Real estate is a significant sector of the Nigerian economy, and understanding the terminology used in the industry is critical if you want to buy, sell, or invest in property. In this blog post, we will go over 25 important real estate terms in Nigeria that you should be familiar with.
Table of Contents
Top List of Nigeria Real Estate Terms
1. 𝐋𝐚𝐧𝐝 𝐔𝐬𝐞 𝐀𝐜𝐭
The Land Use Act is a Nigerian law that governs the use and management of land in the country. It was passed into law in 1978 and is considered one of the most significant pieces of legislation governing real estate in Nigeria.
Under the Land Use Act, all land in Nigeria is vested in the state government, which is responsible for managing and allocating it to individuals and organizations for various purposes. The act also establishes a system of land tenure, whereby individuals or organizations are granted the right to use and develop land for a specific period, usually up to 99 years.
One of the primary objectives of the Land Use Act is to simplify and streamline the process of land acquisition and development in Nigeria. The act provides a framework for the registration of land titles, making it easier for individuals and organizations to acquire and transfer land ownership.
You can read more about the land use act here
𝟐. 𝐂𝐞𝐫𝐭𝐢𝐟𝐢𝐜𝐚𝐭𝐞 𝐨𝐟 𝐎𝐜𝐜𝐮𝐩𝐚𝐧𝐜𝐲 (𝐂 𝐨𝐟 𝐎)
This is a document issued by the government to signify ownership and right to use a piece of land. It is obtained through a process that involves paying certain fees to the government and complying with certain conditions.
A piece of land or property purchased without a Certificate of Occupancy is equivalent to owning a vehicle without a logbook. This is clearly not the situation you want to be in as a landowner or property owner in Nigeria.
According to Section 9 of the Land Use Act 1978 stipulates that the certificate of occupancy for a piece of land located in Nigeria can only be issued by the State Governor of the state where the land is situated. The Section further states that the Governor must issue the certificate under his own hand to any individual who is entitled to a statutory right of occupancy, as evidence of such right. This act also established the concept of land use, which distinguishes between various types of land usage such as residential, commercial, mixed-use, etc.
I wrote a comprehensive article on Land Measurement and Documentation Here
3. 𝐃𝐞𝐞𝐝 𝐨𝐟 𝐀𝐬𝐬𝐢𝐠𝐧𝐦𝐞𝐧𝐭
This is a legal document that transfers ownership of a property from one person or entity to another.
A Deed of Assignment in Nigeria can only be prepared by a lawyer. The buyer’s legal counsel drafts this document, known as a deed of assignment, to represent his client’s interests. Following that, the seller’s legal counsel scrutinizes and executes this document in order to project mutual agreement between the two parties.
At the conclusion of a property transaction, any reputable real estate company in Nigeria would provide you with this document. It must also contain certain information in order to be binding on the parties to the transaction. They believe that transferring land ownership requires a deed of assignment.
4. 𝐃𝐞𝐞𝐝 𝐨𝐟 𝐂𝐨𝐧𝐯𝐞𝐲𝐚𝐧𝐜𝐞
This is a legal document used to transfer ownership of a property from one person or entity to another.
The purpose of the deed is to ensure a clear transfer of ownership, free of any encumbrances such as liens, mortgages, or other claims that may affect the property’s title.
Conveyance deeds are commonly used in real estate transactions, such as when buying or selling a home, but they can also be used for other assets such as vehicles, boats, or intellectual property. The deed contains information about the property, such as its legal description, the names and addresses of the parties involved, and the price or consideration paid for the property.
5. 𝐌𝐨𝐫𝐭𝐠𝐚𝐠𝐞
This is a loan obtained from a bank or other financial institution to purchase a property. The property is used as collateral for the loan.
6. 𝐏𝐨𝐰𝐞𝐫 𝐨𝐟 𝐀𝐭𝐭𝐨𝐫𝐧𝐞𝐲
This is a legal document that gives one person (the attorney) the authority to act on behalf of another person (the principal) in legal matters.
