubu Ibrahim & Ors v. Simon Obaje (SC.60/2006, delivered 15 December 2017)  generated substantial discussion on the scope of Governor’s Consent, particularly in relation to private  alienations involving land not covered by statutory rights of occupancy. While the precise application  of the case depends on the facts and nature of the title involved, the broader lesson remains that parties  must understand the type of right being transferred and the consent regime applicable to it. 

For purchasers, the practical risk is this: an executed deed of assignment does not necessarily mean title  has been perfected. Until Governor’s Consent is obtained, stamp duties are paid, registration is  completed and the transaction is properly reflected in the land registry, the buyer may hold an equitable  interest but remain exposed to competing claims, fraud, double sale, insolvency risk, enforcement  difficulties and priority disputes. 

4. Registration Does Not Cure a Bad Title 

Many purchasers assume that once an instrument is registered, the transaction is safe. That assumption  is dangerous. Registration gives notice and may affect priority, but it does not validate a defective  transaction. 

In Lababedi v. Lagos Metal Industries (Nig.) Ltd (1973) 1 SC 1, the Supreme Court made clear that  registration laws are not designed to become engines of fraud or to validate spurious transfers. A  registered instrument may still be challenged if the underlying transaction is fraudulent, void or  otherwise defective. 

The same point applies to Certificates of Occupancy. A land registry file is not a substitute for legal  investigation. If the vendor had no title, if necessary consents were absent, if the land was family  property sold without the correct family authority, if the land was under acquisition, or if the instrument  was procured by fraud, registration may not save the purchaser. 

In due diligence, lawyers should therefore review not only whether an instrument is registered, but what  was registered, when it was registered, who executed it, the authority under which it was executed, the  land it relates to, whether the survey corresponds with the physical land, and whether there are prior or  competing interests. 

5. Family Land and Communal Land: The Consent Trap 

A significant proportion of land in Nigeria originates from family or communal ownership. This creates  special risks because the person physically negotiating with the purchaser may not have legal authority  to sell. 

Under customary law, family land is not the personal property of the head of family. The head of family  is a trustee-like manager of the property. Valid alienation of family land usually requires the  participation of the head of family and the principal members of the family.

In Ekpendu v. Erika (1959) 4 FSC 79, the court drew an important distinction. A sale of family land by  principal members without the head of family may be void. A sale by the head of family without the  consent of principal members may be voidable at the instance of non-consenting principal members.  The exact result may depend on the facts, the applicable custom and whether the aggrieved members  act timeously. 

In Adejumo v. Ayantegbe (1989) 3 NWLR (Pt. 110) 417, the Supreme Court reaffirmed the importance  of proper family consent in alienation of family land. The decision illustrates that a purchaser of family  land must identify the head of family, confirm the principal members, ensure the correct persons execute  the transaction documents, and obtain evidence of family authority. 

The practical danger is that family land disputes often emerge after payment has been made and  possession has been taken. A purchaser may later face claims by excluded branches of the family,  minors, descendants, widows, customary successors or rival family heads. A receipt signed by one  family member, or even a deed signed by the wrong persons, may not be enough. 

Where family land is involved, due diligence should include family meeting minutes, resolutions,  identification of principal members, death certificates or letters of administration where relevant,  confirmation of the applicable custom, and independent interviews with persons in possession or  neighbouring owners. 

6. Possession, Tenants, Occupiers and Equitable Interests 

Physical possession is often treated casually in real estate deals, but possession can be legally  significant. A person in possession may have rights that affect the purchaser. Tenants, licensees,  customary occupants, mortgagees in possession, family members, squatters, caretakers, developers,  contractors and persons claiming equitable interests may all complicate a transaction. 

The law recognizes that possession may put a purchaser on inquiry. A buyer who sees another person  in occupation cannot safely ignore that fact and rely only on documents supplied by the vendor. The  buyer should ask: Who is in possession? Under what arrangement? Is there a tenancy? Is there a pending  sale? Is there a family dispute? Is the occupier claiming ownership? Has rent been paid? Is there a court  order? 

In land transactions, what is on the ground may be as important as what is in the file. 

7. Litigation, Lis Pendens and Court Orders 

A property may have a valid-looking title but be tied up in litigation. The vendor may not disclose  pending suits, appeals, injunctions, probate disputes, receivership, insolvency proceedings, family  litigation or enforcement actions. 

The doctrine of lis pendens: suit pending warns purchasers that property under litigation should not be  freely dealt with in a manner that defeats the court’s authority or prejudices the outcome of the case. A  purchaser who buys property during litigation may be bound by the eventual judgment.

Due diligence should therefore include litigation searches at relevant High Courts, Federal High Court  where applicable, probate registry, corporate affairs records for company-owned land, and inquiries  from persons in possession. 

8. Probate and Estate Property Risks 

Where land forms part of a deceased person’s estate, the purchaser must be careful. Beneficiaries,  children or relatives may physically control the property, but they may not have legal authority to sell.  Depending on the circumstances, letters of administration, probate, assent, family consent or court  approval may be required. 

A sale by persons without proper authority may expose the buyer to future claims by administrators,  executors, beneficiaries or creditors of the estate. 

9. Mortgages, Charges and Encumbrances 

A property may be subject to a legal mortgage, equitable mortgage, charge, caveat, lien, judgment debt,  receiver’s appointment or other encumbrance. A purchaser who fails to conduct proper searches may  acquire property subject to existing third-party interests. 

Searches should be conducted at the Lands Registry, Corporate Affairs Commission where the owner  is a company, courts, asset-management agencies where relevant, and any registry applicable to the  transaction type. The buyer should also request the original title documents, because possession of  originals may indicate whether the property has been deposited with a lender. 

The Practical Due-Diligence Checklist 

A prudent purchaser should go beyond asking for a C of O. At minimum, due diligence should include: 

1. reviewing the root of title and chain of ownership; 
2. verifying the C of O, deed, Governor’s Consent and registration details at the Lands Registry; 3. charting the survey at the Surveyor-General’s office; 
3. checking whether the land is under acquisition, excision, committed use, setback or government  scheme; 
4. inspecting the property physically; 
5. interviewing occupiers, neighbours and relevant community representatives; 7. confirming family or communal consent where applicable; 
6. checking planning and building approvals; 
7. conducting court and litigation searches; 
8. verifying company authority, probate authority or attorney authority where relevant; 11. checking for mortgages, charges, caveats and other encumbrances; 
9. confirming tax, stamp duty and registration obligations; 
10. ensuring that completion documents are properly executed, consented to and registered.

Conclusion 

The Certificate of Occupancy remains a central document in Nigerian real estate transactions, but it is  not the end of legal due diligence. It is only one piece of the title puzzle. Courts have consistently shown  that a C of O may be challenged where the root of title is defective, where a prior interest exists, where  the grant was improperly made, where consent requirements are ignored, where family land rules are  breached, or where fraud infects the transaction. 

The safest approach is to treat every property transaction as a legal investigation, not a document  exchange. The purchaser must look behind the certificate, behind the deed, behind the survey and  behind the vendor’s assurances. 

In Nigerian real estate, the most expensive risk is often not the absence of documents. It is the false  comfort created by documents that were never properly interrogated. 

A C of O may open the door. Proper due diligence is what keeps the buyer inside safely.