Buying Off-Plan in Lagos: How to Structure a Purchase You Can Enforce

Buying Off-Plan in Lagos: How to Structure a Purchase You Can Enforce

Off-plan purchasing dominates the mid and upper segments of the Lagos market for a simple reason. Developers need capital before completion and buyers want a price below the finished value. Both sides get something they want.

What buyers frequently do not price correctly is what they are giving up in exchange for the discount. In an off-plan purchase, the buyer takes on construction risk, delivery risk, specification risk and developer solvency risk, usually without the contractual protections that would make those risks manageable.

The discount is real. So is the exposure. The work is in structuring the transaction so that the second does not consume the first.

## What you are actually buying

At the point of an off-plan purchase, there is no unit. There is a promise to build a unit, a set of drawings, a specification, and a developer's balance sheet standing behind the promise.

That changes the nature of the enquiry. In a completed purchase, due diligence focuses on the property. In an off-plan purchase, due diligence has to cover the property, the project and the developer, because the developer's capacity to perform is the asset you are relying on.

## Due diligence on the land

Everything that applies to a completed purchase still applies here.

Confirm the developer's title to the land, traced to root. Confirm it through a search at the Lands Registry rather than through the brochure. Chart the survey. Establish that the parcel is not under government acquisition and is not subject to litigation.

A surprising number of off-plan projects are marketed on land the developer does not yet own outright, or holds under a joint venture arrangement with a landowner. That is not automatically fatal, but you need to know it, because it determines who can actually convey a unit to you at the end and what happens if the developer and the landowner fall out.

Also confirm the planning position. Building approval, the approved drawings and any required permits should exist and should match what is being marketed. Projects sold on drawings that have not been approved carry a risk of redesign, delay or enforcement action, and the buyer absorbs all three.

## Due diligence on the developer

The land can be perfect and the transaction can still fail if the developer cannot perform.

Look at completed projects rather than renderings. Visit them. Speak to buyers who bought in earlier phases and ask specifically about delivery timelines and specification changes. Ask what was promised and what was delivered.

Check the corporate entity. Confirm registration, confirm who the directors are, and confirm that the entity contracting with you is the entity with the assets. Developers commonly use special purpose vehicles, which is legitimate, but it means your contractual counterparty may be a company with no assets other than the project itself.

Check whether the developer is registered with the relevant Lagos State regulator. Registration is not a guarantee of quality and its absence is a signal worth noting.

## The payment structure is the main protection

The single most important commercial term in an off-plan purchase is the relationship between payment and progress.

Payments tied to the calendar transfer risk to the buyer. Payments tied to verified construction milestones keep the developer's incentive aligned with delivery. Foundation complete, frame complete, roof on, mechanical and electrical installed, finishes complete, snagging closed. Each stage should be certified by someone acting for you rather than by the developer alone.

Buyers who pay a large percentage upfront in exchange for a further discount are buying that discount with the only leverage they had. Once the money is gone, the buyer's remaining remedy is litigation, which is slow, expensive and uncertain.

## Terms that should be in the contract

**Defined specification.** The finishes schedule should be annexed and specific. General language about quality finishes is unenforceable in practice. Where the developer reserves a right to substitute materials, that right should be limited to items of equal or better quality and should require notice.

**Defined completion date, with consequences.** A completion date with no consequence attached to missing it is a statement of intent. There should be a mechanism, whether liquidated damages, rent compensation or a price adjustment, that gives the date commercial force.

**Defined unit.** Floor area, floor level, orientation, parking allocation and unit number should be specified. Substitution of one unit for another is a recurring source of dispute, and the contract should either prohibit it or set out clear terms on which it can occur.

**Title transfer mechanics.** The contract should state what the buyer receives at completion, who is responsible for consent and registration, and on what timetable. Off-plan buyers in developments frequently end up with possession and no perfected title for years.

**Exit and refund terms.** What happens if the buyer needs to withdraw. What happens if the developer abandons the project. What happens if completion is delayed beyond a longstop date. These provisions are usually drafted to favour the developer and are usually negotiable.

**Common areas and service charge.** In multi-unit developments, how the common areas are held, who manages them, how the service charge is calculated and how it can be increased. Buyers focus on the unit and inherit the estate.

## Where these transactions typically fail

**Delay without remedy.** The most common failure. The project slips by months or years and the buyer has no contractual lever.

**Specification drift.** What is delivered does not match what was marketed, and the marketing material was expressly excluded from the contract.

**Unit substitution.** The buyer is offered a different unit on the basis that the original is no longer available, frequently after full payment.

**Developer insolvency.** The project stalls, the SPV has no assets, and buyers discover they rank alongside other unsecured creditors.

**Title never perfected.** The building is delivered, the buyers move in, and the paperwork remains incomplete indefinitely.

Every one of these is addressable at the contract stage. None of them is easily addressable afterwards.

## The negotiating position buyers do not use

Off-plan buyers routinely accept the developer's standard contract on the assumption that it is not negotiable. In a market where developers need early capital, the buyer bringing funds at an early stage has more leverage than at any later point in the transaction.

That leverage is worth spending on structure rather than on price. A further discount on a contract you cannot enforce is worth less than the same price on a contract you can.

## The practical summary

Off-plan works when the developer is credible, the land is clean, the payments follow progress, the specification is defined and the exit terms are real. It fails when the buyer treats the discount as the deal and the paperwork as an afterthought.

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