real estate Archives - Milton and Cross

3 Important things you need to know about Deeds of Assignment in Nigeria

Posted on June 4, 2021June 4, 2021 by admin in real estate, transaction advisory

Deeds of assignment are an important part of any land transaction in Nigeria. It acts as the main record of the transaction between the Seller and the Buyer. The Deed of Assignment transfers legal ownership of the property to the Buyer. This is distinct from a Contract of Sale, which merely transfers equitable ownership to the buyer.

Where a seller delivers a Deed of Assignment to the Buyer, the law assumes that the purchase price has been paid, and other necessary conditions have been fulfilled by the parties. The Seller cannot later say that he did not receive the purchase price.

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Key elements of A Deed of Assignment

The Property’s Legal Owner must sign the Deeds of Assignment

A Deed of Assignment of Land must be executed by the Legal Owner of the property. Legal title is the actual ownership of the property. Legal title grants true ownership of the property, along with the bundle of rights that comes with land ownership.

A simple search at your state lands registry can help you identify the title holder. We recommend that you do this search as part of your due diligence process. This saves you stress in the future.

To register your title, you must have filed an application for Governor’s Consent with your State Lands Registry. In some situations, a seller may be eligible to apply for a Certificate of Occupancy.

Where a seller has not registered his title with the State Government, he/she can only transfer equitable title to the property. This means that the Legal title still resides in the last person who registered their title with the state.

A Rule of Thumb: If the seller is not the registered title holder, they cannot sign the Deed of Assignment

You must do your due diligence beforehand

Generally, the law expects a buyer to physically inspect the property he wants to purchase. He should also verify the title documents. A seller can only transfer his/her rights to the buyer. This means that if there are any limitations to their rights, those limitations will be passed on to the buyer. This can be quite infuriating.

This process should tell you whether you are buying the land from the right person, if there is any encumbrance on the land (such as an unpaid mortgage) or whether the land is suitable for your purposes. Facts discovered during the search process may affect your negotiations with the seller.

Recitals are Important

Recitals can make or break your Deeds of Assignment. This is because the root of title has to be clearly outlined and traceable within the recital. You must always ensure that there are no gaps in the chain of title between past owners of that property and the seller. Furthermore, any errors in your recital may lead to lengthy and costly litigation in the future. You could also experience immense frustration when trying to register your title with the government.

There is a widely-held perception that the recitals are legally inconsequential, since their role is fundamentally ‘scene-setting’ in nature and they do not automatically form part of the operative, legally binding agreement between the contracting parties. However, when a dispute arises and a court or arbitrator has to decipher the contract, the recitals may aid interpretation. They are, after all, clearly a part of the written contract in some way or other.

Milton & Cross Solicitors provides transaction advisory, due diligence and contract drafting services to individuals and businesses. We are always happy to assist you in coordinating and negotiating effective Deeds of Assignment.

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Real Estate Contract: Mr. Dan Ngerem v. Crown Realties Plc [2021] 4 NWLR (Pt. 1767) 476

Posted on April 20, 2021April 22, 2021 by admin in Case analysis, real estate, rule of law

What was the Contract?

Crown Realties Plc (“The Respondent”) entered into a contract to sell six houses in Crown Estate, Lekki, Lagos to Mr. Dan Ngerem. The houses were sold off-plan (they were yet to be constructed). It was agreed that the houses would be completed within 9 months from the date of the initial deposit. Following these assurances, Mr. Ngerem paid the agreed initial deposit of N39.08 Million.

Unfortunately, Crown Realties failed to complete the houses at the agreed time. The company completed the houses 6 months after the due date. Mr. Ngerem condoned the breach of contract and the contractual relationship continued as if there had been no breach. Upon completion of the houses, Crown Realties wrote to Mr. Ngerem, informing him that the houses had been completed and demanding for the balance of the purchase price.

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How the Dispute Emerged

On his part, Mr. Ngerem was unable to pay the balance of the purchase price to Crown Realties. Instead, he proposed to pay the balance in installments. To this end, he paid a deposit of N34 Million, which amounted to a total of N73.08 Million.

When Mr. Ngerem presented further payment, the company returned the cheque and revoked the contract on the ground that Mr. Ngerem was in breach of the payment terms of the contract which did not stipulate payment by installments.

The company applied N28.1 Million of the payments made by Mr. Ngerem as payment for one house, out of the 6 houses. The company proposed to refund the N44.9 Million balance after selling the other properties. For undisclosed reasons, Crown Realties sold the remaining five houses to other interested buyers but failed to refund Mr. Ngerem’s money.

