ASSESSMENT OF THE LEGAL AND REGULATORY FRAMEWORK FOR REAL ESTATE TRANSACTIONS IN NIGERIA

ABSTRACT

The real estate sector in Nigeria plays a pivotal role in the country’s economic development, contributing significantly to GDP and employment. However, the efficacy of real estate transactions is often undermined by a complex legal and regulatory framework that can impede progress and foster insecurity among stakeholders. This research aims to critically assess the existing legal and regulatory structures governing real estate transactions in Nigeria, identifying key challenges and opportunities for improvement. By examining relevant laws, policies, and regulations, the study will provide insights into the effectiveness of the current framework in facilitating transparent and secure property transactions.

The study employs a qualitative research methodology, utilizing interviews, surveys, and document analysis to gather data from industry stakeholders, including real estate professionals, legal practitioners, and regulatory authorities. This multi-faceted approach enables a comprehensive understanding of the perceptions and experiences of those directly involved in real estate transactions. The research will explore critical issues such as property rights, land use regulations, dispute resolution mechanisms, and the role of government agencies in overseeing real estate activities.

Furthermore, the study will evaluate the impact of bureaucratic inefficiencies and corruption on real estate transactions, highlighting the implications for investors and homeowners alike. By analyzing case studies and examples of best practices from other jurisdictions, the research aims to propose actionable recommendations for enhancing the legal and regulatory framework in Nigeria.

Ultimately, this assessment seeks to contribute to the ongoing discourse on real estate governance in Nigeria, advocating for reforms that promote greater transparency, accountability, and efficiency in the real estate sector. The findings of this research are expected to benefit policymakers, practitioners, and scholars, providing a foundation for informed decision-making and policy formulation that aligns with international best practices in real estate regulation.


 

TABLE OF CONTENTS

ABSTRACT. ii

TABLE OF CONTENTS. iii

 

CHAPTER ONE. 1

INTRODUCTION. 1

1.1 Background to The Study. 1

1.2 Statement of The Problem.. 4

1.3 Objectives of The Study. 5

1.4 Research Questions. 5

1.5 Research Hypothesis. 6

1.6 Significance of The Study. 6

1.7 Scope of The Study. 7

1.8 Limitations of The Study. 7

1.9 Organization of The Study. 7

1.10 Definition of Terms. 8

 

CHAPTER TWO.. 11

REVIEW OF RELATED LITERATURE. 11

2.1 Introduction. 11

2.2 Theoretical Review.. 11

2.2.1 The Institutional Theory. 11

2.2.2 The Legal Realism Theory. 11

2.2.3 The Market Efficiency Theory. 12

2.2.4 The Governance Theory. 12

2.3 Conceptual Review.. 12

2.3.1 Overview.. 12

2.3.2 Legislative Framework. 13

2.3.3 Administrative and Regulatory Bodies. 13

2.3.4 Challenges in Land Administration. 14

2.3.5 Title Registration and Security of Tenure. 14

2.3.6 Dispute Resolution Mechanisms. 15

2.3.7 Estate Investment and Financing. 15

2.3.8 Government Policies and Initiatives. 15

2.3.9 Regulatory Reforms. 16

2.4 Empirical Review.. 16

2.5 Summary of Literature Review.. 18

 

CHAPTER THREE. 20

RESEARCH METHODOLOGY. 20

3.1 Introduction. 20

3.2 Research Design. 20

3.3 Population and Sample Selection. 20

3.4 Data Collection Methods. 21

3.5 Data Analysis Techniques. 21

3.6 Ethical Considerations. 22

3.7 Conclusion. 22

 

CHAPTER FOUR. 24

DATA ANALYSIS AND INTERPRETATION. 24

4.1 Preamble. 24

4.2 Socio-Demographic Characteristics of Respondents. 24

4.3 Analysis of The Respondents’ Views on Research Question One: 28

4.4  Testing Hypothesis. 42

4.5 Discussion of Findings. 43

 

CHAPTER FIVE. 46

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS  46

5.1 Summary of Findings. 46

5.2 Conclusion. 47

5.3 Recommendations. 47

REFERENCES. 49

APPENDICES. 52

APPENDIX I; RESEARCH QUESTIONNAIRE. 52

 


CHAPTER ONE

INTRODUCTION

1.1 Background to The Study

Real estate means the land and any permanent structure, such as a house or improvements attached to the land, whether natural or man-made. Real estate refers to real estate that is immovable. Nigeria offers numerous opportunities for real estate investment, be it in developed properties or in rural areas, given its average area of 923,768 square kilometers (Ademu-Eteh, 2023). Over the past year, the COVID-19 pandemic has caused significant changes in the Nigerian real estate market. Tenants require less space as home offices become more common, which has a particularly detrimental effect on the commercial real estate market. But according to the September 6, 2021 edition of Business Day, the reopening of the economy, the highest growth rate in six years and increased interest in investments resulted in the Nigerian real estate market growing by 3.85% in the second quarter of 2021 (Uroko and Okafor , 2023).

