The Conveyancing Transaction: Pre-Contract Stage

Introduction:

Prior to a purchaser agreeing to be part of a contract for the transfer of an interest in land, various checks and due diligence are conducted. These checks and due diligence form part of the pre-contract stage of a conveyancing transaction and are discussed in this note.

Outline:

The following enquiries and searches should be conducted by the solicitor of a prospective purchaser:

1. Verify the identity of the vendor.
2. Get the vendor to prove title.
3. Evaluate documents of ownership.
4. Make requisitions on title.
5. Conduct searches at
6. Lands Commission.
7. Land Use and Spatial Planning Authority.
8. Collateral Registry.
9. Registry of the Courts.
10. Field visit.
11. Go into occupation.

These are now discussed.

1. Verify the Identity of the Vendor:

A. What to Do:

The solicitor of the purchaser will often obtain the identity card of the vendor, such as a Ghana Card or a passport. He may also visit the land and make enquiries as to the identity of the vendor. For instance, he can ask adjoining landowners whether they know the vendor.

B. Purpose and Benefits:

Verifying the identity of the vendor has the following benefits:

1. Ensure that the identity provided by the vendor matches the details on the land documents. If it does not, it could mean the vendor does not have the interest he is seeking to convey, in which case the purchaser will not obtain any interest (unless the vendor is acting as agent for the real owner).
2. To determine whether the vendor qualifies to convey the interest. For instance, in Article 266 of the Constitution, 1992, it is provided that “No interest in or right over any land in Ghana shall be created which vests in a person who is not a citizen of Ghana a leasehold for a term of more than fifty years at any one time.” Consequently, if investigation of the identity of the vendor reveals that he is a non-citizen but has a leasehold interest of more than 50 years, the purchaser ought to be aware that the interest of the vendor may have been nullified, having been acquired in contravention of Article 266.  
3. To facilitate tracing the vendor in cases of fraud. In Ghana, it is not uncommon for a person to falsely lay claim to land and obtain payment from an unsuspecting purchaser. Where the purchaser has verified and documented the identity of the vendor, a report may be made to the police and the vendor may be more easily traced.

2. Get the Vendor to Prove Title:

A. What to Do or Get the Vendor to Do:

The vendor must be made to prove that he has good title to the land. Under Section 64 of the Land Act, 2020 (Act 1036), good title is derived from

1. an enactment;
2. a grant, vesting order or conveyance from the State;
3. a final judgment of a court of competent jurisdiction; or
4. a grant, an acquisition under customary law, conveyance, assignment or mortgage which is at least thirty years old and establishes that a person is entitled to convey an interest in the land.

To prove he has title, the vendor must,

1. In the case of registered land, produce a land certificate.
2. In the case of unregistered land, produce an abstract of title.

i. Land Certificate—For Registered Lands:

Presently, under Act 1036, the land certificate is issued by a Land Registrar. Among others, it contains the following:

1. The nature of the interest held by the person to whom the certificate is issued (whether leasehold, freehold, etc.)
2. Description and identification of the land.
3. Encumbrances, liens, interests, etc. to which the land is subject.
4. Date of registration.
5. Certificate number.

Below is an illustration of a Land Certificate.

Prior to the issuance of the certificate to the registered owner, an entry is made into the land register. Per Section 111(1) of Act 1036, “an entry in the land register shall be conclusive evidence of title of the holder of the interest specified in the land register.”

ii. Abstract of Title—For Unregistered Lands:

In Black’s Law Dictionary, 9^th ed., abstract of title is defined as

A concise statement, usu. prepared for a mortgagee or purchaser of real property, summarizing the history of a piece of land, including all conveyances, interests, liens, and encumbrances that affect title to the property. Also termed brief; brief of title

In the case of Joseph v. Boakye [1977] 2 GLR 392, the court characterised an abstract of title as follows:

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 (20 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 incumbrances”

