The Legal Regime for Real Estate Network Marketing In Nigeria
Real Estate Network Marketing is a relatively new business (about a decade old) in Nigeria as only few players have understood the game and are currently playing it. This may be because several persons and institutions do not have the underlying knowledge about the meaning and nitty-gritty of Real Estate Network Marketing, its workings and how to profit from it. The model was pioneered by the first & foremost real estate information, network marketing and development company- the PWAN Group which has come to be widely accepted and adopted in the sector.
Real Estate Network Marketing can be easily defined by dividing the phrase into two parts: ‘Real Estate’ and ‘Network Marketing’. Real Estate, according to Investopedia, is the land with any permanent improvements attached to the land, whether natural or man-made- including water, trees, minerals, buildings, homes, fences and bridges. It is different from ‘personal property’, which are things not permanently attached to the land such as vehicles, boats and so on. There are several categories of real estate: residential, commercial, industrial and so on. Network Marketing, on the other hand, is, according to Entrepreneur.com, a type of business model in which a distributor network is needed to build the business. Usually such businesses are also multilevel marketing in nature in that payouts occur at more than one level. This means that an arrangement is made where a merchant pays commission to a promoter or marketer for sales generated from their referrals. Together, Real Estate Network Marketing can be said to be a type of business model in which a distributor network is needed to grow the business of sale of landed properties (lands and buildings).
While Network Marketing is not new to Nigeria, as several business outfits have started business in Nigeria through distributor network, not many have applied this business model in the business of buying and selling of Real Estate. As a result of the lack of general interest, understanding and practice of Real Estate Network Marketing in Nigeria, there are few legislations regulating that aspect of business and none has been specially drafted and passed into law for the sake of Real Estate Network Marketing.
Nevertheless, Real Estate is regulated by several laws such as the Constitution of the Federal Republic of Nigeria, 1999 and the Land Use Act of 1978. The Constitution of the Federal Republic of Nigeria, 1999 specifically guarantees the right of every Nigeria to own and acquire real property in any part of the country. Section 43 of the constitution states that:
The constitution is the grundnorm (the genesis and root) of all the laws in Nigeria and the Land Use Act is the law that primarily regulate land ownership in Nigeria including the sale, acquiring and lease of such landed property. The Act states that all lands, with some exception, in a state are held in trust by the Governor of the State for the citizens of that state. For this reason, the occupants of the state have several rights over land in Nigeria. This includes: Right of
Occupancy to occupy a land for 99 years, from the time the act was passed into law, before it reverts back, in trust, to the Governor of the state. Other rights are Easements, Assignment and so on. Apart from the Land Use Act, individual States can draft and pass into law several legislations in order to regulate real estate in their respective state. Such laws could refer to the dues expected to be paid on land and the process of divesting interest on land to others. In Lagos for example, the Land Registration Law Cap L41, 2015 and the Land Use Charge Law 2020 have been passed into law. However, the laws passed by the State must not be incompatible with the Constitution and the Land Use Act but an extension.
From the laws stated above and some additional laws and practices, the relationship between a seller and a buyer of land, after the due diligence has been done, sale and execution of title documents have perfected, include the registration of title by the buyer, obtaining governor’s consent and so on. It is important that a sale or change in interest in land is registered with the adequate department in the State’s Ministry of Lands (most times, the department is the Bureau of Lands) where the land is located, as this serves as part of the history of the land and prevents anyone who did due diligence from the possibility of falling into the hands of fraudulent persons.
The fundamental right of freedom of association is at the heart of the Real Estate Network Marketing model where a group of persons (Juristic and Natural) associate for the purpose of trading in and profiting from real estate. For the Real Estate Network Marketer, there is need to obtain license to carry out their business in Nigeria. The body empowered by law to grant such license is the Corporate Affairs Commission as it is the body that registers all legally recognized forms of business entities in Nigeria. For a Real Estate Network Marketer to obtain adequate license in Nigeria, the marketer must either apply to register as a company or a business name, though, with the amount of obligations and liabilities involved in
“Subject to the provisions of this Constitution, every citizen of Nigeria shall have the right to acquire and own immovable properly anywhere in Nigeria”.
Real Estate Network Marketing, it is preferable to register as a company. Individual states have several bodies that are involved in the registration of a company apart from the CAC. In Lagos, legislation like the Partnership Law of Lagos State, 2009 is involved in the regulation and registration of the Limited Partnership and Limited Liability Partnership in the state. The Lagos State Real Estate Regulatory Authority (LASRERA) is equally saddled with the statutory responsibility of regulating the real estate sector including registration and renewal of licence of real estate organizations and allied agents.