Aggrieved, Mr. Ngerem sued Crown Realties before the High Court of Lagos State. He claimed a refund of the N44.9M, an order of specific performance and damages for breach of contract. among other reliefs.

How did the Nigerian Courts view the Contract?

The trial Court dismissed Mr. Ngerem’s claims on the ground that both parties were caught up in a mixed show of contract breaches. While Crown Realties breached the contract by not delivering within the 9-month period, Mr. Ngerem waived the breach by accepting delivery of the houses after the additional 6-month period. In the same vein, Mr. Ngerem breached the contract by not paying the balance, instead, he opted for payment by installments. The trial Court held that Mr. Ngerem was not entitled to damages for breach of the contract.

Dissatisfied, Mr. Ngerem appealed to the Court of Appeal. The Court agreed with the trial Court’s position on contract breaches by both parties. It held that Mr. Ngerem had the option to treat the contract as breached the moment Crown Realties failed to deliver within the agreed time. This would have entitled him to damages for the breach. But he ignored the breach and kept the contract alive by subsequently proposing to pay the balance by installments. Failure to pay the balance forthwith was also a breach in itself.

The court held that Mr. Ngerem was entitled to a N44.9 million refund. This is because he never received value for the payment. This was due to the revocation of the contract and subsequent sale of 5 houses to other purchasers.

WHEN IS A COMPANY INSOLVENT?

Posted on February 26, 2018 by admin in Capital, Compliance, Corporate Governance, insolvency, International Investment, Small Businesses

Corporate insolvency law is not merely concerned with the death and burial of companies. Important issues are whether corporate difficulties should be treated as terminal and whether it is feasible to mount rescue operations.

WHAT DOES INSOLVENCY MEAN?

Insolvency refers to the regulated legal process that ensues upon the bankruptcy of a company. Insolvency procedure registers and prioritizes claims, freezes other legal actions, limits company to business as usual, and tries to establish value from assets.

In a society that facilitates the use of credit by companies, there is a degree of risk that company creditors will suffer because the firm has become unable to pay its debts on the due date.

If a number of creditors were owed money and all pursued the rights and remedies available to them (for example, contractual rights; rights to enforce security interests; rights to set off the debt against other obligations; proceedings for delivery, foreclosure or sale), a chaotic race to protect interests would take place and this might produce inefficiencies and unfairness. This is what insolvency laws seek to prevent.

The end target of any restructuring or insolvency process is to return a company to financial health. Predominantly by lowering and decreasing its obligations. If the situation can’t be rectified, insolvency law will work to ensure a fair allocation of liquidated assets.

WHEN IS A COMPANY INSOLVENT?

There are two definitions of Insolvency, depending on the test applied by the court. Briggs J in Re Cheyne Finance Plc contrasted “a momentary inability to pay as a result of temporary liquidity soon to be remedied” with “an endemic shortage of working capital” which renders “a company insolvent, even though it may be able to pay its debts for the next few days, weeks or months before an inevitable failure.”

A company is balance sheet insolvent where the company’s liabilities exceed its assets.

A company is cash flow insolvent when the company is unable to pay its mature liabilities as they fall due. In this situation, the company may be balance sheet solvent and is experiencing temporary cash flow/liquidity problems.

Where a company is cashflow insolvent it may undergo restructuring through schemes of arrangement, administration, or receivership and be managed until it returns to profitability.

If the company cannot be returned to profitability, it may be wound up and its assets sold to satisfy creditors claims, after which the company is then liquidated.

Many companies would find themselves without access to funding or credit and may enter unnecessarily into insolvency proceedings if an arbitrary approach was taken to the balance sheet test. For this reason the cash flow test is used to identify companies that merely require a cash injection and those that need to be totally restructured.

In BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL Plc, The court held that the “balance sheet” test of insolvency may only apply where a company has reached a point of no return (where it is clear that the business will not be able to meet its future or contingent liabilities). However, if the cash flow test were the only relevant test for insolvency, then current and short-term creditors would in effect be paid at the expense of creditors to whom liabilities were incurred after the company had reached the point of no return because of an incurable deficiency in its assets.

An insolvency usually begins with an event of default (“EoD”) or inability to meet an agreed business obligation. This obligation may be a contractual debt, a bill payment or a business loan.

A period is sometimes allowed to repair the default (Cure Period); usually between 1 week to 3 months. If the Cure Period lapses or there isn’t one to begin with, the creditor has a right to declare EoD and pursue legal action against the company for the immediate payment of all outstanding obligations.