…

Kindersley V.C. also conceived it to be an informal document meant to serve a definite purpose. In Oakden v. Pike (1865) 34 L.J.Ch. 620 at p. 622 he gave expression to his view of an abstract in those words:

“Now, I apprehend that an abstract is delivered whenever a number of sheets of paper, call it what you will, whenever a document is delivered to the purchaser, which contains, with sufficient clearness and sufficient fullness, the effect of every instrument which constitutes part of the title of the vendor, and that is a delivery of the abstract, even though, it takes place, as it must, I apprehend in all cases take place, before the actual comparison of the abstract with the deeds themselves, which they purport to abstract.”

The court clarified that the law does not lay down the particular form for the abstract of title. What is important is for the abstract of title to contain the instruments and events by which the vendor claims to be entitled to the property.

Below is an illustration of an abstract of title:

Note that the vendor must produce all the evidence that is necessary to prove the statements contained in the abstract of title.

B. Purpose and Benefits:

It is essential for the purchaser to be satisfied that the vendor has good title or is representing a person with good title. Without a good title, a purchaser cannot obtain a good title.

However, it should be noted that a vendor may be unwilling to prove his title unless he is satisfied that the purchaser will complete the transaction. Accordingly, the vendor may defer proving his title until after a contract for the transfer of the interest in land has been duly executed between the parties.

3. Evaluate the Documents of Ownership (if Provided):

A. What to Do:

After the vendor produces his land certificate or abstract of title, they must be evaluated for authenticity and accuracy.

Among others, the solicitor of the purchaser must ensure that the site plan is consistent with the description of the land in the instrument that granted title to the vendor. This instrument could be a conveyance, a lease, an assignment, or a sublease.

B. Purpose and Benefits:

The evaluation of documents of ownership serves several important purposes. First, it enables the purchaser’s solicitor to confirm that the vendor’s title is genuine and that the documents relied upon are not forged, altered, or otherwise defective. This is particularly important in light of the prevalence of fraudulent land transactions.

Second, it ensures that the vendor is conveying the same interest and the same parcel of land as that described in the title documents. Consistency between the site plan and the operative instrument helps to prevent disputes relating to boundaries, location, or the extent of the land.

4. Make Requisitions on Title (if Abstract of Title is Provided):

After examining the title, any doubts or objections to the title should be raised with the vendor’s solicitor by means of a written enquiry. This is known as a requisition on title, and will be discussed in subsequent notes.

5. Conduct Searches and Enquiries:

The solicitor of the purchaser must conduct searches at the following places:

i. Lands Commission:

The solicitor will submit the site plan of the land to the Lands Commission for a consolidated search. It is advised that the site plan that is presented to the Lands Commission be one that is prepared by the surveyor of the purchaser, as fraudsters may provide the purchaser with a site plan that does not relate to land intended to be purchased.

Formerly, a search at the Lands Commission produced three separate reports from the Public & Vested Land Management Division, Land Registration Division, and Survey & Mapping Division. Since 2021, the Lands Commission produces a consolidated search report consisting of information from these three divisions.

ii. Court Registry:

It is essential to determine if there is pending litigation involving the land intended to be purchased. If there is a pending action challenging the title of the vendor, the purchaser may decide to wait until the determination of the action or abandon the plan to purchase the land.

iii. Land Use and Spatial Planning Authority:

The Land Use and Spatial Planning Authority was established under the Land Use and Spatial Planning Act, 2016 (Act 925). Per Section 3, the objects of the Land Use and Spatial Planning Authority are to

1. provide for sustainable development of land and human settlements through a decentralised planning system;
2. ensure judicious use of land; and
3. enhance the attainment of Ghana’s decentralisation programme and in particular create an enabling environment for District Assemblies to better perform the spatial planning and human settlements management functions.

