How to Conduct Due Diligence When Buying Property in Nigeria
Introduction
The Nigerian real estate market continues to offer promising opportunities for homebuyers and investors alike. With property values in prime locations like Ikoyi, Victoria Island, and Lekki appreciating by an average of 15% annually over the past five years, the potential for significant returns is clear. However, the path to successful property acquisition in Nigeria is fraught with potential pitfalls that can transform a promising investment into a costly mistake.
According to the Real Estate Developers Association of Nigeria (REDAN), over 30% of property transactions in Nigeria encounter some form of dispute, with nearly 60% directly attributable to inadequate due diligence. This sobering statistic underscores the critical importance of thorough investigation before finalizing any property purchase.
This comprehensive guide will walk you through the essential steps of conducting proper due diligence when buying property in Nigeria, incorporating real-world examples and expert insights to help you navigate this complex but rewarding market.
What is Property Due Diligence?
Property due diligence is the systematic process of investigating and verifying all aspects of a property before completing a purchase. It encompasses legal, physical, financial, and environmental considerations designed to uncover any issues affecting the property’s value, usability, or legal status.
In the Nigerian context, due diligence is important due to the prevalence of informal land arrangements, historical disputes, and documentation irregularities. As Lagos-based real estate attorney Chidi Okonkwo explains, “The Nigerian property market operates with unique complexities that make thorough due diligence not just advisable but essential for protecting your investment.”
The Essential Steps of Property Due Diligence in Nigeria
1. Verify Authentic Ownership
The first and most critical step in property due diligence is confirming the seller’s legitimate right to transfer ownership. This requires:
Obtaining and verifying the property’s title documents:
- Certificate of Occupancy (C of O)
- Deed of Assignment
- Governor’s Consent
- Registered Survey Plan
Case Study: In 2023, Mr. Adebayo purchased a property in Magodo Phase II, Lagos, after being shown what appeared to be valid documentation by the seller. He later discovered the seller was a tenant who had forged ownership papers. Mr. Adebayo lost his ₦145 million investment and faced eviction from the rightful owner. A proper title search at the Lagos State Land Registry would have revealed the deception.
Expert Tip: Always cross-verify title documents with the relevant state’s land registry. For Lagos properties, the Lagos State Land Registry maintains records that can be searched for a fee of approximately ₦15,000 to ₦30,000, a small price compared to the potential losses from fraudulent transactions.
2. Conduct a Comprehensive Land Registry Search
A land registry search confirms a property’s ownership history, encumbrances, and legal status. This critical step involves:
- Searching the state’s land registry records
- Investigating any registered encumbrances (mortgages, liens, etc.)
- Confirming the property’s survey plan matches official records
According to data from the Lagos State Land Bureau, property registry searches increased by 22% in 2024, indicating growing awareness of their importance. Yet only about 35% of buyers conduct these searches before purchase.
Real-Life Example: Mrs. Nkechi completed the purchase of a property in Ologolo, Lekki Phase 1 in 2023, only to discover it had been used as collateral for a ₦25 million bank loan. The seller had deliberately concealed this fact, and without conducting a proper land registry search, Mrs. Nkechi was unaware of the encumbrance. She ultimately had to pay off the outstanding loan to clear the title.
3. Investigate Planning and Development Approvals
Ensuring a property complies with local planning regulations is essential to avoid potential demolition or costly modifications. This step includes:
- Verifying approved building plans
- Checking zoning permissions
- Confirming building permits and approvals
- Investigating any pending government infrastructure projects that might affect the property
The Federal Capital Development Authority (FCDA) reports that in Abuja alone, over 120 structures were demolished in 2024 due to lack of proper approvals or encroachment on public infrastructure corridors.
Case Example: In 2023, a family purchased a luxury property in Lekki Phase 1 for ₦150 million. Six months later, they received notice that part of their property was scheduled for demolition to accommodate road expansion. The previous owner had been aware of the development plan but failed to disclose it. Proper investigation with the Lagos State Physical Planning Authority would have revealed this critical information.
4. Assess Physical Condition and Infrastructure
Beyond legal documentation, thorough due diligence requires assessment of the property’s physical state and supporting infrastructure:
- Structural integrity evaluation
- Utilities availability and condition (water, electricity, drainage)
- Access roads and transportation infrastructure
- Flooding history and environmental concerns
A 2024 survey by the Nigerian Institution of Estate Surveyors and Valuers found that 45% of property buyers in Nigeria reported significant undisclosed physical defects after purchase.