7. 𝐑𝐢𝐠𝐡𝐭 𝐨𝐟 𝐎𝐜𝐜𝐮𝐩𝐚𝐧𝐜𝐲
This is a document issued by the government to allow an individual or entity to occupy and use a piece of land for a specified period of time. This is one of the most important real estate terms on the list.
8. 𝐒𝐮𝐫𝐯𝐞𝐲 𝐏𝐥𝐚𝐧
This is a map or diagram of a piece of land that shows its exact boundaries, dimensions, and other features.
9. 𝐓𝐞𝐧𝐚𝐧𝐜𝐲 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧t
This is a legal document that outlines the terms and conditions of a rental agreement between a landlord and a tenant.
10. 𝐓𝐢𝐭𝐥𝐞 𝐃𝐨𝐜𝐮𝐦𝐞𝐧𝐭
This is a legal document that shows ownership of a property, and may include a deed of assignment, certificate of occupancy, or other relevant documents.
11. 𝐒𝐭𝐚𝐦𝐩 𝐃𝐮𝐭𝐲
This is a tax levied on documents, such as land transactions, that are stamped and registered at the Lands Registry or the Corporate Affairs Commission (CAC).
12. 𝐏𝐫𝐨𝐩𝐞𝐫𝐭𝐲 𝐕𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧
Property valuation is the process of estimating the monetary value of a real estate property while taking into account a variety of factors such as the property’s location, size, condition, and features. The valuation may be performed for a variety of reasons, including the sale, purchase, mortgage, insurance, taxation, or resolution of legal disputes.
13. 𝐏𝐫𝐨𝐩𝐞𝐫𝐭𝐲 𝐃𝐞𝐯𝐞𝐥𝐨𝐩𝐦𝐞𝐧𝐭
This refers to the process of building or renovating a property, such as a house, apartment complex, or commercial building. Property developers often work with architects, contractors, and other professionals to plan and execute their projects.
14. 𝐏𝐫𝐨𝐩𝐞𝐫𝐭𝐲 𝐌𝐚𝐧𝐚𝐠𝐞𝐦𝐞𝐧𝐭
Property Management is a real estate term that refers to the supervision, administration, and maintenance of real estate properties, including residential, commercial, and industrial properties. Property management companies in Nigeria are responsible for ensuring that real estate properties are in good condition, collecting rents, managing tenant relations, maintaining the property’s physical and structural integrity, and handling all legal and financial matters related to the property. They act as intermediaries between property owners and tenants, providing a range of services to both parties. In essence, property management in Nigeria’s real estate sector aims to ensure that real estate properties are well-maintained and generate optimal returns for their owners.
ALSO READ: Top 5 Innovative Real Estate Companies In Port Harcourt
15. Appreciation
Appreciation simply means the increase in value of a property over time due to various factors such as location, demand, economic conditions, and improvements made to the property.
When a property appreciates, it means that its market value has increased, and it can be sold for a higher price than what it was initially purchased for. For example, if a property was bought for N10 million and its value increased to N15 million over a period of time, it has appreciated by N5 million.
16. 𝐋𝐚𝐧𝐝𝐥𝐨𝐫𝐝
A landlord is the owner of a rental property who leases or rents out the property to tenants in exchange for regular payments called rent. The landlord can be an individual, a family, a group of individuals or a company that owns the property.
The responsibilities of a landlord in Nigeria’s real estate sector include ensuring that the rental property is habitable, maintaining the property, collecting rent from tenants, enforcing lease agreements, and resolving disputes that may arise between the landlord and the tenant.
17. Depreciation
Depreciation refers to the decrease in value of a property over time due to wear and tear, physical deterioration, and other factors such as changes in market conditions, economic trends, and technological advancements. Depreciation is a non-cash expense that is recognized by real estate investors and property owners as a way to account for the decline in the value of their assets over time. In Nigeria, depreciation is an important concept for real estate investors to understand as it can impact the overall profitability of a real estate investment.
