Documents required in real estate transactions make up an essential aspect of the real estate process. Regardless of the country or locale where you start your real estate journey, paying attention to documentation is principal.
Every year, lots of individuals fall victim to common real estate fraud that is usually avoidable by checking documents. Although you can start investing in real estate with just a little, real estate investments are usually expensive and run to millions. All this money can be lost in cases where documents are missing or the right documents were not received. However, let’s take a look at the importance of having these documents before we proceed.
Importance Of Documentation In Real Estate
- Viewing the verified title documents of land or property will give you the confidence to go ahead with a purchase.
- These title documents are accepted in a court of law so, in case of any disputes, they can be resolved.
- For developers: Having perfected documents for properties will give your clients the confidence to forge ahead with the purchase of your properties.
Since we’ve been able to establish how paramount documentation is to the house and property buying process, let’s examine the documents that you must look out for.
10 Documents Required In Real estate Transactions
The documents required can be categorized into documents that you can view from your developer before monetary commitment begins and documents that you receive from your developer after monetary commitments (payments) have begun.
A good example of a title document that is required in a real estate transaction is the Certificate of Occupancy (C of O). It is used to verify the legal ownership status of any land or property in Nigeria. It shows that an individual or family has been granted the legal right to occupy a piece of land by the Governor of a state.
When developers buy a property, they must acquire the C of O. After the purchase, there is a need to perfect it and make all necessary name updates. Also, if you are a customer of a real estate developer, you have the right to request to view the C of O before you make any monetary commitment.
Deed of Lease
Apart from outrightly buying land or property, there are other options for a developer to acquire land on a lease. After acquiring a land or lease most developers proceed to build on it and then sublease it to investors. The Deed of Lease is the document that controls the relationship between the landlord and the tenant (in this case, the developer). It shows that the developer has been given authority by the landowner to build on that portion of the land and sublease it to other investors. When viewing the Deed of Lease between the developer and the landowner, some things to look out for are:
- Description of all parties involved: The Deed of Lease must explicitly state the names of all parties involved and their addresses.
- The property description: The Deed Of Lease must include the description of the property including the address, location, structure, and other accessories.
- The lease duration: The Deed of Lease clearly states the validity period of the lease and the conditions of a renewal of the contract.
Joint Venture Agreement
It is also known as a Co-venture Agreement. It is an agreement used when two or more parties start a business relationship aimed at achieving a mutually profitable business goal. In the case of real estate, it is when a landowner and a developer start a business relationship to build properties that will either be subleased or sold to investors.
When developers do not buy or lease land or property, they often enter a Joint Venture Agreement with a landowner. If you are starting your real estate investment journey with a developer, this is one of the documents you can request to see.
Although most people fail to understand the importance of a survey in the house-buying process, you must remember that the survey documents are as important to you as all the other documents mentioned above. It explicitly defines the legal boundaries, reveals the ownership history, and states if the land or property is under any government acquisition.
Drawing Plans – Architectural, Structural, Electrical
A layman may not understand the drawings of a property before construction, but you can still request to see them. The architectural and structural drawings are oftentimes readily available but the electrical drawings are sometimes not available for viewing. In any case, you can request to see these drawings to have an idea of the property that you are investing in or buying.
The remaining documents listed below are the documents that you receive from your developer after you have begun making payments. They explain the type of investment and ownership you have committed to.
Once the developer confirms your payment for a property, a receipt will be sent to you. Oftentimes, there are payment plans available that can enable you to make payments for your desired property in several instalments. Therefore, after each instalment payment, you are expected to get a payment receipt indicating the amount paid and the balance due. As a result, you can avoid any confusion about your balance or the total amount that you have paid so far.
Contract of Sale
After you have reserved a unit with a portion of the full amount of money to be paid, you are expected to receive a Contract of Sale from your developer or the seller. The Contract of Sale states the terms and conditions that guide the sale and purchase of a property. It shows information such as the purchase price, the date of the agreement, the type of property, and other details about the property. This document serves to protect both you (the buyer/investor) and the seller (the landowner/developer) from any breach of contract.
The Contract of Sale, also called Sale Agreement is viewed as a legally binding contract and is attainable in a court of law.
Contract of Sublease
A Contract of Sublease is almost the same as a Contract of Sale. The difference is that a Contract of Sublease is for a property that is only owned through a lease from the developer, whereas a Contract of Sale is for a property that is fully purchased by an investor.
You receive a Contract of Sublease after you have made your first payment for a property that you are purchasing on a lease. It shows information such as the lease price, the duration of the lease agreement, the conditions of the agreement, the type of property, and other details about the property.
It is a legally binding contract that is attainable in a court of law.
Deed of Assignment
Where a Contract of Sale is given to you after your first instalment payment, when full payment has been completed, you receive your final receipt and a Deed of Assignment.
A Deed of Assignment is a document that transfers the legal ownership of a property to a buyer or investor. It is an important document that shows that you have made full payment for a property and you are now the legal owner. It is very necessary to get this document when you are buying a house that has been previously owned or a house that is acquired through a Joint Venture Agreement.
It is sometimes called a Deed of Transfer in some cases.
Deed of Sublease
As the name suggests, a Deed of Sublease is a legally binding document that shows that lease ownership has been transferred to a buyer for an agreed period. It is usually tendered to the buyer/investor by the developer or property owner after full payment of the property has been received. It shows details about the property, the responsibilities of the parties involved, the duration of the lease, and other necessary details.
It protects both the buyer and the seller in the case of any breach of contract.
The documents required in the buying process of any property may differ depending on the unique circumstances of the property. However, we consider these 10 documents as the most important documents required in any real estate transaction.
It is important that both parties carefully read and understand the terms and clauses contained in these documents before proceeding to sign. You may also seek professional legal advice for clarity and understanding of the contents of these documents before making any monetary commitments and entering into any contractual agreement.