Before you jump into buying commercial property in Nigeria, have you made sure to cover all your legal bases?
Commercial property refers to land and buildings used for business purposes intended to generate profit through rental income or capital gains.
Buying commercial property may sound like a no-brainer for earning additional income, however, there are a lot of regulations you need to consider before you buy.
Here are five legal considerations to keep in mind before buying commercial property:
Financing
Commercial properties often require larger down payments with more detailed financial documentation. The terms of your financing can play a big part in how profitable your investment will be. Here are some key points to consider:
• Interest Rates and Loan Terms: Nigerian banks tend to offer higher interest rates for commercial property loans, so it is important to compare to negotiate better terms.
• Collateral Requirements: Commercial property loans often require significant collateral. The lender may ask for your business assets or personal guarantees.
• Legal Fees and Taxes: Commercial property transactions incur various fees from legal fees to property taxes and stamp duties.
• Bank Guarantees and Letters of Credit: Banks may issue guarantees or letters of credit to secure the transaction.
Due Diligence
This entails ensuring that your property is free of any legal or physical issues, verifying the legitimacy of the property’s title and understanding any leasing agreements. Doing this ensures that you understand the current situation regarding the property and are not hit by any unwelcome surprises in the future.
Landlord Responsibilities
When you purchase commercial property, you will take on landlord responsibilities. This includes legal obligations to tenant relations, property maintenance and compliance with local laws. Understanding your responsibilities ensures that you are legally compliant and helps to prevent disputes with tenants.
Property Licenses
You need to obtain specific licenses and permits before you can begin operating or renting out your commercial property. These licenses vary by state in Nigeria, and failing to obtain these licenses can lead to fines or legal action. Common property licenses and permits include:
• Business Premises Permit: Businesses are required to obtain this permit before operating from a commercial property.
• Environmental Impact Assessment (EIA): You need to conduct an EIA before making any significant changes to the property.
Zoning and Planning Permissions
These regulations dictate how the land can be used and what types of developments or activities are permitted.
You should check with local government planning authorities like the Lagos State Ministry of Physical Planning and Urban Development or the Federal Development Authority (FCDA) in Abuja for zoning classifications.
If you do want to make any structural changes to the property, you will need planning permission from the relevant authorities first.
Lawhaven Solicitors is one of the top law firms in Nigeria with a team of lawyers experienced in all aspects of property law. If you are considering buying commercial property, contact us.
Your first consultation is free!