The Essential Guide to Real Estate Due Diligence in Nigeria

Why Due Diligence Matters More in Nigeria

In mature real estate markets, institutional frameworks provide layers of protection for investors. In Nigeria, while the regulatory environment is evolving, the onus of thorough due diligence falls more heavily on the investor and their advisory team.

The consequences of inadequate due diligence range from disputed ownership to outright fraud. At Hormel, we've seen investors lose millions of naira by skipping critical verification steps. This guide outlines the comprehensive approach we recommend — and practice — for every transaction.

The Five Pillars of Real Estate Due Diligence

1. Title and Ownership Verification

This is the foundation of any real estate transaction. Key steps include:

Search at the Land Registry: Verify the seller's title documents against official records at the relevant state land registry.
Chain of Title Review: Trace the ownership history to identify any breaks, disputes, or encumbrances.
Governor's Consent: For transactions involving land covered by a Certificate of Occupancy, confirm that the governor's consent for the transfer is obtainable.
Lis Pendens Check: Verify that the property is not subject to any pending litigation.

2. Survey and Physical Inspection

Never rely solely on documents. Physical verification is essential:

Commissioned Survey: Engage a licensed surveyor to confirm property boundaries match the survey plan.
Beacon Verification: Ensure survey beacons are in place and correspond to official records.
Encroachment Assessment: Check for any unauthorized structures or uses on the property.
Infrastructure Audit: Assess road access, drainage, utilities, and surrounding development.

3. Legal and Regulatory Compliance

Ensure the property meets all legal requirements:

Zoning Compliance: Verify the intended use aligns with the area's zoning regulations.
Building Approvals: For developed properties, confirm all building permits and approvals are in order.
Tax Compliance: Verify that all property taxes and land use charges are current.
Environmental Clearance: For larger developments, confirm environmental impact assessments have been conducted.

4. Financial Analysis

Every investment must make financial sense:

Independent Valuation: Commission a valuation from a certified appraiser, independent of the seller.
Comparable Market Analysis: Review recent transactions for similar properties in the area.
Cash Flow Projection: For income-generating properties, model rental income against operating expenses.
Total Cost Assessment: Account for all acquisition costs including legal fees, stamp duties, and registration fees.

5. Commercial Due Diligence

Understand the broader market context:

Market Trends: Analyze supply and demand dynamics in the specific sub-market.
Development Pipeline: Research planned developments that could affect property values.
Tenant Quality: For income properties, assess tenant creditworthiness and lease terms.

Common Red Flags

When conducting due diligence, these warning signs should trigger deeper investigation:

Pressure to close quickly — legitimate sellers understand due diligence takes time
Reluctance to provide documents — transparency is non-negotiable
Significant price deviation from market comparables
Multiple claims of ownership or family disputes
Lack of development approvals for supposedly permitted projects

Our Due Diligence Process

At Hormel, we follow a structured 30-point checklist for every property we evaluate. Our process typically takes 4-6 weeks and includes:

Independent title search and verification
Licensed surveyor inspection
Legal opinion from our real estate counsel
Independent property valuation
Environmental and structural assessment (where applicable)
Financial modeling and risk analysis

Only properties that pass all stages enter our curated portfolio of investment opportunities.

Want to learn more about our due diligence process? Reach out to our team for a detailed consultation.