Like in other developing Countries, in Nigeria, there are instances where the government at the Federal, State or even Local may partner with private entities who have the expertise and finances under the Private Public Partnership (" PPP ") for the purpose of developing public infrastructure or a specialized project on behalf of the government. This is achieved through agreement between the government and the private entity which details the rights and obligations of the parties.
The common type of PPP agreement for real estate development is a Development Lease Agreement (" DLA "). Under DLA, the government grants the private entity the right to develop a real estate for a stipulated period with a provision for the developer to nominate purchasers of portions of the real estate for issuance of a Certificate of Statutory Occupancy ( “C of O” ). We shall address pertinent questions on legal title which may arise from a DLA.
How does a DLA for real estate development work?
Usually, the government grants a lease over an expanse of land to a private developer (" the developer ") for a stipulated period with an option to renew. This means the developer is to develop the land within the stipulated period and its lease over the land will expire at the end of the period and all its infrastructural improvements on the land will revert to the government.
Under the DLA, it is the responsibility of the government to issue the C of O to any person who the developer nominate to have rights over development on the land within the stipulated period in the DLA. This means the developer’s right to nominate persons for issuance of C of O will expire at the end of the stipulated period.
The DLA does not envisage the developer assigning the remainder of its interest on the land under the DLA to purchasers but to develop the land and nominate persons to the government who shall issue C of O to purchasers for the usual number of years for grant of fresh allocations. For the purpose of the DLA, the developer does not have legal title over the land but a development lease over the land for the stipulated period.
Legal title on the land is vested in the governement from the commencement of the DLA till its expiration. Under the DLA, the developer is a partner of the government to develop the land on behalf of the government. The developer’s gain under the DLA is the development and sale of housing units on the land throughout the stipulated period.
Why would the government grant lease for a number of years to purchasers nominated by the developer which exceeds the stipulated period of the developer’s development lease? This is a massive contradiction and guarantees future problems.
The developer’s lease is for development of the land and nomination of purchasers purposes only. The government only granted a development lease to the developer over the land and not an outright title on the land. Legal title on the land is still vested in the government throughout the stipulated period in the DLA and afterwards. Therefore, the government has the liberty to grant lease to purchasers over and above the stipulated period of the development lease in the DLA.
Is the government legally justified to grant higher number years of lease to purchasers more than the stipulated period for the development lease in the DLA? The government may revoked the C of O once it discovers this discrepancy.
The government did not by the DLA, grant legal title to the developer over the land for the stipulated period. The government only granted a development lease to the developer. The government is merely using the technical and finances of the developer to develop the land. Legal title to the land remains with the government. Thus, the government is legally justified to grant higher number of years of lease to purchasers more than the stipulated period for the development lease in the DLA.
There is no guarantee that current or future government is bound to issue any C of O in contradiction to DLA. It is actually illegal.
All lands in Nigeria is vested in the relevant government. It is usual for the government to grant a specific term for fresh allocation. Purchasers nominated under the DLA are fresh allotees and the government is contractually bound to issue a C of O to them for the customary term for fresh allocation. Hence the issuance of C of Os for the purchasers for the customary term cannot be said to be illegal.
The DLA envisages that the purchasers will hand over the property to the government upon expiration of the stipulated time in the DLA.
It is the developers’ development such as roads, electricity, drainages, sewages and other infrastructure improvements on the land that will revert to the government at the expiration of the stipulated period in the DLA and not the title of purchasers duly nominated to the Minister under the DLA.
Would different owners of a property, for instance where different persons own each floor of the property, be issued their respective C of O for the floor they own?
The developer may make arrangement with the government for issuance of C of O to the respective owners of different portions of a single property.
However, if this is not possible, the developer may furnish the respective owners with the Global C of O of the entire property and a duly executed Deed of Sublease showing the portion of the property in which they own.