Learning Objectives

Upon completion of this lesson, the candidate shall be expected to:

Identify and analyse the principal statutory restrictions on the disposition of land in Nigeria, with reference to sections 21 and 22 of the Land Use Act 1978.

Explain the requirement for Governor’s consent and its practical implications.

Distinguish among oral contracts, open contracts, and formal contracts for the sale of land.

Examine the legal significance of the deposit and remedies upon default.

Evaluate the capacity of parties.

Describe the process of exchange of formal contracts and steps for perfection of title.

Apply ethical principles governing mortgage brokers and legal practitioners.

The sale of land in Nigeria is governed by a complex legal framework shaped by pre-colonial customary practices, received English law, and post-independence statutes — foremost the Land Use Act 1978. Land remains the single most valuable class of asset held by individuals and corporate entities in Nigeria.

This lesson, the first of two on sale of land, addresses the contractual stage — formation, content, and enforceability — and the statutory restrictions that circumscribe freedom to dispose of interests in land.

Prior to the LUA 1978, land disposition was governed by a patchwork of customary law, received English common law, and regional statutes (Conveyancing Act 1881, Property and Conveyancing Law of Western Region, Land Tenure Law of Northern Region).

The Land Use Decree No. 6 of 1978 (now Act) took effect 29 March 1978 and was preserved by section 315 of the 1999 Constitution. The Act vested all land in the Governor of each state, to be held in trust for all Nigerians.

By section 315(5)(d) of the 1999 Constitution, the LUA is virtually unamendable through ordinary legislative processes.

Section 22 provides: "it shall not be lawful for the holder of a statutory right of occupancy granted by the Governor to alienate his right of occupancy or any part thereof by assignment, mortgage, transfer of possession, sublease, or otherwise howsoever without the consent of the Governor first had and obtained."

The phrase "or otherwise howsoever" has been interpreted broadly to encompass virtually every form of dealing that transfers an interest.

Savannah Bank of Nigeria Ltd v. Ajilo (1989) 1 NWLR (Pt. 97) 305 — Supreme Court held that a mortgage of SRO without prior Governor’s consent is null and void. The defect goes to the root of the transaction.

The practical implications for mortgage lending have been profound. Financial institutions in Lagos, Abuja, and other cities have developed elaborate procedures for obtaining consent.

Section 21 provides that 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 bequest without the approval of the appropriate Local Government.

Section 21(a) permits alienation of customary right (with approval) by assignment, mortgage, transfer of possession, or sublease if the land is in an urban area and the holder has been granted a statutory right; otherwise section 21(b) prohibits alienation by assignment, mortgage, or sublease and permits only transfer of possession or bequest with Local Government approval.

Process varies state to state. In Lagos: applications to Lagos State Lands Bureau with completed form, certified C of O or deed, approved survey plan, evidence of ground rent payment, tax clearance, and instrument of alienation.

The processing has historically been characterised by significant delays — six months to several years. Sources include bureaucratic inefficiency, multiple approvals required, disputes over consent fees (typically a percentage of consideration), and corruption.

Reforms: Lagos has digitised aspects via the e-Governor’s Consent platform. FCT Administration has implemented measures to reduce processing times.

Savannah Bank v. Ajilo — null and void ab initio. Subsequent decisions affirm this strict approach. Equitable doctrines (estoppel, part performance) generally do not validate transactions effected without consent.

Adedeji v. Oloso (2020) LPELR-49574(CA) — Court of Appeal clarified application in a sale-of-land transaction in Ogun State. Where purchaser had paid full price and been let into possession but the deed had not been perfected by consent, the purchaser acquired at most an equitable interest — not enforceable against a subsequent purchaser for value without notice who obtained legal estate with consent.

Three categories conventionally recognised: oral contracts, open contracts, formal contracts.

Section 4 of the Statute of Frauds 1677 (received) provides that no action shall be brought upon any contract or sale of lands unless the agreement or some memorandum is in writing and signed by the party to be charged.

The Statute is received into most Nigerian states or analogous provisions enacted locally (e.g., section 67 of the Property and Conveyancing Law, Cap. P21, Laws of Lagos State 2015).

Effect: oral contracts for sale of land are not void but unenforceable by action.

Principal exception: equitable doctrine of part performance. Acts of part performance include payment of part/all of the purchase price, taking possession, and making permanent improvements.

An open contract has been reduced to writing setting out essential terms (parties, property, consideration) but doesn’t contain detailed conditions of sale. The terms are "open" and supplemented by conditions implied by law.

Implied conditions include: vendor’s obligation to deduce a good root of title dating back at least 15 years (or as prescribed); purchaser’s obligation to accept a title shown to be good; right to raise requisitions on title within a reasonable time.

Open contracts are unsatisfactory due to uncertainty. Standard practice is to proceed to formal contract as expeditiously as possible.