Real Estate Network Marketing involves a lot of persons who are called partners, advertisers, marketers or given some other nomenclature. Whatever they are called, they are working for the Real Estate Network Marketing Company and as such, the Labour Law of Nigeria will depending on the specifics of each system apply. The first issue to be determined in the application of Labour Law to the business outfit is to determine whether the relationship between the business outfit and its workers is that of the Master-Servant (Employer-Employee) Relationship or that of an Independent Contractor.
Taxation of the Network Marketer is legitimatized by several legislations such as the Companies Income Tax Act (CITA), the Capital Gains Tax, Value Added Tax, Stamp Duty and so on.
Other laws that the Real Estate Network Marketer should be abreast of are the Nigerian Urban and Regional Planning Act, Regional Planning Laws, National Environmental Standards and Regulations Enforcement Agency Act (NASREA), The Environmental Impact Assessment Act. There is also the need to obtain licenses or permits before development can take place on a land such permit include the Building permit and the Development permit.
Lagos State has been in the forefront of creating legislations that regulate Real Estate in the Nigeria. In 2015, the State passed into law the Lagos State Estate Agency Regulatory Law Cap 128, Laws of Lagos State. This law, in order to ensure due compliance to its regulations, created the Lagos State Real Estate Agency Regulatory Authority (LASRERA). LASRERA has been radical in developing and creating rules and regulations with regards to real estate in the State and for accountability and compliance purpose, the authority, in 2020, released registration requirements for Real Estate Practitioners in Lagos State.
Some of the requirement for registration include: Evidence of registration with the Corporate Affairs Commission, Means of Identification, Operational Office Address and Minimum Academic Qualification (Senior School Certificate Examination). So, in Lagos, only those who have duly registered with the LASRERA can carry out their business legally. This registration is extended to Real Estate Network Marketers too as their business is covered by the functions and powers given to LASRERA by the Lagos State Estate Agency Regulatory Law.
Another body which has gained recognition in the Real Estate sphere in Nigeria is the Real Estate Developers Association of Nigeria (REDAN). It is the principal agency and umbrella body of the organized private sector responsible for housing development in Nigeria. Being a body that accommodates Real Estate Practitioners and Marketers in
Nigeria, it has legitimacy to create regulations that have the underlying notion of protecting its members and ensuring progress of its members.
Several legal frameworks that affect or regulate the Real Estate Network Marketers in Nigeria have been examined but there are several other legislations that may directly or indirectly regulate Real Estate Network Marketing in Nigeria. Individual states, also, have legislations that regulate this business outfit.
There are no specialized acts or laws in Nigeria that focus majorly on Real Estate Network Marketing in Nigeria but this does not put the business outfit in a no man’s land as there are several other legislations that one way or the other regulate and affect the practice of Real Estate Network Marketers in Nigeria. Some of the legislations have been examined in this work and it has been shown that even though there is no special Act or Law focusing on Real Estate Network Marketing, it is still largely regulated by other laws in the country. The laws that currently regulate the Real Estate Network Marketers are applicable because they apply to one of the properties or attributes of the Real Estate Network Marketing business outfit. While there have been arguments for and against the network marketing model, it remains that the model has come to stay and businesses and individuals.
Most recently, the National Assembly passed a bill for the establishment of the Real Estate Regulatory Council of Nigeria. According to a November 2021 publication of the Guardian Newspaper, the bill seeks to curb fraudulent practices and ensure compliance with the National Building Code, standardise the business of real estate development by regulating the conduct of transactions in the real estate sector as well as provide enabling environment and transparency in the business of real estate development.
“For the Real Estate Network Marketer, there is need to obtain license to carry out their business in Nigeria. The body empowered by law to grant such license is the Corporate Affairs Commission as it is the body that registers all legally recognized forms of business entities in Nigeria. For a Real Estate Network Marketer to obtain adequate license in Nigeria, the marketer must either apply to register as a company or a business name, though, with the amount of obligations and liabilities involved in Real Estate Network Marketing, it is preferable to register as a company.”
Similarly, it also targets to make the business of real estate development in Nigeria conform to international best practices and safeguard the ultimate interest of all stakeholders in the business. Other objectives include, curb fraudulent practices in the business of real estate development, ensure the real estate business conforms with the National building code, create an innovative and sustainable environment to promote Nigeria as a real estate investment destination in Africa and the world.
Thought the bill had been previously denied assent by the President, it is trite law that the Federal Government is bereft of the constitutional powers to make laws outside its legislative competence, which are by implication residual matters meant for the State Assembly as held by the Supreme Court in Attorney General of the Federation and Minister of Justice vs Attorney General of Lagos and Commissioner for Justice SC. 340/2010. Hence, if and when the bill is passed and assented to, it will only be applicable to the Federal Capital Territory and to States that domesticates the “Act”.