According to the National Bureau of Statistics, this is the highest second quarter growth since Nigeria's real estate sector grew by 4.95% in the second quarter of 2014. The National Bureau of Statistic (NBS) has released the 2022 Gross Domestic Product (GDP) first quarter report Total GDP grew in real terms by 3.11% (compared to the previous year). While the real estate sector grew by 10.84%, it was 2.79 percentage points higher than the growth rate recorded in the same period in 2021.

The National Bureau of Statistic (NBS) has released the 2022 gross domestic product (GDP) report for the first quarter. Compared to the previous year, the real growth rate of total GDP was 3.11%. These figures show the upward trend of the Nigerian real estate market, which offers an opportunity for lawyers. It is well known that lawyers provide advice on these transactions.

Therefore, it is important to understand the rules relevant to this industry (Mohammed, 2022). Nigeria's legal and regulatory framework for real estate transactions is critical to influencing the market and maintaining transaction integrity. Moreso, the Nigerian real estate industry, characterized by its rapid expansion and enormous potential, operates within a complicated framework of laws and rules designed to control real estate transactions, protect interested parties and promote a stable investment climate.

An evaluation must be conducted to determine the effectiveness of the framework and identify areas that need to be changed or improved (Mohammed, 2022). Due to the country's federal structure, real estate regulations in Nigeria are based on both federal and state laws. The most important laws are the Land Use Act of 1978, which regulates land ownership and distribution, and a number of state-specific laws that regulate issues of local land administration (Land Use Act, 1978).

These laws are complemented by administrative directives from authorities such as the Federal Ministry of Works and Housing and the Nigerian Investment Promotion Commission (NIPC), which influence real estate development and investment (NIPC, 2023). Understanding these regulations is crucial for investors, developers and lawyers operating in the Nigerian real estate market. Recent developments in the Nigerian legal framework aim to address issues such as property rights, land tenure security and dispute resolution mechanisms.

The Nigerian government has introduced several reforms aimed at improving transparency and efficiency in real estate transactions. For example, the Nigerian Land Registration Act was enacted in 2020 with the intention of improving the management of land records and expediting real estate registration procedures (Land Registration Act, 2020). Furthermore, the passage of the National Land Use Act (Amendment) Bill, 2021 represents continued attempts to address issues related to land ownership and advance fairer land use policies (National Assembly, 2021).

Despite this progress, the implementation of real estate regulations in Nigeria faces several challenges. Problems such as bureaucratic inefficiency, inconsistent application of the law and corruption were identified as key obstacles (Transparency International, 2022). These challenges reportedly undermine the effectiveness of the regulatory framework and result in delays and increased costs for stakeholders (World Bank, 2023). Addressing these issues is critical to creating a more conducive environment for real estate investment and development in Nigeria.Top of Form

 

Bottom of Form

                                                                                              

1.2 Statement of The Problem

The legal and regulatory framework for real estate transactions in Nigeria presents several critical issues that impact the effectiveness of property dealings and the overall investment climate. Despite the existence of comprehensive laws such as the Land Use Act of 1978, which seeks to regulate land ownership and use, practical challenges persist. These challenges include bureaucratic inefficiencies, inconsistent application of regulations, and widespread corruption, which create obstacles for both domestic and international investors. Reports indicate that these issues lead to prolonged transaction times, increased costs, and a general lack of confidence in the system (World Bank, 2023; Transparency International, 2022).

 

Moreover, the fragmented nature of Nigeria's real estate regulatory environment, where federal and state laws sometimes conflict, further complicates the legal landscape. This fragmentation often results in confusion and inefficiencies, as property transactions must navigate a complex array of regulations and administrative procedures. Recent reforms, such as the Land Registry Act of 2020, aim to address these inefficiencies by streamlining property registration processes, but their impact has been uneven across different states and sectors (Land Registry Act, 2020). Consequently, stakeholders face significant uncertainties and risks that undermine the potential benefits of these regulatory advancements.Top of Form

 

Bottom of Form

 

1.3 Objectives of The Study

The main objective of the study is to examine the legal and regulatory framework for real estate transactions in Nigeria. Specific objectives of the study are:

  1. To assess the Adequacy of Existing Legal and Regulatory Frameworks
  2. To analyze the Effectiveness of Enforcement Mechanisms
  3. To identify Areas for Improvement and Reform

1.4 Research Questions

To guide the study and achieve the objectives of the study, the following research questions were formulated:

  1. To what extent do the current legal and regulatory frameworks in Nigeria provide adequate protection for buyers, sellers and investors in real estate transactions?
  2. How effective are the enforcement mechanisms in place to ensure compliance with real estate laws and regulations in Nigeria?
  3. What specific areas of the legal and regulatory framework require reform or improvement to enhance the efficiency and transparency of real estate transactions in Nigeria?

