Other Charges You Need to Know When Buying Real Estate in Lagos & Why

Other hidden charges in Lagos real estate
BY Godswill Igbokwe October 10, 2024

Buying real estate in Lagos, one of the busiest and most populous cities in Africa is often seen as a significant investment. But are you aware that there are other real estate charges you need to pay beyond the cost of the property in Lagos? Some people call them hidden charges but they are not really hidden. The company always makes it clear in their FAQs.

The real estate market in Lagos is competitive and dynamic, offering a wide range of options for both local and international investors. 

Are you purchasing land, residential, or commercial property? You must be aware of the other charges that go beyond the purchase price. 

These additional fees can significantly impact the overall cost of acquiring property in Lagos.

In this article, we’ll expose you to other charges you need to know when buying real estate in Lagos and explain why they are important to your investment journey.

1. Agency Fees

One of the first charges you are likely to encounter when buying real estate in Lagos is the agency fee. 

Real estate agents or brokers are typically involved in property transactions, and they expect a commission for their services.

Why Are Agency Fees Necessary?

1. It Facilitates Your Transactions

Agents are often the middlemen between buyers and sellers. 

They help identify properties that meet your specifications, negotiate the price, and guide you through the process.

2. The Market Knowledge

Local agents have insider knowledge of the Lagos real estate market, which can help you find properties at the best prices.

3. Property Search

In a city as vast as Lagos, it can be time-consuming and overwhelming to find the right property. 

Real estate agents provide you with options, saving time and energy.

How Much Should You Expect as an Agency Fee?

Agency fees in Lagos generally range from 5% to 10% of the property’s purchase price, depending on the agent and the deal’s complexity. 

While this fee may seem steep, it is essential to ensure you are getting a good deal and the process is professionally managed.

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2. Legal Fees

Real estate transactions in Lagos will not be complete without the services of a lawyer. 

The legal aspects of property ownership are crucial, and a real estate lawyer ensures that everything from the title deed to contracts is in proper order.

Why Are Legal Fees Important?

1. For Due Diligence

Lagos has a history of fraudulent land sales and disputes over property ownership. 

A lawyer conducts due diligence to verify the authenticity of the property documents, ensuring that you are buying from the rightful owner.

2. For Drafting Contracts

Legal professionals help you draft the sale agreements and other necessary documents, ensuring that all legalities are adhered to.

3. For Title Transfer

Your lawyer will facilitate the title transfer process, ensuring that your name is properly registered with the appropriate authorities.

How Much to Expect as Legal Fees?

Legal fees typically range from 5% to 10% of the property’s purchase price, depending on the lawyer’s experience and the deal’s complexity. 

Investing in a good lawyer can save you from future legal complications.

3. Survey Plan Fees

When buying land or property in Lagos, obtaining a survey plan is very important. 

The survey plan provides you with a detailed description of the property’s location and boundaries. 

This ensures that there is no overlap with neighboring properties and that the land you’re buying is as described by the seller.

Why are Survey Plan Fees Necessary?

1. Help You Avoid Disputes

A proper survey helps prevent future land disputes that could arise from unclear boundaries or encroachments on other properties.

2. For Documentation

A survey plan is an essential document when applying for other permits or conducting transactions involving the property.

3. For Validation

The Lagos State Surveyor-General must validate the survey plan for it to be recognized as a legitimate document.

How Much to Expect as the Survey Plan Fees?

Survey fees vary based on the location of the property and the professional hired to perform the survey. 

The cost generally ranges from ₦100,000 to ₦2,500,000, depending on the size and complexity of the land.

4. The Deed of Assignment Fee

The Deed of Assignment is one of the most critical documents in real estate transactions in Lagos. 

It transfers the ownership of the property from the seller to the buyer and serves as evidence of this transfer.

Why Are Deed of Assignment Fees Important?

1. It Provides You With Legal Proof of Ownership

Without a properly executed Deed of Assignment, your ownership of the property might be legally challenged in the future.

2. Future Transactions

A Deed of Assignment is required if you ever wish to sell or transfer the property to someone else.

3. Government Registration

The deed is also necessary for the proper registration of the property with the Lagos State Government.

How Much to Expect as the Deed of Assignment Fee?