A formal contract is a comprehensive written instrument setting out all terms and conditions. Typically prepared by legal practitioners. Not binding until executed by both parties and copies exchanged.

Addresses: identity and capacity of parties; full description of property; purchase price and payment terms; deposit treatment; title to be deduced; date for completion; representations and warranties; provisions for Governor’s consent; conditions for rescission; governing law and dispute resolution.

The deposit serves a dual function: part payment of the purchase price and an earnest of the purchaser’s intention to complete. Conventional amount in Nigerian practice is 10%.

Where purchaser fails to complete without lawful justification, vendor is entitled to forfeit the deposit independently of damages claim.

Where vendor fails or refuses to complete, purchaser is entitled to return of the deposit with accrued interest, plus may claim damages or specific performance.

Deposit frequently paid to a stakeholder (vendor’s solicitor or independent escrow agent). The stakeholder assumes fiduciary obligations and may not release funds to vendor until contract conditions are satisfied.

A deposit paid to a stakeholder is held on trust for both parties pending completion; a deposit paid to vendor’s agent is immediately available to the vendor.

Under the general law applicable in most Nigerian states, age of majority is 18 years. A minor lacks full contractual capacity. Under the Children and Young Persons Laws and the Child Rights Act 2003, a minor may not enter into a contract for sale of land — any such contract is voidable at the minor’s instance.

A person of unsound mind lacks capacity. Contract entered into is voidable at that person’s instance, provided the other party knew or ought to have known of the incapacity. The burden rests on the party alleging incapacity.

A company incorporated under CAMA 2020 has capacity to acquire and dispose of interests in land, subject to memorandum and articles. Section 43 CAMA provides company has capacity and rights of a natural person, subject to qualifications.

Verification of corporate capacity is critical. Before accepting corporate mortgage, lender should verify: company is duly incorporated and subsisting; transaction is within objects; necessary board and shareholder approvals obtained; persons executing have been duly authorised.

The exchange is the point at which parties become legally bound. Prior to exchange, each party is at liberty to withdraw without incurring liability. This principle applies in Lagos, Abuja, Port Harcourt, Enugu, Kaduna, and every Nigerian jurisdiction.

Mechanics: vendor’s solicitor prepares draft and submits to purchaser’s solicitor; once terms agreed, two identical parts are engrossed; one signed by vendor (held by vendor’s solicitor), the other signed by purchaser (held by purchaser’s solicitor); exchange is effected when each solicitor delivers to the other the part signed by his client.

At exchange, the deposit is paid by purchaser’s solicitor to vendor’s solicitor or stakeholder.

Period between agreement of principal terms and exchange is often the most vulnerable stage.

Execution of deed does not by itself confer a legal interest. Perfection requires: stamp duty; registration; Governor’s consent (for SRO land).

The Stamp Duties Act, Cap. S8, LFN 2004, requires instruments to be stamped. Quantum prescribed in Schedule. Failure renders instrument inadmissible in evidence in civil proceedings (section 22 SDA), unless court exercises discretion to admit upon payment of duty plus penalty.

Stamping effected at FIRS (for FCT or corporate transactions) or State Internal Revenue Service.

Various state registration laws (Registration of Titles Law in Lagos; Land Instruments Registration Law in former Northern Region states).

Functions: notice to the world; in jurisdictions with registration of title, confers legal title.

In Lagos, the Registration of Titles Law provides for a Torrens-style system — register conclusive evidence of registered proprietor’s title.

Processing times vary; delays of several months are common.

Sequential: consent first, then stamping, then registration. In some states, consent and stamping may run concurrently. The totality is referred to as "perfection." Until perfection, the transferee holds at most an equitable interest.

General conditions (standard application from established conveyancing practice) and special conditions (tailored to the transaction).

General conditions address: vendor’s obligation to deduce title; time for requisitions; apportionment of outgoings (ground rent, service charges, rates) at completion; risk of damage between contract and completion; rate of interest on default; circumstances for rescission.

Special conditions address: inclusion/exclusion of fixtures and fittings; vendor’s disclosure of defects; allocation of responsibility for Governor’s consent; restrictive covenants or easements affecting the property.

Mortgage brokers and legal practitioners have ethical obligations: duty to act in best interests of client; duty to provide accurate and complete information; duty to disclose material facts; duty to avoid conflicts of interest.

Specific issues:

Dual representation: solicitor acting for both vendor and purchaser faces inherent conflict. Generally prohibited under Rules of Professional Conduct for Legal Practitioners 2007 unless both parties give informed consent in writing.

Handling client funds: deposit and other monies must be held in a designated client account. Commingling with personal or office funds is a serious disciplinary offence.

Duty of due diligence: thorough searches and enquiries to verify vendor’s title, identify encumbrances, ensure compliance with statutory requirements. Failure may render solicitor or broker liable in negligence.