1.5 Research Hypothesis

The following research hypothesis was developed and tested for the study:

Ho: The current legal and regulatory framework for real estate transactions in Nigeria does not significantly impact the efficiency, transparency, and effectiveness of real estate transactions.

1.6 Significance of The Study

The study is important for many reasons. The following are the major stakeholders this paper through its practical and theoretical implications and findings will be of great significance:

Firstly, the paper will benefit major stakeholders and policy makers in the Estate Management sector. The various analysis, findings and discussions outlined in this paper will serve as a guide in enabling major positive changes in the industry and sub-sectors.

Secondly, the paper is also beneficial to the organizations used for the research. Since first hand data was gotten and analyzed from the organization, they stand a chance to benefit directly from the findings of the study in respect to their various organizations. These findings will fast track growth and enable productivity in the organizations used as a case study.

Finally, the paper will serve as a guide to other researchers willing to research further into the subject matter. Through the conclusions, limitations and gaps identified in the subject matter, other student and independent researchers can have a well laid foundation to conduct further studies.

1.7 Scope of The Study

The study is delimited to Lagos State, Nigeria.  Findings and recommendations from the study reflects the views and opinions of respondents sampled in the area. It may not reflect the entire picture in the population.

1.8 Limitations of The Study

The major limitations of the research study are time, financial constraints and delays from respondents. The researcher had difficulties combining lectures with field work. Financial constraints in form of getting adequate funds and sponsors to print questionnaires, hold Focus group discussions and logistics was recorded. Finally, respondents were a bit reluctant in filling questionnaires and submitting them on time. This delayed the project work a bit.

1.9 Organization of The Study

The study is made up of five (5) Chapters. Chapter one of the study gives a general introduction to the subject matter, background to the problem as well as a detailed problem statement of the research. This chapter also sets the objectives of the paper in motion detailing out the significance and scope of the paper.

Chapter Two of the paper entails the review of related literature with regards to corporate governance and integrated reporting. This chapter outlines the conceptual reviews, theoretical reviews and empirical reviews of the study.

Chapter Three centers on the methodologies applied in the study. A more detailed explanation of the research design, population of the study, sample size and technique, data collection method and analysis are discussed in this chapter.

Chapter Four highlights’ data analysis and interpretation giving the readers a thorough room for the discussion of the practical and theoretical implications of data analyzed in the study.

Chapter Five outlines the findings, conclusions and recommendations of the study. Based on objectives set out, the researcher concludes the paper by answering all research questions set out in the study.

1.10 Definition of Terms

1.  Real Estate Transaction

A real estate transaction refers to the legal process of buying, selling, leasing, or renting property, which involves the transfer of ownership or rights associated with real estate. This process typically includes contract negotiations, due diligence, and the execution of legal documents.

2.  Legal Framework

The legal framework encompasses the body of laws, regulations, and legal principles that govern real estate transactions. In Nigeria, this includes statutes such as the Land Use Act, the Property and Conveyancing Act, and various state-specific laws that regulate property rights and transactions.

3.  Regulatory Framework

The regulatory framework consists of the rules and guidelines established by government agencies and regulatory bodies to ensure compliance with legal standards in real estate transactions. In Nigeria, this includes regulations set by agencies like the Federal Inland Revenue Service (FIRS) and the Nigerian Mortgage Refinance Company (NMRC).

4.  Land Use Act

The Land Use Act of 1978 is a key piece of legislation in Nigeria that governs land ownership and use. It centralizes land administration under state governments and sets out the procedures for obtaining land titles and leases, impacting all real estate transactions.

5.  Title Deed

 A title deed is a legal document that evidences ownership of a property. It outlines the rights and interests of the owner and serves as proof of legal ownership in real estate transactions. In Nigeria, title deeds are essential for transferring property ownership and securing mortgages.

6.  Due Diligence

 Due diligence in real estate transactions refers to the process of investigating and verifying the legal, financial, and physical aspects of a property before completing a transaction. This includes checking property titles, verifying ownership, and ensuring compliance with regulatory requirements.

7.  Property Taxation

Property taxation involves the assessment and collection of taxes on real estate properties by government authorities. In Nigeria, property taxes can include land use charges, capital gains tax, and other levies imposed by local or state governments. Understanding property taxation is crucial for compliance and financial planning in real estate transactions.