{"id":4810,"date":"2021-10-29T23:48:26","date_gmt":"2021-10-29T23:48:26","guid":{"rendered":"https:\/\/koriatlaw.com\/?p=4810"},"modified":"2021-10-29T23:48:26","modified_gmt":"2021-10-29T23:48:26","slug":"fundamental-clauses-in-real-estate-transaction-contracts","status":"publish","type":"post","link":"https:\/\/koriatlaw.com\/2026\/2021\/10\/29\/fundamental-clauses-in-real-estate-transaction-contracts\/","title":{"rendered":"FUNDAMENTAL CLAUSES IN REAL ESTATE TRANSACTION CONTRACTS"},"content":{"rendered":"\n
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INTRODUCTION<\/strong><\/p>\n\n\n\n

As diverse as real estate\ntransactions may be, so are the legal instruments for securing or consummating\nsuch transactions. Real estate transactions could be evidenced by contract of\nsale, deed of assignment or lease or sublease or tenancy agreement, or other\nsuitable deeds or agreements, which a real estate lawyer will advise after\ntaking into consideration the peculiarities of the transaction and governing\nlaw. <\/p>\n\n\n\n

Whatever agreement a lawyer\nor party adopts for a real estate transaction, certain clauses are essential\nnot only to protect the investment and avoid loss in case of defect in title or\nother defects that are prevalent in real estate transactions, but also to\nprotect the parties from liabilities that may arise from improper consideration\nof all the relevant issues. Whatever the parties insert in their agreement will\nbe construed when any dispute arises and nobody will be allowed to import into\nthe agreement what is not contained in it.<\/p>\n\n\n\n

In this article, we have highlighted some essential clauses that parties need to incorporate in their real estate transaction agreements.<\/p>\n\n\n\n

1. Provision relating to Capacity of the Parties<\/em><\/strong><\/p>\n\n\n\n

Capacity\nis crucial to vesting or divesting of interest in real property. For example,\nthe Court of Appeal in Federal Mortgage\nBank Ltd. v. Omidiji <\/em>held that a minor (i.e. person below the age of 21\nyears old) lacks capacity to buy or sell land in Nigeria unless he or she does\nso through a guardian. <\/p>\n\n\n\n

Therefore, where the vendor or buyer of real property is a minor, the deed or agreement should state the capacity in which the transaction is being consummated to avoid the transaction from being voidable.<\/p>\n\n\n\n

2<\/strong>. Provision relating to Consideration for the Real Property<\/strong><\/em><\/p>\n\n\n\n

This is\none important clause parties must include in their agreement. A consideration clause\nstates the amount a buyer has paid or will pay to the seller in respect of the purchased\nproperty. <\/p>\n\n\n\n

If the agreed sum has been paid before execution of the agreement, then, the consideration clause should reflect that the seller acknowledges receipt of the amount paid by the buyer. The consideration clause should also set out the components of the consideration e.g., where applicable, the price of the property, the cost of drafting of agreement or solicitors\u2019 fee, the survey fee, security fee, development fee, etc.<\/p>\n\n\n\n

3<\/strong>. Provision for Service Charge, Land Use Charge, Taxes and dues <\/strong><\/em><\/p>\n\n\n\n

Parties\nare advised to agree on who has the duty to pay service charge, land use\ncharge, taxes and dues that may be applicable or charged on the property. <\/p>\n\n\n\n

For\nexample, Section 9 (1) of the Land Use Charge Law of Lagos State<\/em><\/strong>\nprovides that the owner of a property or an occupier of a lease of 10 years or\nabove, anywhere in Lagos State, shall be liable to pay an annual land use\ncharge to be assessed by the Collecting Authority. <\/p>\n\n\n\n

In\naddition to the foregoing, Section 7 of the Lagos State Tenancy Law, 2011<\/em><\/strong>\nimposes certain obligations on the tenant. It provides thus: <\/p>\n\n\n\n

\u201cSubject to any provision to the contrary in the tenancy agreement the tenant shall<\/strong>:<\/em><\/p>\n\n\n\n