Final liquidations are a last resort, sometimes the best of both worlds can be achieved by a court approved private work out as creditors generally prefer private negotiation to judicial intervention.

Judicial proceedings are a fall back remedy, used when it is necessary to stay hold out creditors, bind dissentients, improve title, enhance foreign recognition, monitor gross unfairness and punish fraud.

When a corporate failure occurs, this may have a dramatic impact on the lives, interests and employment prospects of a number of parties. It is important to understand the nature of these potential effects. This would help us better manage the negative effects of corporate failure.

10 Reasons to Have an Employee Handbook

Posted on July 19, 2017 by admin in Capital, Corporate Governance, entrepreneurship, leadership, Small Businesses, strategy, transaction advisory, Uncategorized, upscale

Jacob runs a travel agency which caters primarily to individuals seeking overseas admission. After running the company alone for a few months, Jacob hired Lucia to work in an administrative support role. A few months down the line, Jacob feels frustrated because Lucia has not been performing to his expectations. He periodically tries to tell her where she is going wrong, but she usually perceives his attempts as being overly critical and reacts defensively.

Jacob is confused. he is unwilling to fire Lucia, but he feels she is either incompetent or unable to understand his expectations of her. Lucia in turn feels stressed because Jacob has neither expressed his expectations of her, nor is there any handbook or documentation that could give her insight into his expectations. Jacob seeks legal advice on the way forward.

An Employee handbook provides the organisation with the following benefits.

Introduces employees to your culture, mission and values

Perhaps the most important aspect of your employee handbook is the introduction of new employees to your corporate culture. This helps to foster a sense of pride and belonging, which studies show will help employees become more productive in a shorter period of time.

Communicates to employees what is expected of them

A well-written handbook provides employees with a clear understanding of their responsibilities. The handbook also serves as a compass for the organization’s policies and procedures. For example, it advises employees what the procedures are for requesting time off or a vacation. It advises employees whom they should contact when they have an unscheduled absence (and what the timing should be). It tells employees whom to go to if they have questions about any of the specific policies in the handbook.

The handbook also communicates an employee’s general responsibilities regarding safety, timekeeping and reporting. By providing clear, accessible information, handbooks ensure companies continue moving in the right direction.

Educates employees about what they can expect from management and leadership

An employee handbook provides objectives and leadership styles, as well as management best practices, to foster healthy management-employee relationships. It also outlines logistics, such as timekeeping requirements, hours of work and pay periods.These clearly communicated policies help to eliminate confusion and inconsistencies that result when handbooks are silent on these topics.

Helps ensure key company policies are clearly and consistently communicated

No policy is effective if it is practiced inconsistently. A handbook will accurately communicate your organization’s policies regarding employment, conduct and behavior, compensation and other policies and procedures you follow. Most importantly, managers can refer to the handbook when answering questions or making decisions regarding your policies and ensure their answers and actions are consistent with your policies and best practices.

Showcases the benefits you offer

Does your organization offer vacations, investment plan, health insurance, paid parental leave or other benefits to employees? Make sure they know about these policies and the eligibility requirements by communicating them in the handbook. A robust benefits package can help you retain your best and brightest employees, so be sure they know about your full suite of offerings by communicating these in the handbook.

Ensures compliance with federal and state laws

No matter what state or country you do business in, or how many employees you have, you will be subject to state and federal employment laws. Your handbook not only communicates these various entitlements and obligations to employees, but is useful in demonstrating that your organization strives to be compliant with these regulations. you will want to be sure they understand their rights and obligations .

Helps defend against employee claims

Employers should consider it a matter of when, and not if, they will face a lawsuit or similar challenge from a current or former employee. When this happens, one of the most useful documents you can provide your attorney will be a copy of your handbook.

A thorough and compliant employee handbook will help to show that the organization exercised “reasonable care” towards its employees. The employee’s signed acknowledgement page will show that the employee had an opportunity to familiarize themselves with the organization’s policies, a chance to ask related questions, knew whom they could turn to for help within the organization, and agreed to follow the terms and conditions of employment set forth by the organization.

Lets employees know where to turn for help

Ultimately, you want employees to feel comfortable turning to a trusted member of management for help when they want to report workplace violations, obtain workplace-related assistance and get answers to any other questions they may have.When a handbook not only outlines one or two management individuals for an employee to turn to in these situations, but also designates another individual to turn to in the event the employee disagrees with the first decision, they are more likely to keep their complaints in-house, and this is a good thing for employers.