How real estate firms, agencies fleece prospective property buyers, tenants

Fraudulent agents and developers are taking advantage of the desperation displayed by prospective homeowners and tenants to defraud their victims of billions of naira. The largely unregulated nature of the market makes these unsuspecting prospective homeowners fall prey to unscrupulous individuals, and charlatans, VICTOR GBONEGUN reports. 

United States-based Nigerian couple, Olubukola and Oluyomibo Olaniyan decided to invest in the property market at home. In early 2022, they subscribed to a three-bedroom terrace duplex residential property, owned by a popular real estate development firm at the cost of N56.7 million.

The couple made an initial deposit of N10 million, and a contract was sealed for the sale of the building, while an agreement was sent to them.

Part of the agreement was that a 50 per cent down payment must be made before the commencement of the building, and because of this clause, the couple sourced funds and completed the payment amounting to N26.45 million within the same year.

After the deposit in March 2022, the family requested an update on their property, and a lot of unfulfilled promises were made. At first, the initial completion date, which was nine months from the 50 per cent payment date got shifted to December 2022 and thereafter got moved to June 2023. Later, it was again moved to December 2023.

“Every time we visited the site or any of our representatives, there was no development on the property. On July 7, 2023, we lost hope in the firm’s empty promises, and requested a full refund because of the serial breach of the contract,” the Olaniyans said.

It took the intervention of the Lagos State government and the media before the couple recovered their money, with an eroded value due to the naira’s devaluation.

Peeved by the development, the couple vowed never to invest in the Lagos property market.

The Olaniyans are one of the many Nigerians, who have fallen victim to rising fraudulent practices in the real estate sector.

Despite increasing inflation and the soaring costs of building materials, prospective homeowners’ dreams of acquiring roofs over their heads have been dashed severally by property firms as evidenced by the sheer number of uninhabited estates in the nooks and crannies of the state.

Fraudulent acts in the sector are not only committed by charlatans and touts, but some registered professionals are also culpable as reflected in the suspension of a valuer, by the Estate Surveyors and Valuers Registration Board of Nigeria’s Tribunal for swindling one Mrs Oluwaranti Williams N3.5 million for the construction of a building, which he never did.

Williams was forced to report the matter to the regulatory body after several attempts to prevail on the suspect to, either execute the project or refund the money failed.

Over the last decade, there has been a general lack of transparency and trust in the property market, as some operators resort to sharp practices to fleece their compatriots.

Often, the perpetrators of this inglorious activity, several of whom claim to be marketing consultants, or agents with a mandate to sell property worth millions of naira in choice locations, while others specialise in renting out disputed property to as many unsuspecting prospective tenants as possible, while issuing fake receipts, as well as allocation letters.

Among tactics deployed by these scammers include misrepresenting property, locations, or amenities to lure buyers, and advertising non-existent/already occupied lands, or lands without proper titles.

Beyond these, the criminals also resort to delayed or non-delivery of the property after payment, forging documents to deceive buyers, non-execution of projects according to agreed terms, and advertising non-existent projects to collect money from unsuspecting investors in the name of off-plan sales.

For instance, on Anuoluwapo Street in the Ejigbo area of Lagos State, about 200 house seekers, who paid various sums of money for accommodation were all duped when the landlady of the one-storey building allegedly connived with an agent to perpetrate the fraud. The landlady was said to have directed the prospective tenants to the agent for payments after they enquired about the building.

Minister of Housing and urban development, Ahmed Musa Dangiwa

Unfortunately, when the victims got to the house, they discovered that the number of tenants outnumbered the available 14 flats. It was gathered that the prospective tenants paid various sums ranging from N300,000 to N500,000.

After the illicit haul, the agent vanished into thin air, and all his phones switched off. The matter was later reported to the police for investigation.

The list of defrauded house seekers in Lagos State also includes 113 in Akoka, who were swindled of over N51 million, 66 in Gbagada, who were defrauded of about N16 million, as well as victims in Alapere and Ajao Estate who paid between N200, 000 and N500, 000 for 20-unit apartments.

Away from Lagos State, the Economic and Financial Crimes Commission (EFCC) recently arraigned a property developer on a four-count charge that bordered on obtaining money by pretense, forgery, and using false documents in Abuja.

The convict and the property firm were arraigned for fraudulently obtaining the sum of $298,000 and N48 million from another property firm under the pretext of being the beneficial owner of Plot 1721, Jahi District, Cadastral Zone. The culprit was eventually tried and sentenced to 24 years in prison.

In Ogun State, more than 30 people have lost millions of naira to fraudulent estate agents in six years. A prominent case was that of one Mr Ikoni, who was subsequently arrested, charged, and sent to jail for defrauding nine accommodation seekers of about N3.9 million.

He collected various sums of money from different people, ranging from N750,000, N500,000, and N490,000 from nine persons totaling N3.9 million, promising to provide them accommodation, which he failed to do. He did not refund their money but converted the fund to personal use.