(1) \u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026; <\/em><\/p>\n\n\n\n

(2)\nPay all existing and future rates and\ncharges not payable by the landlord by law;<\/strong><\/em><\/p>\n\n\n\n

Also, real\nestate assets are subject to capital gain tax at 10% when disposed at a gain,\nexcept those assets that are specifically exempted by law.<\/p>\n\n\n\n

Parties are at liberty and are, indeed, advised to set out in their real estate transaction contracts who between them should bear the responsibility to pay land use charge, capital gain tax or any other dues that may be chargeable by a government authority in respect of the property.<\/p>\n\n\n\n

4<\/strong>. Indemnity Clauses <\/strong><\/em><\/p>\n\n\n\n

This\nremains one pivotal clause in every real estate contract. In simple terms, an indemnity\nclause seeks to reimburse either of the parties for any loss suffered by an\ninnocent party but arising from fault of the other party. The purpose of\nincluding an indemnity clause in a real estate contract is to shift or allocate\nthe probable risks or costs or loss suffered by a party to another party.<\/p>\n\n\n\n

For\nexample, an indemnity clause is very helpful where it is observed that a demised\nproperty may have a third party\u2019s interest or there may be a likely breach of\nthe covenants contained in the agreement. <\/p>\n\n\n\n

It is\nagainst this backdrop that either of the parties should insist on an indemnity\nclause in order to protect his or her interest from any form of encumbrance or\nany losses arising from a breach of agreed covenants in respect of the\nproperty.<\/p>\n\n\n\n

When a\nlawyer is acting for the Owner<\/strong>, below\nis a sample of Indemnity Clause<\/em> that\ncan be inserted in a real estate transaction contract to protect the owner-client:<\/p>\n\n\n\n

The\nPurchaser shall indemnify the Owner in full and for all losses, costs, expenses\nor disadvantages suffered by reason of the Assignee\u2019s breach of any the terms\nherein or by reason of its breach of any future regulation or order as shall be\nprescribed or issued by any competent authority in respect of the Property\nhereby sold.<\/em><\/p>\n\n\n\n

When acting for\nthe Purchaser,<\/strong> the Indemnity Clause\ncould be drafted in the manner below to protect the purchaser-client:<\/p>\n\n\n\n

That the Owner shall indemnify (and hereby indemnifies) the purchaser against any defect whatsoever in its title to the Property howsoever arising and at all times hereafter shall keep the purchaser indemnified against all actions, claims, demands, costs, losses and expenses which may be brought or made against the purchaser or which the purchaser may pay, sustain or incur as a result of or attributable to a defect in the owner\u2019s title.<\/em><\/p>\n\n\n\n

5. Specific Covenants to Set out in Real Estate Transaction Contract<\/strong><\/em><\/p>\n\n\n\n

Virtually\nevery real estate transaction is expected to contain some specific covenants to\nwhich the parties have held themselves to be bound. The covenants constitute\nthe body or operative parts of any real estate agreement. <\/p>\n\n\n\n

For\nexample, a typical tenancy agreement will contain the following standard covenants:<\/p>\n\n\n\n

  1. covenants\nto pay rent, <\/li>
  2. covenants\nnot to sub-let or assign the demised premises without the consent of the landlord,\n<\/li>
  3. covenant\nnot to derogate from the grant, <\/li>
  4. Covenant\nto grant quiet enjoyment of the premises, etc<\/li><\/ol>\n\n\n\n

    It is\nworthy of note that most of these express terms have now been implied under\nseveral states Tenancy Law but it is advisable for parties to set out in clear\nterms how they wish to be bound in respect of those aspects of their\ncontractual relationship. <\/p>\n\n\n\n

    The\nimplication is that where the parties fail to provide such express covenants,\nthe law shall imply same into the tenancy agreement. For example, Section\n7 of the Lagos State Tenancy Law, 2011<\/em><\/strong> imposes certain obligations on\nthe tenant. It provides thus: <\/p>\n\n\n\n

