How to Conduct Due Diligence When Purchasing Land in Ghana.
In the past few months, I have been contacted by a number of friends and family with various challenges they are facing (or have had in the past) regarding the acquisition of land in Ghana. The purpose of this article is to simplify what has been provided on land acquisition in B.J. da Rocha and C.H.K. Lodoh’s book “Ghana Land Law and Conveyancing” as much as possible, to make it easy to understand.
Land acquisition is one of the most common methods of wealth management in Ghana. This can be attributed to the fact that the value of land consistently appreciates in most cases. As a result, most people prefer to purchase land with money they do not have any immediate need for, as opposed to saving it at the bank or in an investment fund of some sort. However, due to the significant growth in the real estate market space, it has also led an increase in fraudsters posing as landowners or agents ready to prey on unsuspecting buyers, also creating a need for this article.
Before we delve into the discussion on why one must conduct due diligence when purchasing land, it will be prudent to take a quick look at the two main approaches to conveyancing in Ghana. Generally, the two main approaches to the purchase of land in Ghana are the informal and formal approach.
The informal approach is relatively the most popular approach when it comes to the purchase of land in Ghana, usually with the purchase of unregistered land. This approach is popular in Ghana either because of the ignorance of the consequences, if the transaction fails, or because the parties are in a haste to complete the transaction or want to avoid paying legal fees. With this approach, there is no prior written agreement between the vendor and the purchaser. The conveyance is usually made when the vendor transfers his interest in the land to the purchaser immediately after the parties agree on the land to be sold. This agreement between the parties may also include, the purchase price, the date of delivery of vacant possession, etc. The informal approach may look simple and easy, but it is not always safe especially when the vendor has not got an impeachable title under the Land Act, 2020 (Act 1036). A major disadvantage associated with this approach is that, if the vendor refuses to convey the land to the purchaser, the purchaser will find it difficult to compel the vendor to convey the land to him (even with the use of the Court) unless the purchaser can prove sufficient acts of part-performance pursuant to the oral agreement between the parties to sell and purchase the land.
On the other hand, the formal approach is another method used to purchase land in Ghana. This approach starts where both parties, thus the vendor and the purchaser enter into a written agreement for the sale and purchase of the land. A major advantage of this approach is that the written agreement is binding and ties the hand of the vendor which enables the purchaser to perfect title before the completion of the sale. There are two types of contracts used in the formal approach, namely, the open contract and the formal contract. A contract for the sale of land is classified as open when it contains only the names of the of the parties, the schedule to the land being sold and the price of the land, leaving all other terms of the contract to be implied by law. In contrast, a formal contract for the sale of land includes all the contents of an open contract and all other terms that the parties want to govern the transaction. The conveyancing transaction is usually divided into Pre-contact (Enquiries and Searches), Exchange of contracts, Pre-completion, Completion and Post-Completion. These stages will be broken down and discussed in detail in another article.
As mentioned above, when it comes to the purchase of land in Ghana, there are a lot of fraudsters posing as landowners looking for an opportunity to take advantage of unsuspecting purchasers. As the saying goes “If it’s too good to be true, it’s exactly so”. At the searches stage, gut feelings and common sense should not be ignored because this stage is not strictly governed by law. Ascertaining the identity of the vendor or investigating the vendor’s title is not something that should be overlooked. The purchaser’s intention to proceed with the transaction will depend on the outcome of the searches and enquiries as the vendor has a limited duty to disclose defects in title. It falls entirely on the purchaser to discover everything he needs to know before contracts are exchanged. It is a solicitor’s duty to carry out the searches and enquiries where the purchaser engages the services of a solicitor.
The first step in conducting due diligence when purchasing land is to verify the identity of the vendor. There have been various cases where fraudsters pose as landowners just to outsmart unsuspecting purchasers. In verifying the identity of the vendor, any identity card issued by the state may be used. This may include an ECOWAS identification card (Ghana Card), a driver’s license, or passport. However, one must be cautious since these cards can be forged. A way around this is to write to the issuing body to verify the authenticity of the identification card if you deem it fit to do so. Additionally, the prospective purchaser may visit the land to enquire of the identity of the vendor from the neighbours.