Adedeji v. Oloso (2020) illustrates consequences of inadequate due diligence. Purchaser’s failure to obtain Governor’s consent resulted in loss of legal interest despite full payment and possession.

Key principles:

Alienation of both SRO and CRO is subject to consent/approval requirements of sections 22 and 21 LUA; failure to obtain renders the transaction void.

Savannah Bank v. Ajilo remains the leading authority on consequences of non-compliance, reaffirmed in Adedeji v. Oloso (2020).

Contracts may be oral (unenforceable absent part performance), open (supplemented by implied conditions), or formal (most complete and secure).

The deposit is both part payment and earnest; careful drafting of the deposit clause is essential.

Capacity governed by age (18 years), mental competence, and corporate authorisation under CAMA.

Exchange creates binding obligation to complete; period prior to exchange is vulnerable.

Perfection requires consent, stamping, and registration.

Mortgage brokers and legal practitioners bound by ethical obligations of diligence, fidelity, and transparency.

KEY TAKEAWAYS

Section 22 LUA: Governor’s consent mandatory for alienation of SRO; mortgage without consent is void ab initio.

Section 21 LUA: Local Government approval required for alienation of CRO.

Three contract types: oral (unenforceable except by part performance), open (implied terms), formal (comprehensive).

10% deposit conventional; stakeholder vs vendor’s agent has fiduciary implications.

Capacity: 18 years minimum age; corporate transactions require CAMA verification.

Exchange creates binding obligation; deposit paid at exchange.

Perfection = consent + stamping + registration (sequential).

Ethics: avoid dual representation without consent; protect client funds; exercise due diligence.

Knowledge Check (10 Questions)

1. Which Supreme Court decision established that a mortgage executed without Governor’s consent under section 22 LUA is null and void ab initio?

   1. Adedeji v. Oloso (2020)
   2. Savannah Bank of Nigeria Ltd v. Ajilo (1989)
   3. Ukeje v. Ukeje (2014)
   4. Idundun v. Okumagba (1976)

2. The Statute of Frauds 1677 (as received) renders an oral contract for the sale of land:

   1. Void
   2. Unenforceable by action absent part performance
   3. Valid and enforceable
   4. Illegal

3. Which of the following is NOT a typical act of part performance recognised in equity?

   1. Payment of part or all of the purchase price
   2. Taking possession of the land
   3. Making permanent improvements to the land
   4. Negotiating a lower price

4. The conventional deposit in Nigerian sale-of-land practice is:

   1. 5%
   2. 10%
   3. 25%
   4. 50%

5. Under section 21 LUA, the consent required for alienation of a customary right of occupancy is from:

   1. The Governor
   2. The Local Government
   3. The traditional ruler
   4. The Federal Mortgage Bank

6. The age of majority in most Nigerian states for the purpose of contractual capacity is:

   1. 16 years
   2. 18 years
   3. 21 years
   4. 25 years

7. Which Act governs the capacity of companies to acquire and dispose of interests in land in Nigeria?

   1. Land Use Act 1978
   2. Companies and Allied Matters Act 2020
   3. Constitution of the Federal Republic of Nigeria 1999
   4. Stamp Duties Act

8. The exchange of formal contracts creates:

   1. An option to purchase only
   2. A binding obligation to complete
   3. An equitable interest only
   4. An indefeasible legal title

9. Perfection of a land transaction in Nigeria requires:

   1. Stamping only
   2. Registration only
   3. Governor’s consent, stamping, and registration
   4. Publication in the Federal Gazette

10. A solicitor acting for both vendor and purchaser in the same sale transaction:

    1. Is acceptable as a matter of course
    2. Faces an inherent conflict of interest and requires informed written consent of both parties
    3. Is illegal under all circumstances
    4. Is permitted only in Lagos State

Answers

Answers: 1. (b) 2. (b) 3. (d) 4. (b) 5. (b) 6. (b) 7. (b) 8. (b) 9. (c) 10. (b)

Selected Bibliography and Further Reading

Adedeji v. Oloso (2020) LPELR-49574(CA)

Savannah Bank of Nigeria Ltd v. Ajilo (1989) 1 NWLR (Pt. 97) 305

Land Use Act, Cap. L5, LFN 2004

Companies and Allied Matters Act, 2020

Stamp Duties Act, Cap. S8, LFN 2004

Property and Conveyancing Law, Cap. P21, Laws of Lagos State 2015

Otubu, A., "The Land Use Act and the Question of Governor’s Consent" (Nigerian Journal of Contemporary Law, 2011)

Omotola, J.A., Law of Property in Nigeria (2nd edn, Lagos University Press 2007)

Smith, I.O., Practical Approach to Law of Real Property in Nigeria (3rd edn, Ecowatch Publications 2012)

Umezulike, I.A., Introduction to Law of Conveyancing (4th edn, Snaap Press 2013)

Rules of Professional Conduct for Legal Practitioners, 2007

IMBL Nigeria Certification