    \u201cSubject to any provision to the contrary in the tenancy agreement the tenant shall<\/strong>:<\/em><\/p>\n\n\n\n

    (1) Pay the rents at the times and in the manner stated; <\/em><\/p>\n\n\n\n

    (2)\nPay all existing and future rates and charges not payable by the landlord by\nlaw; <\/em><\/p>\n\n\n\n

    (3)\nKeep the premises in good and tenantable repair, reasonable wear and tear\nexcepted; <\/em><\/p>\n\n\n\n

    (4)\nPermit the landlord and his agents during the tenancy at all reasonable hours\nin the daytime after previous written notice, to view the condition of the\npremises and to effect, repairs in necessary parts of the building; <\/em><\/p>\n\n\n\n

    (5)\nNot make any alterations or additions to the premises without the written\nconsent of the landlord; <\/em><\/p>\n\n\n\n

    (6)\nNot assign or sublet any part of the premises without the written consent of\nthe landlord; and <\/em><\/p>\n\n\n\n

    (7)\nNotify the landlord where structural or substantial damage has occurred to any\npart of the premises as soon as<\/em> <\/em>practicable.\u201d<\/em><\/p>\n\n\n\n

    Consequently, in the absence of express provisions in the agreement, parties will be bound by the implied provisions of the law. It is therefore commercially prudent for any intending party to a real estate transaction to ensure that the agreement contains covenants that spell out the obligations of the parties to the transaction.<\/p>\n\n\n\n

    6. Provision for Pre-Judgment Interest Rates in Case of Default or Breach<\/em><\/strong><\/p>\n\n\n\n

    In\nlitigation over real estate contracts, there are two types of interests that a\ncourt can award. The pre-judgement interest and post-judgement interest. There is a clear difference between\nan award of interest pre-judgment, where a\nplaintiff must specifically claim such interest, plead it in his pleadings and\nprove it during trial, unlike the award of interest on a judgment-debt, which is purely based on statutory\nprovision, and can only be awarded because there are provisions to that effect\nin the law or rules of court. <\/p>\n\n\n\n

    According to the Supreme Court of\nNigeria in Skymit Motors Ltd. v. U.B.A. Plc (2021) 5 NWLR (Pt. 1768) 123<\/em><\/strong>,\napre-judgment was defined as simply a judgment reached\nbefore evidence is available. According to the apex court, if a claim is for\nmoney, the claimant may claim interest up\nuntil the date the judgment is given, and that is pre-judgment interest. <\/p>\n\n\n\n

    Whilst\nit is usual to find clear provisions for refund of money had and received or damages\nin the event of breach of a real estate transaction contract, parties rarely\nremember to determine the interest rate that should apply to a defaulting\nparty. If the parties\u2019 agreement does not provide for a pre-judgment interest,\nthe court will not award such interest during litigation.<\/p>\n\n\n\n

    In C.R.S.W.B. v. N.C. Eng. Ltd. (2006) 13 NWLR (Pt. 998) 589 at page 614<\/em><\/strong>, the Court of Appeal held thatpre-judgment\u00a0interest\u00a0cannot be awarded as a matter of course. The Court went further to hold that such interest is awarded where the successful party has discharged the onus of strict proof in that regard. \u201cIn the instant case, the 1st and 2nd respondents did not depose to facts as to how the rate of\u00a0pre-judgment\u00a0interest\u00a0they claimed was reached; that is, whether by agreement, custom or usage and\/or the statutory backing for the\u00a0interest\u00a0so claimed. In the circumstance, the 1st and 2nd respondents ‘ claim for\u00a0pre-judgment\u00a0interest\u00a0failed as there was no evidence backing it.\u201d<\/em><\/strong><\/p>\n\n\n\n

    7<\/strong><\/em>. Dispute Resolution Clause<\/em><\/strong><\/p>\n\n\n\n

    It is proper to\nhave provisions to govern potential dispute between transaction parties even\nwhen parties strongly feel that dispute can never arise. Thus, parties should\nagree on the means of settling their disputes when any arises. <\/p>\n\n\n\n