18. 𝐓𝐞𝐧𝐚𝐧𝐭
A tenant is an individual or entity that rents or leases a property (such as a house, apartment, or commercial space) from a landlord or property owner. The tenant is obligated to pay rent to the landlord in exchange for the right to occupy and use the property for a specified period of time as defined by the terms of the tenancy agreement. The agreement typically outlines the rights and responsibilities of both the tenant and the landlord, including issues such as rent payment, maintenance of the property, and the conditions under which the tenancy may be terminated.
19. 𝐑𝐞𝐚𝐥 𝐄𝐬𝐭𝐚𝐭𝐞 𝐀𝐠𝐞𝐧𝐭/𝐁𝐫𝐨𝐤𝐞𝐫
A real estate agent/broker in Nigeria is a licensed professional who helps clients buy, sell or rent properties. They act as intermediaries between buyers and sellers, facilitating real estate transactions and providing guidance and advice to their clients.
Real estate agents/brokers in Nigeria are required to be registered with the Nigerian Institute of Estate Surveyors and Valuers (NIESV) and hold a valid license from the Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON). They typically earn a commission on the sale or rental of properties, which is usually a percentage of the total transaction value.
20. 𝐏𝐫𝐨𝐩𝐞𝐫𝐭𝐲 𝐎𝐰𝐧𝐞𝐫𝐬𝐡𝐢𝐩
In Nigeria, property ownership can be held by individuals, corporations, or the government. It is important to ensure that the ownership of a property is clear and legally valid to avoid disputes and legal issues in the future.
21. Rent-to-Own
Rent-to-own is a type of financing arrangement in which a tenant rents a property for a set period of time with the option to purchase the property at a later date. During the rental period, the tenant typically pays a higher monthly rent than they would if they were simply renting the property, with a portion of the extra money going toward a down payment on the property if they choose to exercise their option to purchase. The option to purchase the property is typically outlined in the rental agreement, with the price and terms of the purchase negotiated in advance.
22. Due Diligence
Due Diligence refers to the process of conducting a comprehensive and thorough investigation of a property or real estate investment opportunity before making a decision to purchase or invest. This process is carried out to ensure that the property or investment is free from any legal or financial issues, and that it represents a sound and viable investment opportunity.
The due diligence process typically involves a review of the property’s legal documents, such as title deeds and land use permits, as well as an assessment of the physical condition of the property, including any potential environmental issues or hazards. Other areas of investigation may include a review of the property’s financial performance, such as rental income and expenses, and an analysis of the local real estate market to assess the property’s potential value and marketability.
23. 𝐑𝐞𝐚𝐥 𝐄𝐬𝐭𝐚𝐭𝐞 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐓𝐫𝐮𝐬𝐭𝐬 (𝐑𝐄𝐈𝐓𝐬)
REITs are investment vehicles that allow individuals and organizations to invest in real estate without actually owning physical property. In Nigeria, 𝐑𝐄𝐈𝐓𝐬 are regulated by the Securities and Exchange Commission (𝐒𝐄𝐂).
24. 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐆𝐚𝐢𝐧𝐬 𝐓𝐚𝐱
This is a tax levied on the profit realized from the sale or transfer of a real estate property that has appreciated in value over time. In other words, it is a tax on the gain made from the sale of a property that was purchased at a lower price.
In Nigeria, the capital gains tax rate on real estate is 10% for individuals and 20% for companies. The tax is usually paid by the seller of the property and is calculated based on the difference between the selling price of the property and its original purchase price, adjusted for inflation.
It’s important to note that certain exemptions may apply to capital gains tax in Nigeria real estate, such as when the property is being sold as a result of death, gift, or compulsory acquisition by the government.
25. Closing Cost
Closing costs are the fees and expenses associated with the purchase of a property that must be paid by the buyer at the time of closing. These fees and expenses may differ depending on the location, the price of the property, and the type of mortgage being used.
It’s important to note that closing costs can add up to a significant amount, often ranging from 2% to 5% of the purchase price of the property, so buyers should be prepared to budget for these expenses.
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