Down South, specifically in Rivers State, the story is not different as property scams have grossed close to N100 million in the last two and half years. One major case was an attempt to swindle a victim of the sum of N25.4m proceeds of property sale, and N16,200 m in an attempted sale of land belonging to another person by an estate agent.

A 2020 report by the Civil Society Legislative Advocacy Centre (CISLAC), an affiliate of Transparency International (TI) listed cities such as Abuja, Lagos, and Port Harcourt, as locations where high-level capital flights take place, adding that the real estate sector has long provided opportunities for persons and companies to launder illegally acquired funds.

Apart from the EFCC, the Independent Corrupt Practices and Other Related Offences Commission (ICPC) is also handling several property-related scams. Checks revealed that there are close to 1,000 such cases pending with the EFCC.

The ICPC recently revealed that it recovered about N53 billion from one of such developers, who took money from housing subscribers without providing the residential houses promised.

Worried by the rising spate of property scams, the Lagos authorities established the State’s Real Estate Regulatory Authority (LASRERA). The law setting up the outfit was swift due to reported/increasing cases of fraud in the sector, and the compelling need to put an end to the fraudulent and unscrupulous practices.

The Special Adviser to Lagos State Governor on Housing, Barakat Odunuga-Bakare, said: “We have received over 1,577 petitions from the inception of the agency in 2020 till date, and we have been able to resolve 1,027, and we have eight cases in court concerning real estate fraud.

Odunuga-Bakare, who doubles as the Head of LASRERA expressed worries that the sector is polluted with bad eggs and stressed the need for brokers, developers, agents, and realtors to register with authorities to sanitise the real estate sector.

She said the agency intervened in the alleged N40 million-land scam involving one Mr Kayode Oladipo, and a real estate firm, RevolutionPlus Limited. The outcome of the whole issue, she noted, exemplifies the government’s commitment to transparency and zero tolerance for fraudulent activities.

A recurring decimal
HOMEOWNERSHIP is one of the three basic human needs essential for daily survival, and healthy living besides food and clothing.

According to the Association of Housing Corporation of Nigeria (AHCN), Nigeria earned 25 per cent in homeownership when compared to Kenya’s 75 per cent, South Africa’s 70 per cent and Brazil’s 74 per cent.

Access to affordable housing is beyond the reach of Nigerians as figures also point to over 23 million affordable housing deficits in the country.

To date, the housing situation remains scary in the country as reflected in the arrest of dozens of occupants of an “86-room under bridge apartments, in Dolphin Estate Bridge, lkoyi. The tenants allegedly paid about N250,000 per person as yearly rent to one self-acclaimed landlord.

Many of the people who dreamt of owning homes have had their dreams shattered at both the lower and middle cadre of society due to the high cost of building materials, infrastructure, labour cost, lack of access to home finance, affordable mortgages, and an expanding population estimated at over 228 million.

But despite these numerous challenges, Nigerians are increasingly desperate to have a roof over their heads. It is this desperation that pushes many into nets cast by fraudsters who parade as estate agents and developers.

It is generally believed that the consequences of not using the right professionals for any property transaction are sky-high. However, it is also common knowledge that multi-billion-naira transactions involving known professionals or estate agents can also go the wrong way as reflected in some known cases.

A common narrative by most victims of property fraud is that at the initial stage of the transaction, they trusted the developers, or estate agents perhaps due to their professional reputation, appearance, or credentials.

Industry experts are of the view that most times property buyers and investors fail to carry out adequate research on developers, property of interest, and the real estate market before making payments for such property.

To them, most perpetrators of fraud make unrealistic promises about returns, and appreciation, to lure victims, and in many cases, they fall for the unrealistic promises.

Victims are generally swayed by the promise of quick profits or high returns, while neglecting the warning signs, as well as the refusal to seek legal advice and indulge in due diligence before signing contracts or making payments.

Oftentimes also, real estate sales canvassers and developers deploy high-pressure sales tactics to convince buyers to make decisions on their feet and commit to buying property without fully understanding the terms.

An estate surveyor and valuer, Mr Abidemi Ojo, who cautioned against branding all developers as dubious, however, warned that there are red signals that prospective property investors or subscribers must watch out for.

He said by nature some people in the business have dubious intentions, while some others who end up floundering often bite more than they can chew, adding that the menace can be reduced through stringent application of regulations, but might be difficult to do away with stop because it has become a part of the society.

Ojo said: “Some developers are new in the business, so, they lack funds to develop, and have to wait for subscribers’ funds, as off-takers. It is the off-takers fund that they use to continue their development. But some of them are not sincere. Once they collect the funds from subscribers, instead of using it to develop the projects that they promised, they divert it to buy dollars.”

He emphasised that professional bodies need to take the bull by the horns, adding that what is needed is strict regulation as the practice has become an all-comers affair.