It is important to conduct a search at the Land Use and Spatial Planning Authority for the following reasons:

1. To find out if the land being acquired has been zoned for a particular purpose (such as road construction, markets, drains, among others). Per Section 4(u) of Act 925, a function of the Authority is to “ensure the creation of appropriate zoning schemes and also prevent encroachments or breach of zoning schemes.” In Section 84(2) of the Act, it is provided that the District Assembly shall ensure that “buildings and other structural and infrastructural developments in the district conform to the zoning scheme incorporated in the structure plan.” Where a physical development does not comply with a zoning scheme, Section 99(1) of the Act allows a person to lodge a complaint at the District Assembly against the development. Upon receipt of the complaint, Section 99(2) allows the District Assembly to suspend the development.
2. Failure to ensure that the land is zoned for the purpose for which it is being acquired amounts to an offence. In Section 96(4) of Act 925, it is provided that “A person who lets or enters into an agreement relating to land use commits an offence if that person does not have evidence that the premises is zoned for the purpose of the transaction entered into.” In Section 96(5)(b), it is provided that “A person who lets or enters into an agreement relating to land use commits an offence if that person does not have evidence that the premises is zoned for the purpose of the transaction entered into.”
3. Contravention of a zoning scheme amounts to an offence. In Section 102, it is provided that “A person who contravenes a zoning scheme commits an offence and is liable on summary conviction to a fine of not less than one thousand penalty units and not more than three thousand penalty units or to a term of imprisonment of not less than four years and not more than six years or to both.”

iv. Collateral Registry:

When a person enters into a credit agreement with another person, he is often required to provide collateral to guarantee the fulfilment of his obligations under the credit agreement. In the event of default, the collateral can be realised (sold).

Where a person provides collateral to another person, a security interest is created in favour of that person. In Ghana, security interests are registered with the Collateral Registry established under Section 18 of the Borrowers and Lenders Act, 2020 (Act 1052). Where a security interest is so registered, Act 1052 allows a lender to sell the collateral in the event of the borrower’s default.

In purchasing land, it is therefore important to confirm if the land is subject to any security interests by conducting a search at the Collateral Registry.

6. Field Visit:

A. What to Do:

It is important to visit the land that is being purchased to inspect it.

B. Purposes and Benefits:

1. To determine if the site is appropriate for the purchaser’s use. The land may be waterlogged, hilly, or a valley.
2. To determine if the land is currently under occupation. If there are buildings on the land, for instance, it may be evidence that the land has already been sold to another person. Where that is the case, the purchaser will not be a bona fide purchaser for value without notice if he continues with the purchase. In the case of Amuzu v. Oklikah [1997-98] GLR 89-143, the defendant had paid part of the purchase price of a piece of land and was in occupation. The plaintiff purchased the land and proceeded to register his conveyance with the lands registry. He instituted an action for declaration of title to the land and for an order of ejectment against the defendant. At the Supreme Court, their lordships held that the plaintiff knew that the defendant had already made payment in respect of the land and had reached an agreement with the vendor to buy the land. He therefore knew of the equitable interest of the defendant and the fact that the vendor was acting fraudulently. They stated that “Where a party has actual notice that the property was in some way encumbered, he would be held to have constructive notice of all that he would have discovered. In the instant case, since the respondent admitted that prior to the sale of the property to him he was aware that the house was being occupied by persons other than the vendor, he was in duty bound to investigate fully the title of the vendor. Failing such investigation before purchasing the property, he must be deemed in equity to have had notice of all that a reasonably prudent purchaser would have discovered. He cannot be said to be an innocent purchaser for value without notice.” In that case, the defendant had paid part of the purchase price and was in occupation.
3. To talk to adjoining occupants to ascertain and confirm the identity of the owner of the land (this may or may not turn out to be the vendor).
4. To determine if co-tenants will constitute a nuisance or pose security threats.

7. Go into Occupation:

The purchaser may build a wall or construct some structure on the land. The purpose of this is to provoke attention on the land. If another person has already acquired the land, going into occupation will provoke that person to challenge the purchaser’s acts of occupation.