Land is the basis of real estate investment and buying, keeping and selling vacant land is one of the most profitable investments that you can make. If your location is right and you buy at the right price getting a hundred per cent return on your investment within five to seven years is not unusual. However, there are pitfalls to avoid and challenges that you may face in your bid to make profit through this investment medium.
Few days ago, I had a chat with a friend on the challenges he is currently faced with on a parcel of land he bought some years ago in one of the outskirts of Lagos. He recently visited the area to check up on this investment only to discover that a quarter of the plot had been sold and one of the access roads no longer exists because the traditional land owners popularly referred to as ‘Omo-Onile’ in South West Nigeria had sold it and a building had been erected on it.
This is not an isolated incident as I am sure either you or someone known to you might have had a bitter experience in this regards. It is the by-product of some lawlessness in our society which a better land regulatory regime should correct.
One of the most painful aspects of investing in real estate is to discover that you have used your hard earned money to buy litigation or crisis. The possibility of resolving land dispute in record time is generally remote. Some land matters involving serious conflicts have lasted between 10 to 25 years or more before they are finally resolved.
By that time some of the beneficiaries might have died and the benefit of the victory not as exciting as it should be. These are some of the reasons why it is good to avoid these pitfalls or be better prepared to handle them when and if they do occur.
One of the key points to keep in mind is that although an agreement could be made verbally or in writing, when it involves real estate ensure that the agreements are in writing. Oral land transactions cannot be enforced by our law courts.
The most basic of the document that you need is a purchase receipt. You should ensure that you read any fine print on the receipt and take note of the words used. For instance, if you fully paid for the purchase of the land and you find written on the receipt that you leased it no explanation from the seller should suffice until he or she changes the words to reflect that the land had been sold to you.
Land can be purchased from an individual, a community, a private or a public corporation. When the land is purchased from a community rather than an individual, the precautions you need to take during and after payment are slightly different. In this instance, a sale of community land must be with the consent of the head of the family. The receipts and agreements that you will have must be signed by the head of the family and any other recognised signatory or signatories of the family.
There is also the need to take precautions against fraud in various shades and shadows. One area to note is to ensure that the seller is properly identified and actually signed the documents. Several years ago a real estate investor bought some acres of land from a family and thereafter travelled outside the country. He then sent his brother who did not know the authorised signatories to go to the sellers and collect the signed agreement from them. They gave him the agreement but some years after they encroached on his land and claimed that he did not buy through the authorised family representatives. The matter went to the court and one of the key discoveries that cost this investor his investment was that they proved that one of the names on the agreement was that of a member of the family that had died several years prior to the transaction.
The need for due diligence and reading or understanding the fine prints is not limited to land transactions with individuals or private companies alone. Infact, you need to be more careful when dealing with the government because they possess the machineries of the state with which they could enforce their will. Always ensure that the land you want to buy is not under government acquisition and find out what is the approve use.
If you have a Certificate of Occupancy on the land it is important to understand that there are several clauses written on it specifying your responsibilities. If you fail to carry out any of these obligation you may provide the government with the basis that they need to revoke your Certificate of Occupancy. You need to be extremely careful in this regards if your land is located in a prime area.