    It is advised\nthat parties should provide for amicable settlement through mediation or\nnegotiation meeting and thereafter, if the matter is unresolved, parties should\nresort to Arbitration. Litigation is time-consuming and involves huge\nexpenditure and may never engender any reconciliatory end for both parties. <\/p>\n\n\n\n

    Hence, a dispute\nresolution clause providing for arbitration after breakdown of settlement is a\npreferred choice to litigation or non-provision for dispute resolution medium\nin a contract.<\/p>\n\n\n\n

    Below is an example\nof dispute resolution clause:<\/p>\n\n\n\n

    • In the event of any dispute arising\nout of or in connection with this Agreement, parties shall apply their best\nendeavors to resolve the matter amicably by mutual negotiation, at least,\nduring three (3) settlement meetings. <\/em><\/li><\/ul>\n\n\n\n
      • Where\nthe parties are unable to resolve any dispute after three (3) settlement\nmeetings, the matter shall be referred to arbitration by a sole arbitrator to\nbe appointed by \u2026\u2026\u2026\u2026\u2026 (e.g. the Lagos\nMulti-Door Courthouse or Lagos Court of Arbitration<\/em>).<\/li><\/ul>\n\n\n\n
        • The\naward of the sole arbitrator shall be final and both parties shall bear the\ncosts of the arbitration proceedings.<\/li><\/ul>\n\n\n\n
          • The\narbitration shall hold in \u2026\u2026\u2026\u2026.. (e.g. Lagos\nor Abuja<\/em>) in accordance with the extant Arbitration Law of the forum.<\/li><\/ul>\n\n\n\n

            Please note that settlement meetings\nmay be held physically or virtually. Also, the number of settlement meetings\nmay be reduced to one or two depending on the nature of transaction and how\nmuch time is of the essence.<\/p>\n\n\n\n

            \u00a08.\u00a0\u00a0 Insurance Clause<\/em><\/strong><\/p>\n\n\n\n

            Insurance\nclauses are considered essential to certain real estate contracts. With respect\nto leases and contract of sale, it may be commercially expedient for the\ncontracting parties to insert an insurance clause in the agreement with a view\nto protecting the property against fire or any other peril beyond the control\nof the parties. An insurance clause will usually state who is to insure<\/em>,<\/strong>\nthe\ntype of insurance procured<\/em><\/strong>,<\/em>\npremium\npayable<\/em><\/strong>,<\/em> the\ninsurance company<\/em><\/strong> etc. <\/p>\n\n\n\n

            A\ntypical insurance clause could be as follows:<\/p>\n\n\n\n

            \u201cThe\nPart A shall insure the property with a reputable insurance company registered\nin Nigeria against loss caused by fire, flood and other usual peril for the\ncost of reinstatement, and the insurance policy shall be assigned to the\nPurchaser at completion:<\/em><\/em><\/p>\n\n\n\n

            PROVIDED THAT where reinstatement is not possible, the insurance money shall be shared between the parties\u00a0pro rata\u00a0the deposit paid by the Party B.<\/em><\/p>\n\n\n\n

            9. Provisions relating to Custody and Safe Keeping of Title Documents <\/em><\/strong><\/p>\n\n\n\n

            In\nrespect of partitioned property which is covered by a single title document,\nfor example, a certificate of occupancy that covers several plots of land or an\nerected building comprising block of flats, It is important for the parties to\nensure that there is an \u201cAcknowledgment of Custody and Safe keeping\nof the Title Documents<\/strong><\/em>\u201d <\/strong>clause\nin the transaction contract. <\/p>\n\n\n\n

            Th provision relating to custody and safe-keeping of title documents is usually tenable under a typical Deed of Assignment where the owner transfers his entire interest in respect of a part and not the whole of the property. The buyer of a part of the property should insist on a clause relating to custody and safe-keeping of title documents to secure his (purchaser\u2019s) right to the title deeds; such that whenever he (purchaser) needs the title documents, the seller shall oblige him with a copy or the original; and the seller should covenants with the purchaser to guarantee the safe keeping of the title document(s).<\/p>\n\n\n\n

