Lecture 9 - Due Diligence in Conveyancing Transaction (Revised)
Lecture 9 - Due Diligence in Conveyancing Transaction (Revised)
Lecture 9 - Due Diligence in Conveyancing Transaction (Revised)
F A C U L T Y O F L AW , P E N T E C O S T
U N I V E R S I T Y, A C C R A
L AW Y E R B A R I M A K O F I K O R A N T E N G
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APPROACHES TO LAND TRANSACTIONS
There are two main approaches to land purchase in Ghana. These are
(a) Informal Approach
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THE INFORMAL APPROACH
This is where there is no prior written agreement between
the vendor and the purchaser and a conveyance is made
transferring the vendor’s interest in the land to the
purchaser immediately the parties orally agree on the
land to be sold, the purchase price to be paid and such
other terms as, date of full payment of the purchase price,
date of delivery of vacant possession of the land etc.
This approach is not always safe especially if the vendor
has not got an unimpeachable title.
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THE INFORMAL APPROACH
The problem with the approach is that if for any reason, the vendor refuses to
convey the property to the purchaser, the purchaser may find it extremely
difficult to get the Court to compel the vendor to convey the land to him
unless he can prove sufficient acts of part-performance pursuant to the oral
agreement to sell and purchase the land. It is prudent to have evidence of
payment, even if the vendor does not provide any.
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THE FORMAL APPROACH
This is where the purchaser first enters into a written contract for the sale of the
land with the vendor. The advantage of this approach is that it ties the hand of
the vendor and enables the purchaser to perfect title before the completion of
the sale.
The contract envisaged in this approach may be either an open contract or a
formal contract. A contract for the sale of land is an open contract if it contains
only the names of the parties, the designation of the land to be sold and the price to
be paid and leaves all other terms of the agreement to be implied by law.
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THE FORMAL APPROACH
On the other hand, a formal contract for the sale of land contains, in addition to
the contents of an open contract for the sale of land all the terms the parties
want to govern their transaction. A conveyancing transaction can be divided
into the following parts or stages:
a) Pre-contract – Enquiries and Searches
b) Exchange of contracts
c) Pre-completion
d) Completion
e) Post-completion
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DOCTRINE OF CAVEAT EMPTOR AND CAVEAT
VENDITOR IN LAND TRANSACTIONS
Caveat emptor is a Latin expression which signifies ‘‘let the buyer be aware’’
It is a deep rooted rule which is applied to determine questions identified with products, administrations and
property. It is doctrine that the buyer of goods or property must utilise his insight and make an
educated and cautious buy.
The court in Egbeyemi v. G.B. Ollivant & Co., Ltd. (1939) 5 W.A.C.A. 147 painstakingly advised
purchasers of property to do all the necessary checks before purchasing a property. The court held:
‘‘While sympathising with the respondent who has lost his money and got nothing for it, I think it
cannot be too often pointed out that a purchaser of real property, without a covenant for
title, has, in the absence of fraud, no remedy once he has paid the money over. It is
otherwise if he has not actually parted with the money. It is up to a purchaser whether
by private treaty or at auction to satisfy himself as to the right, title and interest" he is
buying, and if he buys without doing so he cannot complain if he is ousted by a third
party proving a better title. This is the doctrine of Caveat Emptor which was applied in
Owo v. Kasumu 11 N.L.R. p.116 and in my opinion it is equally applicable to the
present case.
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DOCTRINE OF CAVEAT EMPTOR
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CAVEAT VENDITOR
The caveat emptor doctrine does not however mean that sellers have no responsibility to
engage in the right conduct. Indeed, there are damages to vendors who engage in
criminality, relative to land sale.
Section 72 of the Lands Act, 2020 is on Damages and penalty for fraudulent concealment.
(READ THE ENTIRE PROVISION)
………………………………………………………..
I will however hasten to add that, in spite of the caveat venditor doctrine which may
eventually come in aid to the purchaser who has been defrauded, it is prudent for the
purchaser to stick to the caveat emptor doctrine, for we know how difficult or
impossible it is for monies paid in land transactions to be retrieved after fraud has
been uncovered.
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PRE-CONTRACT STAGE - ENQUIRIES AND SEARCHES
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FRAUD IN LAND TRANSACTIONS
‘‘One of the banes of our current society is the frequency with which vendors
of land, motivated by greed and venality, purport to sell the same property
over and over again to multiple purchasers. Frequently, it is only the vendor
who comes out smiling, having collected his moneys from his victims.