“An investor must be able to look at the financial strength of the company that he is investing his money. It is just for the company to supply the proof of funds that it has the money to do a project either by loan, or others. This could entail a letter from the bank. They should ask if the project is insured for unforeseen circumstances. As an investor, you must see the insurance that covers the project, and ensure that there are no encumbrances whatsoever,” he said.

Furthermore: “A subscriber can search for the firm that he wants to buy a property from, through the Corporate Affairs Commission (CAC) to know who the directors and members of the board of directors; whether they have integrity, are trustworthy, and the length of time that they have spent in real estate business. It is also important to find out whether they are still listed in CAC, their pedigree, as well as whether they make yearly returns to the government.

“This might look too strict, but that is where we have found ourselves in the country. If a developer is new in the business, there must be an assurance that investors’ money is secure through indemnity insurance to refund in case something goes wrong,” Ojo said.

A professional builder, Akingbade Adekola, argued that a lack of knowledge and experience about contracts, and legal procedures is making more property investors and subscribers vulnerable to fraudulent real estate agents and developers.

He also affirmed that clients may feel pressured to make quick decisions, especially in real estate transactions, which can lead to overlooking red flags or failing to conduct due diligence.

“Regulatory bodies may not be effective in monitoring and enforcing real estate laws and regulations, thereby allowing fraudulent activities to go undetected. Subscribers need to adequately verify agents’ credentials and reputation before remitting funds for any property,” he said.

A call to action for regulators, professionals
TO the Chief Executive Officer of Trustcrow Limited, Mr Joe Orji, regulators and professional associations should play a proactive role in establishing and enforcing policies that safeguard the interests of all stakeholders in real estate transactions.

These policies, he said, should prioritise transparency, accountability, and risk mitigation. “By implementing robust verification processes such as leveraging technology for title searches and authentication, we can reduce the likelihood of fraudulent transactions and provide assurance to buyers, sellers, and other parties involved,” Orji said.

He argued that the establishment of intermediaries to handle payments until title transfers are done can greatly reduce payment risk.

“These intermediaries can ensure that funds are securely held in escrow until all conditions of the transaction are met, giving both parties peace of mind and minimizing the potential for disputes or financial loss. Additionally, regulators and professional associations should focus on promoting education and awareness among stakeholders about their rights and responsibilities in real estate transactions. This can help empower individuals to make informed decisions and protect themselves from potential risks or scams,” he said.

Orji said that by working collaboratively with regulators, professional associations, and industry stakeholders, a more resilient and trustworthy ecosystem that fosters confidence and prosperity for all can be built.

The immediate past President of the Real Estate Developers Association of Nigeria (REDAN), Dr Aliyu Wamakko, said that the association has zero tolerance for shoddy and unprofessional dealings from registered and non-registered members.

“As for our members, they are under our radar as they have signed our Code of Conduct to transact business with due diligence and to adhere to structured guidelines. We can categorically state that most of them are compliant and not involved in under-the-table deals,” he said.

According to him, for this category of unregistered members, REDAN cannot vouch for their behaviour, alleging that these are those who are mainly involved in nefarious dealings.

He disclosed that the association has helped members of the public to recover their monies or houses noting: “Any member of the public that has any problem with our members or non-members that relates to housing business ownership, our doors are open, and we will do the needful to help by recovering them. We also have zero tolerance for quackery. That is why our code of conduct has clauses for compliance. We are determined to clean the housing development and real estate ecosystem from fraudulent operators,” he assured.

Wamakko said REDAN has a robust relationship with the Nigerian Financial Intelligence Unit (NFIU). Thus, members are obliged to report any suspicious transactions relating to housing and real estate transactions, while our members also report sales transactions above the approved threshold of SCUML for Anti-Money Laundering and Counter-Terrorism Transactions.

He added that the association also has a relationship with the ICPC and the EFCC.

The Vice Chairman of the Nigerian Institute of Architects (NIA) Lagos chapter, Mr Biodun Fatunyi, blamed the rate of fraudulent practices in the industry on the level of corruption in the country.

While acknowledging the existence of laws that guide against such illicit activities, he regretted that the government seems not to have been enforcing its laws diligently.

According to him, in professions across the world, including Nigeria, there are governing laws that stipulate how a professional should act; how they should be paid, and how the client should engage them.

“We also have these laws in Nigeria but what is lacking is stringent implementation or enforcement of these laws. It is only in Nigeria that a client is willing to buy 10 trucks of cement, but not willing to pay the person that will make the structure, or the building habitable. The issue of fraud is centred on the clients as there is a standard of practice required from the professionals.

Fatunyi advised prospective homeowners to relate with professionals noting:  “A professional that takes money from the client and does not deliver the property should go to jail, or have his/her practice license withdrawn. A client that doesn’t pay must also not expect a property.”

On his part, Ojo, an estate surveyor and valuer, added: “All professionals in the building industry need to come up with a blueprint on ways to stop fraudulent practices in real estate transactions.”