The cost for preparing a Deed of Assignment usually ranges from ₦100,000 to ₦300,000. 

The lawyer preparing the deed and the complexity of the transaction typically determine the cost.

5. The Governor’s Consent Fee

In Lagos, land is technically owned by the state government under the Land Use Act of 1978. 

As a result, every land transaction requires the consent of the state governor, known as the Governor’s Consent. 

Without this, the sale or transfer of land is considered invalid.

Why Are Governor’s Consent Fees Crucial?

1. Legitimacy

The Governor’s Consent is required to ensure that the sale is legal and that the property is free from encumbrances such as mortgages, disputes, or third-party claims.

2. Ownership Documentation

This document makes your ownership legally binding and recognized by the government.

3. For Future Sales

If you plan to sell or transfer the property, having the Governor’s Consent is crucial for a smooth process.

How Much to Expect as the Governor’s Consent Charge?

The cost of obtaining the Governor’s Consent varies depending on the location and value of the property. 

It typically ranges between 3% and 5% of the property’s value. This fee is paid to the Lagos State Government.

6. Capital Gains Tax (CGT)

Capital Gains Tax is a federal tax imposed on the profit made from the sale or transfer of property. 

This tax applies to the seller but can sometimes be factored into the cost paid by the buyer.

Why Is CGT Important?

1. Compliance with Tax Laws

Paying CGT ensures that the transaction complies with Nigerian tax laws, avoiding any legal issues with the Federal Inland Revenue Service (FIRS).

2. Property Transfer

Failure to pay CGT can delay or invalidate the transfer of property ownership.

How Much to Expect?

The Capital Gains Tax is set at 10% of the profit made from the sale of the property. 

The amount is typically calculated based on the difference between the purchase price and the selling price.

7. The Stamp Duty

Stamp duty is a tax imposed on legal documents during real estate transactions. 

It applies to agreements, contracts, and other documents associated with the transfer of property.

Why is Stamp Duty Necessary?

1. Government Requirement

Stamp duty must be paid to authenticate the legal documents involved in the transaction. 

With it, your property transfer documents will be recognized as valid.

2. Title Registration

Stamp duty is required before the title can be registered with the Lagos State Government.

How Much to Expect as Your Property Stamp Duty?

Stamp duty is typically 1.5% of the property’s purchase price. It is paid to the Federal Inland Revenue Service (FIRS).

8. Property Registration Fees

After buying property in Lagos, you must register it with the Lagos State Government to formalize ownership. 

The property registration fee covers the costs of processing and filing all necessary documents to make the transaction legally binding.

Why Are Property Registration Fees Important?

1. Legitimate Ownership 

Property registration ensures that your ownership is formally recognized by the government.

2. Prevention of Fraud

Registering the property reduces the risk of fraudulent transactions, as your ownership will be recorded in government records.

3. For Future Sales

Properly registered property is easier to sell or transfer in the future.

How Much to Expect?

The cost of property registration varies depending on the property’s value, but it typically ranges from 3% to 5% of the purchase price.

9. Development Levy

In certain parts of Lagos, especially in developing areas, you may be required to pay a development levy. 

This fee is usually charged to support the development of infrastructure, such as roads, drainage, and utilities in the area.

Why Is The Development Levy Necessary?

1. Infrastructure Development

The development levy helps fund the construction of essential infrastructure that makes your property more accessible and valuable.

2. Government Compliance

In some cases, this levy is mandatory, and failure to pay can lead to delays in processing your property documents.

How Much to Expect as the Development Levy?

The development levy varies depending on the location and the size of the property. The development levy of an estate typically ranges from ₦100,000 to as high as ₦20,000,000.

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Conclusion

When buying real estate in Lagos, it’s important to budget for more than just the purchase price. 

While Lagos offers incredible real estate opportunities, navigating the complexities of the market requires due diligence, professional guidance, and proper budgeting.

By being aware of these charges, you’ll be better prepared to make informed decisions, protect your investment, and secure your ownership of the property for the long term. Which of these real estate charges are you aware of in Lagos?

Do you desire to buy land in Epe, Ibeju-Lekki or Enugu, send a WhatsApp message to +2348134794494

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