Sometimes, as in this case, such a vendor, with his loot in hand, vanishes
from the scene leaving his victims to spend vast amounts of valuable time
and money fighting over the property. This menace has reached such
proportions that there are numerous locations in our metropolitan areas
where purchasers feel compelled to resort to self-help in various forms,
including the unlawful employment of armed personnel, to guard their land
developments against competing purchasers.’’( JUDGMENT AKUFFO
JSC, Amuzu v Oklikah [1998-99] SCGLR 141)
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FRAUDULENT SALES
IN RICHARD KWABENA ASIAMAH V. REPUBLIC (2020) JELR
92044 (SC) the issue of conveyancing fraud came to the fore. In this
case, the facts as borne out by the charge sheet and the undisputed
evidence from the trial are that, one Leticia Acquah, the first accused
person who was a senior officer at the Lands Commission informed
the complainant, Mr. Ernest Ofori Sarpong, that there was a parcel of
land for sale at Airport Residential Area and she had a power of
attorney to sell the land on behalf of the owner. It however turned out
that she had no such power of attorney. In this case, the records of the
Lands Commission were momentarily changed by the Land
Commission officials to support the fake vendor.
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FRAUDULENT SALES
IN AMUZU v OKLIKAH [1997-98] 1 GLR 89, where the vendor sold the same piece
of land to two purchasers, with the second purchaser knowing the existence of the
first purchase but going ahead to register his interest first, the Supreme Court
invalidated the registration, calling it fraudulent. The apex court maintained that the
Land Registry Act, 1962 (Act 122) did not abolish the equitable doctrines of notice
and fraud and neither had it conferred on a registered instrument a state-guaranteed
title. Besides, since equity would not permit a statute to be used as an instrument of
fraud or inequitable conduct, section 24(12) of Act 122 should not be interpreted in a
way that would facilitate fraud in the acquisition and sale of lands. Accordingly, a
later executed instrument could only obtain priority over an earlier one by registration
under section 24(1) of Act 122 if the later instrument was obtained without fraud and
without notice of the earlier unregistered instrument. Thus registration did not create
an absolute title.
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FRAUDULENT SALES
Accordingly, in the instant case, the respondent’s later instrument,
exhibit B, could not take priority over the appellant’s earlier
instrument, exhibit A, by its registration under section 24(1) of Act
122 because since the respondent had actual notice of the
appellant’s purchase of the disputed property, he would be held to
have had constructive notice of and to have been bound by the
contract of sale between the appellant and the vendor, and the terms
of the contract including equities which under the contract the
appellant had against the vendor. Accordingly, the judgments of the
High Court and the Court of Appeal would be set aside. (AMUZU v
OKLIKAH, supra)
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The decisions in Amuzu v Oklikah and Brown v Quarshigah have been affirmed in
section 124( Priority of registered interest) of the Lands Act which stipulates:
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PRE-CONTRACT STAGE
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1. VERIFY THE IDENTITY OF VENDOR
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THE VENDOR’S DUTY TO PROVE TITLE
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THE VENDOR’S DUTY TO PROVE TITLE
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DUE DILIGENCE IN BUYING FAMILY PROPERTY
BEFORE BUYING A SPOUSAL PROPERTY PAY HEED TO SECTION 47 of ACT
1036 which stipulates thus;
1. In the absence of a written agreement to the contrary by the spouses in a marriage, a
spouse shall not, in respect of land, right or interest in land acquired for valuable
consideration during marriage,
(a) sell, exchange, transfer, mortgage or lease the land, right or interest in the land,
(b) enter into a contract for the sale, exchange, transfer, mortgage or lease of the land,
right or interest in the land,
(c) give away the land, right or interest in the land inter vivos, or
(d) enter into any other transaction in relation to the land, right or interest in the land
without the written consent of the other spouse, which consent shall not be unreasonably
withheld.