            10. Anti-Money Laundering Provisions <\/strong><\/p>\n\n\n\n

            Real\nestate is one of the most attractive targets for money launderers because of\nits potential for enabling large cash transactions. The Economic and Financial\nCommission (\u201cEFCC\u201d) and the Special Control Unit against Money Laundering (\u201cSCUML\u201d)\nare monitoring closely real estate transactions to identify and arrest illicit funds\nand proceeds of crimes.<\/p>\n\n\n\n

            It\nis therefore important that real estate transaction parties should protect\nthemselves with necessary anti-money laundering clauses in their contracts. In\norder to protect the company from being exposed to potential charge for receipt\nof illicit funds or proceed of crimes from buyers or investors, it is\ncommercially prudent for the company to insert anti-money laundering clause in\nthe contract.<\/p>\n\n\n\n

            The\nAnti-Money laundering clause could be couched thus:<\/p>\n\n\n\n

            • The Company shall not be liable for\nany damages at tort or under criminal code and laws of the federation for such\ndeposits from any Investor which is illegal or questionable.<\/em><\/li><\/ul>\n\n\n\n
              • The Investor assures the Company that\nthe funds used for this investment is not proceed of crime and warrants that he\nwill indemnify the Company for any loss or damage suffered by the Company or\nits staff arising any criminal investigations, prosecution by a law enforcement\nagency or civil claims by a third party arising<\/em>\nfrom the source or means or nature of the Investor\u2019s funds for this Investment.<\/li><\/ul>\n\n\n\n

                11.\u00a0 Clauses Relating to Post-Dated Cheques <\/em><\/strong><\/p>\n\n\n\n

                In\nwhatever transaction that requires a party to issue a post-dated cheque, it is\nimportant for the party issuing the post-dated cheque to take precautionary\nmeasure to protect itself against potential charge for issuing dud cheques if\nthose cheques are dishonoured when presented. <\/p>\n\n\n\n

                CONCLUSION<\/strong><\/p>\n\n\n\n

                The list of key\nprovisions or clauses to insert in a real estate transaction contract is not exhaustive\nand will largely vary and depend on the nature of transaction. <\/p>\n\n\n\n

                We have compiled the above based on our experience in advising and supporting individual and corporate clients in real estate transactions.<\/p>\n\n\n\n

                The above is not legal advice and does not create lawyer-client relationship between us and readers.<\/p>\n\n\n\n

                If you have specific questions, please email us via <\/em>admin@koriatlaw.com or call us 09067842241.<\/p>\n","protected":false},"excerpt":{"rendered":"

                INTRODUCTION As diverse as real estate transactions may be, so are the legal instruments for securing or consummating such transactions. Real estate […]<\/p>\n","protected":false},"author":1,"featured_media":5165,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[152,153,154,155,156,157,158,159,160],"class_list":["post-4810","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-publications","tag-buy-land","tag-construction-lawyer","tag-estate-agent","tag-land-lawyer","tag-land-transaction-lawyer","tag-property-lawyer","tag-property-management-company","tag-property-manager","tag-real-estate-lawyer"],"_links":{"self":[{"href":"https:\/\/koriatlaw.com\/2026\/wp-json\/wp\/v2\/posts\/4810","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/koriatlaw.com\/2026\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/koriatlaw.com\/2026\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/koriatlaw.com\/2026\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/koriatlaw.com\/2026\/wp-json\/wp\/v2\/comments?post=4810"}],"version-history":[{"count":0,"href":"https:\/\/koriatlaw.com\/2026\/wp-json\/wp\/v2\/posts\/4810\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/koriatlaw.com\/2026\/wp-json\/wp\/v2\/media\/5165"}],"wp:attachment":[{"href":"https:\/\/koriatlaw.com\/2026\/wp-json\/wp\/v2\/media?parent=4810"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/koriatlaw.com\/2026\/wp-json\/wp\/v2\/categories?post=4810"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/koriatlaw.com\/2026\/wp-json\/wp\/v2\/tags?post=4810"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}