Expert Insight: Engr. Folake Adeniyi, a structural engineer with 15 years of experience in Lagos property assessments, advises: “Always engage a qualified engineer to conduct a thorough structural assessment, particularly for properties over 10 years old. In coastal areas like Lekki and Victoria Island, special attention should be paid to foundation integrity due to the water table levels and soil conditions.”
5. Investigate the Community and Environment
Understanding the property’s surroundings can significantly impact its long-term value and livability:
- Security situation in the area
- Proximity to essential services
- Environmental hazards
- Community development plans
- Historical land use (especially important for industrial areas)
Real-Life Example: The Jenkins family purchased a beautiful property in Banana Island in 2024, attracted by the prestigious address and apparent value. However, they failed to research ongoing dredging activities nearby, which resulted in significant noise pollution and periodic water service disruptions. Community investigation would have revealed these issues, which had been ongoing for over a year.
6. Financial Due Diligence
Financial investigation ensures there are no hidden costs or liabilities:
- Confirming property tax payment status
- Verifying utility bill payments
- Checking for outstanding service charges (for estates)
- Investigating any community development levies
According to the Federal Inland Revenue Service (FIRS), approximately 40% of properties in Nigeria have some form of outstanding tax obligations that could become the responsibility of new owners if not identified before purchase.
Case Study: In 2024, a young professional purchased a property in Ikeja GRA only to discover ₦1.2 million in outstanding Lagos State Land Use Charges that legally transferred with the property. The seller had deliberately concealed these arrears, which the buyer became liable for after completing the transaction.
Common Due Diligence Pitfalls in Nigerian Real Estate
1. Relying Solely on Agents or Intermediaries
Many buyers place unwarranted trust in real estate agents or intermediaries without conducting independent verification. While reputable agents provide valuable services, their primary goal is completing transactions.
Expert Advice: Mr. Tunde Balogun, President of the Association of Real Estate Agents of Nigeria (AEAN), notes: “Even with the most reputable agent, buyers should still conduct independent verification of all claims and documents. Professional agents will welcome and facilitate this process rather than discouraging it.”
2. Rushing the Process Due to “Hot Market” Pressure
The fear of missing out on seemingly attractive deals often makes buyers rush due diligence. This is particularly common in rapidly developing areas like Ibeju-Lekki and Epe, where land values have increased by over 200% in some locations following infrastructure developments.
Real Example: In 2023, several investors rushed to purchase plots in a “fast-developing” estate in Ibeju-Lekki after being told only a few plots remained. They skipped thorough due diligence due to time pressure, only to discover the developer lacked proper titles and had sold the same plots to multiple buyers.
3. Neglecting Local Knowledge and Community Investigation
Many buyers, especially from diaspora or other states, fail to tap into local knowledge that could reveal critical information about properties.
Case in Point: A diaspora Nigerian purchased a property in Abeokuta in 2024 based solely on online listings and agent representations. The buyer later discovered the area experienced severe water shortages for six months of the year—a fact well-known to locals but not disclosed in marketing materials.
Professional Support for Effective Due Diligence
Engaging key professionals can significantly enhance your due diligence process:
- Real Estate Attorney: For document verification and legal counsel
- Registered Surveyor: To confirm property boundaries and survey accuracy
- Structural Engineer: For physical evaluation
- Estate Valuer: For accurate valuation and market analysis
The cost of engaging these professionals typically ranges from 1-3% of the property value—a small price compared to the potential losses from inadequate due diligence.
According to the Nigerian Bar Association Section on Business Law, property transactions that involved legal counsel from the beginning were 75% less likely to result in litigation than those that engaged attorneys only for documentation.
Conclusion
The Nigerian real estate market offers tremendous opportunities for buyers who approach it with proper diligence and care. By following the comprehensive steps outlined in this guide, you can significantly reduce your risk and increase the likelihood of a successful property investment.
Remember the cautionary tale of Mr. Adebayo, who lost ₦45 million to a fraudulent seller, or Mrs. Nkechi, who inherited an undisclosed ₦25 million debt with her property purchase. These costly mistakes could have been avoided through proper due diligence.
As Lagos-based property developer Michael Oluwatobi aptly puts it: “In Nigerian real estate, the profit is not just made when you sell—it’s made when you buy correctly. Thorough due diligence is not an expense; it’s your most important investment.”
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About the Author: This article was prepared by the Research Team at Brick & Click Realty, Nigeria’s premier real estate brokerage specializing in transparent, secure property transactions across Nigeria’s major urban centers.