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DUE DILIGENCE IN BUYING SPOUSAL PROPERTY
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DUE DILIGENCE IN BUYING SPOUSAL PROPERTY
The court rejected her contention, maintaining that
‘‘In my humble opinion, since the 2nd Defendant knew all along about the
transaction that went on at the 18th February 2007 meeting and did not object to
the transactions, she cannot now be heard to say that she did not agree to the
contract of sale. As the trial judge rightly established in his judgment, the wife
was privy to the transaction that took place in the home of the plaintiff, and did
not object to the transaction. She had an obligation to object to the sale at the
time that Nana Owusu, DW2, asked all the people present if anyone had views
to express on the proposed contract of sale. 2nd Defendant who remained quiet
and raised no objection and thus induced plaintiff to go through the sale cannot
now be heard to say that she objected to the contract of sale.’’ (ERIC ANSONG
PLAINTIFF/RESPONDENT VRS MR. ALBERT GORMAN
- DEFENDANTS/APPELLANTS MRS. GORMAN (2011)
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DUE DILIGENCE IN BUYING SPOUSAL PROPERTY
The learned trial Judge captured this part of the matter in the following words in the judgment as
follows:-
“So clearly the 2nd defendant, wife of 1st defendant, saw and understood all that went on at that
meeting of the 18th of February, 2007. It was that she kept quiet and when they got home
before she decided to object. I think I have sufficient evidence to find that the 2nd defendant
knew all along about the property put on sale and the sale to the plaintiff. I do not see the
evidence concluding anything else that that she agree, consented to the husband selling their
property and that is exactly what the husband sought out to do. I will say that she authorised
the husband to transact the sale of their property and that is what the husband did. Indeed
there is evidence on record that the Defendants put up a notice on their house offering it for
sale to the general public. Secondly, the 1st Defendant himself testified that because they
were in hard times, they told a few friends that they wanted to sell their house. All these
meant that both couple, 1st and 2nd Defendants were aware of the sale of the house.” ERIC
ANSONG PLAINTIFF/RESPONDENT VRS MR. ALBERT GORMAN
- DEFENDANTS/APPELLANTS MRS. GORMAN (2011)
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DUE DILIGENCE IN BUYING SPOUSAL PROPERTY
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ABSTRACT OF TITLE
An abstract of title is a summary of all the instruments, document, facts and events which,
together, show that the vendor has title. An abstract of title is said to be perfect when
it consists of a connected summary of a series of instruments, wills and other
documents, births, marriages and deaths and other material events, within the
statutory period of commencement of title, which show that the vendor is able to
convey the property to be sold. An abstract of title must begin with a good title
known as the root of title.
Abstracts of all instruments, wills and other documents, facts and events after the root of
title must be given in chronological sequence, so as to show how the title has
devolved from the root of title to the vendor.
The vendor’s solicitor must check the abstract of title that the title has been deduced from
the correct root of title, that all relevant deeds have been correctly stamped and there
are no broken links in the chain of ownership.
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ABSTRACT OF TITLE
In JOSEPH v. BOAKYE [1977] 2 GLR 392-402, the COURT OF
APPEAL held that it seemed clear that though in ordinary
conveyancing practice a separate document specifically designated
abstract of title was usually delivered by the vendor or on his behalf
to the purchaser, the law did not lay down that it should take any
particular form. What was of importance was that what was
proffered as an abstract must be a statement of the instruments and
events by which the vendor claimed to be entitled to the property.
In the present case, notwithstanding its form, the draft deed of
assignment was an abstract of title.
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THE LEGAL IMPLICATION OF ABSTRACT OF TITLE
The question which naturally suggests itself is, what is an abstract of title as used in this
branch of the law? It is, "A chronological statement of the instruments and events
under which a person is entitled to property. Every contract for the sale of land
implies the right to an abstract unless such right is expressly excluded." (See Earl
Jowitt, The Dictionary of English Law at p. 16.) In Gibson's Conveyancing (20th ed.)
at p. 162 the author conceives the vendor's duty and what is comprehended by the
term "abstract of title" in these words:
"On a sale of land the vendor is bound, unless otherwise agreed, to prove his title. For this
purpose, he must deliver to the purchaser an abstract of his title; i.e. an epitome of the
documents and facts which constitute his title. Unless the contract otherwise
provides, the abstract must show a perfect title, i.e., it must show that the vendor can
either himself convey, or compel some other person or persons to convey, to the
purchaser the legal estate and the equitable interest in the property sold, free from
encumbrances. (JOSEPH v. BOAKYE, supra)
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EXAMPLE OF ABSTRACT OF TITLE
1. By a Deed of Conveyance dated the 15th day of June 1944 and made between ABIGAIL
MENSAH, as vendor of the one part and KWADJO BOAKYE as Purchaser of the other part,
ALL THAT PIECE AND PARCEL OF LAND with building thereon known as House No. K44/2
Dadeban Avenue, Haatso-Accra and described in the schedule hereto (hereafter referred to as
“the Property”) was conveyed to the said KWADJO BOAKYE forever.
