A disposition in real estate occurs when a property owner sells or disposes of a property or real estate asset.
The disposal can either be for consideration or without consideration, temporarily or permanently. As the owner of a property, you can either sell, mortgage, or give away your property for free.
In this article, I would be showing you the steps and procedures you should take towards legally disposing of your assets. The focus of this article would be disposition through a sale. Other forms of disposition such as gift, mortgage and joint venture would be the subject matter of a subsequent article.
Preparing To Sell Your Real Estate Asset
While preparing to sell your real estate asset, you must take note of the steps to a legitimate closure and the laws that guide the sale and acquisition of real estate property in Nigeria. Your obligations as a vendor are both stipulated by law and by ethical conducts.
You must also note that there are taxes, fees, costs and other expenses that accompany a disposition of real estate through a sale.
Disposing of your real estate might also lead to some risk exposure if
not professionally handled. Further down I would also help you resolve the most frequently raised issues that pop up during real estate disposition.
Steps To Sell Your Real Estate
Are you prepared and ready to sell your real estate assets? Then take the following steps:
Gather All Relevant Documents
As the owner of the real estate asset you are trying to dispose of, note that you are not only selling the physical property but also must transfer the title to the subsequent purchaser. At the end of the closure, you will also hand over all documents relating to the property to the purchaser.
You should have the original documents of the property in your possession. If you have misplaced them, then you should request for the certified true copies.
Documents you need include all old and current title deeds receipts and other documents proving ownership such as Letters of Administration, Grant of Probate etc.
You should also have evidence of payment of Land Use Charge and other taxes related to the property.
In order to properly dispose of your real estate asset, you may need to engage professional real estates practitioners such as attorneys, estate surveyors and valuers.
The professional work to be done include providing real estate advisory, value your property and also engaging a prospective buyer. A real estate lawyer would draft the contract of sale and provide legal advice all through the road to closure.
– Power of Attorney Or Letter of Authority
When appointing professionals, it is crucial to appoint them through a written authority. The written authority could either be a power of attorney or a letter of authority.
A letter of authority is preferred if the appointment is only for marketing and negotiating the price on your behalf.
However, if you would not be around to execute the documents and you would also like the agent/ attorney to receive the purchase price pay the applicable taxes and other charges on your behalf,
then a power of attorney would be the appropriate appointment document.
Set The Right Price
Setting the right price for your property is very important as this may cause prospective purchasers to either be interested or to pull away.
If the price is not right, most potential purchasers would discard the negotiation.
It is also important to get the right value for your asset unless the disposition is a distress sale.
The Sale Process
When a prospective purchaser has shown interest either through his agent or directly, the disposition process is expected to begin with the following steps.
An offer is an expression of interest communicated to another in anticipation of his acceptance. Either party could make an offer, but the usual practice is that the prospective purchaser would make the offer to show that he is serious.
An offer could be but not necessarily in writing. I always advise the parties to reduce their communication in writing especially to eliminate fraud, dispense ambiguities or show the seriousness of the parties in the transaction.
An offer would include the price the prospective purchaser is willing to pay.
Alternatively, the purchaser and the vendor can negotiate and reach a conclusion orally. If this is done, then the vendor can immediately draw up a contract of sale.
Acceptance is where the person who receives the offer agrees with everything stated in the offer letter.
If you disagree with anything in the offer, then whatever you write back would no longer be an acceptance but a counteroffer. A counteroffer is like a fresh offer which can either be accepted or rejected or countered.
For instance, Mr A offers Mr B his two Storey building for N200million and says Mr A is to pay in two instalments. Mr B then writes back to say he agrees to pay the N200million but prefers to pay in three instalments.
Mr B’s letter is a partial or conditional acceptance which also constitutes a counter-offer and not an acceptance.
When Mr A receives Mr B’s counteroffer, if he writes back to say yes I agree to three instalments, then he has accepted the offer. But if Mr A writes back and insists on two instalments, then there is no contract.
Submission of Copies of Documents
If both parties agree on the purchase price and other terms of the contract and the purchaser has shown that he is serious to buy, then the purchaser is entitled to have photocopies of the title documents.
As the owner of the property, you would be required to submit the copies of your title documents to the purchaser’s agent or solicitor.
This would enable the purchaser to carry out an investigation on your title to be sure that the property is free from encumbrances.
You are also required to disclose any hidden defects, encumbrances or pending litigation on the property.
Drawing Up The Contract
A contract is a legally binding agreement which recognises and governs the rights and duties of the parties to the agreement.
If the vendor and the purchaser agree on the price and mode of payment and the purchaser is satisfied with the investigations done, then a contract would be drawn up.
The contract would usually be drafted by the vendor’s solicitor and
passed over to the purchaser’s solicitor for a review.
If the purchaser’s solicitor is satisfied then he would ask his client to sign. The vendor’s solicitor would also sign and this would be followed by paying off the purchase sum in full or payment of the first instalment or whatever is agreed upon by both parties.
Sign the Deed of Assignment
Immediately after the purchaser pays the purchase price, then you would be required to sign the title deeds that transfer ownership of the property from you to the purchaser.
The title deeds are usually drafted by the purchaser’s solicitor who must carefully ensure that all necessary information is included.
After signing the title deeds, you are also expected to surrender all original documents relating to the property to the purchaser.
However if the documents cover other real estate property attached to the one that is up for sale, then you may only have to give a certified true copy to the purchaser.
An example is if you are selling a four-bedroom flat in a condominium. In this case, you would have to hold onto the original documents until you have completely sold out all the apartments.
Post Sale Activities
Signing the documents and receiving the purchase price is not all that you would have to do while selling your real estate property.
Here are other things you may be ethically and legally required to do.
Sign Further documents
You may be required to sign further documents while the purchaser is trying to perfect his title. For instance, form 1c used in Lagos State also requires your signature.
Also, the purchaser might misplace his documents and call upon you to sign fresh copies. You are required to help out.
Payment of Capital Gains Tax
After the sale of your real estate property, you are required by law to pay capital gains tax.
Capital gains tax is a federal government tax expected to be paid on
the gain or profit you make on the sale of your property.
The profit (capital gain) is calculated by deducting the price you purchased the property and the expenses from the price you sold it.
For instance, if you bought the property at the rate of N200million and you are selling it for N400million and you are paying your lawyer N10million for helping to sell and draft all contracts. Then your capital gain is N190million.