The next step in the due diligence process is to request and evaluate the documents of ownership. A proper way to ascertain ownership is by carefully evaluating the title documents. The documents of ownership usually contain a site plan which provides the measurements, the location of the land, etc. The site plan must be consistent with the description of the land in the instrument which is the document granting title to the vendor. The instrument may be a conveyance, lease, sublease, or an assignment. In cases where the instrument is a lease, sublease, or an assignment, the purchaser must ensure that consent has been sort by the vendor from the appropriate authority for the grant. Where a land title certificate has been issued, it connotes absolute title (unless proven otherwise). The certificate should contain the instrument granting title to the land or lease as well as a filed plan. Furthermore, in cases where the land has been inherited, the vendor must provide a will, letters of administration, probate, and vesting assents where necessary to enable the purchaser to evaluate the documents. Particular attention must be paid to the duration of the interest of the vendor. Most people are under the wrong impression that every acquisition of land in Ghana is 99 years. Assignments usually do not indicate the residue of the lease, so the purchaser must request for the headlease. The headlease will give the purchaser an idea of what the residue is. The number of years the vendor can pass on to the purchaser is dependent on duration of the interest.
Next in line is the site visit. A prospective purchaser MUST always go on a site visit. I personally consider it a cardinal sin for a purchaser to pay for land which he (or someone he “trusts”) has not seen. It will do the purchaser no good to rely only on the documents provided by the vendor. The purchaser must inspect the land to ensure that it is fit for purpose. It may be that the land the vendor is selling is arid land which cannot be used for agriculture if the intention is to use the land for farming. On the other hand, the land may also be waterlogged, hilly or situated in a valley which may not suit the purchaser’s needs. In the acquisition of land for residential purposes, it is advisable to inspect the land during the rainy season to ensure that the land is not situated in a waterlogged area. Another importance of the site visit is to ensure that there are no overriding interests on the land. It is also important for the purchaser to talk to occupants of the land (if any) or persons occupying neighbouring lands. These people may have information on ownership and problems affecting the land such as litigation.
The final step in the due diligence process is the conduct of searches at a number of government agencies starting from the Lands Commission. The purchaser must engage the services of a licensed surveyor to prepare a bar-coded site plan which will be used to conduct a search at the Lands Commission. The Lands Commission and its regional offices have records pertaining to land transactions and ownership. The Lands Commission has recently introduced a consolidated online search process where results will be obtained from all three divisions of the Lands Commission namely, the Public and Vested Management Division (PVLMD), Lands Registration Division and Survey and Mapping Division. It will also be prudent to conduct a search at the Town and Country Planning office in the metropolitan, municipal or district assembly in which the land is located. The importance of the search is to verify the zoning purposes for the land the purchaser intends to buy. There have been instances where land earmarked for roads, markets or other purposes have been sold to purchasers who intend to use the land for residential purposes. To determine whether the land has been mortgaged, the Collateral Registry at the Bank of Ghana and the Land Registry Division has records of mortgages and discharges of same. A search at the court can also be used to determine whether the vendor has been sued in respect to the land, particularly with respect to family and stool lands. Practically, the proper government agency to conduct official searches will depend on the purpose for which the land is being purchased and the location of the land. For example, if the land is stool land, a search on the chief(s) involved at the National House of Chiefs to ascertain whether they are registered in the national register of chiefs is important. Also, where large tracts of virgin land are being purchased usually for agricultural purposes, conducting a search at the Forestry Commission to determine whether the land has not been earmarked as a forest reserve or for wildlife conservation is essential. Based on the search results, the purchaser can negotiate for an abatement of the purchase price due to any defects discovered during the searches and enquiries stage.
In conclusion, the procedure for conducting due diligence in land transactions is not cast in stone. However, before a purchaser makes any financial commitments for the purchase of land, he should have conducted extensive due diligence on the vendor as well as the land in question to avoid losing money or end up in litigation which could have been avoided.
- Ghana Land Law and Conveyancing, 2nd Ed., B.J. da Rocha and C.H.K. Lodoh, 1999.
- Conveyancing and Drafting, Study Manual 2021, Ghana School of Law.