2. The said KWADJO BOAKYE died on the 15th day of April , 1961 seised absolutely in possession
of the Property which was devised to his children FRANK ABOAGYE subject to a life interest to
NANA ABOAGYE.
3. The said FRANK ABOAGYE died on the 11th day of February, 1985 intestate as to the Property
and Letters of Administration to his estate were granted to NANA ABOAGYE on the 22nd day
of JUNE, 1992 by the High Court of Justice-Accra.
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EXAMPLE OF ABSTRACT OF TITLE
4. By a Deed of Conveyance dated 26th day of January, 1994 stamped
AR/ GB/988/94 and or LVB 8957/94 and registered as Land
Registry No. 2502/1994 and made between NANA ABOAGYE (as
beneficial owner of a life interest in the property herein and as the
legal personal representative of the said FRANK ABOAGYE) as
Vendor of the one part and KWAME ADINKRA ADDO as
Purchaser of the Property was conveyed to the said KWAME
ADINKRA forever.
5. The Vendor herein has agreed to convey and to grant to the
Purchaser herein the Property absolutely and or forever.
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EVALUATE DOCUMENTS OF OWNERSHIP
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EVALUATE DOCUMENTS OF OWNERSHIP
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EVALUATE DOCUMENTS OF OWNERSHIP
A non citizen should also know that he can only get 50 years lease.
Pithily put, the buyer must know whether it is a lease, sublease or
assignment that he is contracting to buy.
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SEARCH AT THE LANDS COMMISSION, TOWN AND COUNTRY
PLANNING, COLLATERAL REGISTRY ETC
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CONDUCT SEARCH AT THE LANDS COMMISSION, TOWN AND COUNTRY
PLANNING, COLLATERAL REGISTRY ETC
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FIELD VISIT - LOCUS IN QUO
The purchaser must visit the site to see what is or who is on the land. This inspection is
key so you can know if the vendor is really the owner of the place.
You want to determine at this stage that there is no overriding interests in the said
property.
Your visit will show if the land is water-locked, hilly, or a valley. It could be an arid
land although it is intended for a farm. As there is no uniform measurement for a
plot of land, one could be surprised at what a vendor considers as a plot of land.
Aside the physical observation of the land and area, it will be prudent to talk to occupants
of the land or persons occupying neighbouring lands. In most situations, these people
have information on the ownership and problems affecting that land, e.g. litigation.
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FIELD VISIT - LOCUS IN QUO
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FIELD VISIT - LOCUS IN QUO
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FIELD VISIT - LOCUS IN QUO
INDICIAL OF POSSESSION
1. Building a wall
2. Planting trees –coconut, mango
3. Fencing the land
4. Placing blocks/sand on the land
When you visit the land and you see the above, you must
interrogate further to ascertain if the vendor owns the
above too,
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FIELD VISIT - LOCUS IN QUO
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GOING INTO OCCUPATION
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BACKGROUND CHECKS OF PROSPECTIVE TENANTS
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NEGOTIATIONS
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GOOD TITLE
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REQUISITIONS ON TITLE
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TIME FOR RAISING REQUISITIONS
(a) A defect going to the root of title, as if the vendor has broken or has
no means of performing the contract there will be fundamental
objection. In Want v Stallibrass (1873) LR Ex 175, the purchaser, out
of time objected that the seller/trustees had no power of sale. The Court
upheld this as a requisition going to the root of the title.
(b) A defect not revealed in the abstract, e.g. a defect which the
purchaser discovers through land charge searches.
(c) Defects which the vendor can remove independently of the
concurrence of another.
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VENDOR’S REPLIES
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EXCHANGE OF CONTRACTS
The vendor’s solicitor’s duty is to prepare a draft contract after being satisfied of
the results of the searches and enquiries. Before he can do this he will need to
obtain the title deeds from the vendor. The contract should contain:
a) a description of the property
b) a statement whether the title is freehold or leasehold
c) details of anything affecting or benefiting the property e.g. easements or
covenants
d) the condition on which the property is to be sold
If the title is registered, the vendor’s solicitor will apply to the Land Registration
Division of Lands Commission for copies of the entries on the registration. The
copies of the draft contract are forwarded to the purchaser’s solicitor for approval
together with evidence of the vendor’s legal title. Once the purchaser’s solicitor
has approved the draft contract he will return a copy to the vendor. Each party
then signs the respective part in readiness for exchange.
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EXCHANGE OF CONTRACTS
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EXCHANGE OF CONTRACTS
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COMPLETION
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POST COMPLETION
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POST COMPLETION
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END
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