The blogger ibikunle Abraham laniyan also Group CEO at Midland Cosmos Ltd entertains advise from special adviser on Real Estate.He thereby publishes them for readers and investors perusal.Note however is optional and not mandatory.
To use a family asset as collateral for your company’s loan in Nigeria, you do not simply place a "lien" on it yourself. Instead, you must guide the asset owner and the lender through a structured legal process to create a Tripartite Legal Mortgage or a Tripartite Security Agreement.
Because the asset belongs to a third party (the family or an individual family member) and the loan benefits a separate entity (your company), the asset owner must legally agree to act as a Guarantor/Surety.
Step 1: Secure Absolute Family Consent
Before involving a lender, you must resolve the internal ownership structure of the asset.
Identify the true owner: If the asset is a landed property, verify whose name is explicitly on the Certificate of Occupancy (CofO) or registered title deed.
Execute a Family Resolution: If the asset is jointly owned or family land, all principal family members must sign a formal family resolution consenting to use the property as collateral.
Draft a Letter of Consent: The registered owner(s) must write a formal Letter of Consent explicitly stating they agree to use the specific asset to secure a loan facility for your company.
Step 2: Structure the Tripartite Agreement with the Lender
Once the bank or lender approves your company's loan application, their legal team will draft the security documents. This involves three distinct parties:
The Borrower/Debtor: Your Company.
The Lender: The Bank or Financial Institution.
The Mortgagor/Surety: The Family member(s) owning the asset.
The specific legal document depends on the asset type:
For Real Estate/Landed Property: A Deed of Tripartite Legal Mortgage is executed.
For Stocks/Shares: A Tripartite Lien Agreement is filed with the Central Securities Clearing System (CSCS) to move the family shares into a reserved lien account.
For Cash Deposits/Funds: An Authority to Exercise Right of Lien and Set-Off is executed with the holding bank.
Step 3: Perfect the Security Interest (Crucial for Real Estate)
If you are using landed property, the lender will require the mortgage to be "perfected" to make the lien legally enforceable against third parties. This involves three sequential statutory phases:
Obtain Governor’s Consent: Under the Land Use Act, you must apply to the Ministry of Lands in the state where the property is located to get the Governor's official consent for the mortgage.
Pay Stamp Duties: The executed Deed of Tripartite Mortgage must be taken to the Federal or State Inland Revenue Service to be stamped, and statutory stamp duty fees must be paid.
Register at the Land Registry: The stamped documents are officially registered at the State Land Registry Office.
Step 4: Register the Charge with the CAC
Because a limited liability company is the borrower, the Corporate Affairs Commission (CAC) mandates that any charge or mortgage created over assets to secure a company loan must be registered within 90 days of its creation.
Log into the CAC Intelligent Company Registration Portal (iCRP).
File a Notice of Charge (Form CAC 9).
Upload the certified copy of the stamped Deed of Tripartite Mortgage and the company’s board resolution authorizing the borrowing.
Pay the filing fee (capped at 0.35% of the secured loan amount for private companies under CAMA).
Failure to register this charge with the CAC within 90 days renders the security void against liquidators or other creditors.
Critical Risks & Blind Spots to Consider
Risk Factor
Impact Mitigation Strategy
Foreclosure on Default If the company defaults, the lender has the legal right to sell the family asset without the family's further permission. Maintain a strict debt-service reserve or key-man insurance to protect the business cash flow.
Lengthy Perfection Times Getting Governor's consent and perfecting land titles can take months. Ask the lender for a bridging loan backed by an equitable mortgage (depositing original deeds) while perfection is ongoing.
CAMA Compliance Failing to register the charge with the CAC within 90 days makes the entire loan balance immediately payable. Ensure your company secretary or legal counsel prioritizes the CAC filing immediately after signing the deed.
To ensure this transaction proceeds smoothly and cleanly, it is highly recommended to engage a property and commercial lawyer in Nigeria to review the deed before any family member signs.
This is a classic real estate structuring challenge. You are trying to use a low-risk, high-value asset in Ogbomosho as "bridging collateral" to buy land in Lekki, with the intention of shifting the debt burden to the Lekki project once it starts generating value.
Because this involves a non-interest (Islamic) mortgage, the rules are very strict. Non-interest lenders (like Jaiz Bank, Taj Bank, or Lotus Bank) do not just look at "collateral"; they look at the underlying contract (Akd). They cannot simply give you cash to buy land while holding a factory as a lien.
Here is a step-by-step strategic guide on how to structure this transaction to protect your family factory while securing the ₦100 Million.
1. The Hard Truth About Non-Interest Financing
In non-interest banking, money cannot be rented out for interest. Therefore, the bank will not give you ₦100 Million cash to go buy land. Instead, they will use one of two structures:
Murabaha (Cost-Plus Sale): The bank will buy the Elerangbe land directly from the vendor for ₦100 Million and resell it to your company at a profit (e.g., ₦120 Million), allowing you to pay in installments.
Istisna'a (Manufacturing Contract): This applies later for the ₦2 Billion construction phase, where the bank funds the building process progressively.
2. How to Structure the Collateral "Swap" (The Factory to Lekki Shift)
Your goal is to use the Ogbomosho factory temporarily and release it later. To do this, you must explicitly negotiate a Substitution of Collateral Clause in your initial offer letter with the bank.
[Phase 1: Buy Land] -----> [Collateral: Ogbomosho Factory (Deed of Tripartite Mortgage)]
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(Construct & Build Equity in Lekki)
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[Phase 2: Project Growth] --> [Collateral Swap: Register Charge on Elerangbe Land]
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[Phase 3: Factory Released] -> [Ogbomosho Asset Returned safely to the Family]
Step A: Presenting the Ogbomosho Factory First
To buy the land now, the bank needs immediate security. You will use the Ogbomosho factory as a Tripartite Mortgage.
The Catch: Because the factory is in Ogbomosho, Oyo State, the bank will discount its valuation compared to Lagos property. Ensure the factory's open market value is worth at least ₦150 Million to ₦200 Million to comfortably cover a ₦100 Million facility.
The Family Protection: Write a MOU (Memorandum of Understanding) between your company and the family. The MOU must state that the company will indemnify the family and that the factory will be substituted within a specific timeframe (e.g., 12 to 18 months).
Step B: Executing the Collateral Substitution
Once the Elerangbe, Lekki land is purchased and the title is processed, or once construction begins and the estate gains value, your lawyer will trigger the Substitution Clause:
You will present the Registered Title/CofO of the Elerangbe (Lekki) property to the bank.
The bank will evaluate the Lekki land. If its value matches or exceeds the outstanding loan balance, the bank's legal team will draft a Deed of Release for the Ogbomosho factory.
The lien on the factory is lifted, and a new charge is registered on the Lekki estate.
3. How to Protect the Factory from Being Sold
To guarantee the family factory is never sold, you must structure the repayment of the ₦100 Million using early cash flows from the Lekki estate, rather than waiting for all 50 housing units to be fully built.
Off-Plan Sales (Pre-construction): Do not wait to finish building before selling. Sell the 50 units "off-plan" at the land/foundation stage. Use the initial 10% to 20% deposits from early buyers strictly to pay off the bank's ₦100 Million facility.
Escrow Account: The non-interest bank will likely mandate an escrow account where all off-plan sale proceeds are deposited. The bank will automatically deduct their monthly or quarterly repayment slice and release the remainder to you for construction. This guarantees the factory is never touched.
4. Legal & Regulatory Roadblocks to Watch Out For
Milestone
Ogbomosho Factory (Oyo State) Elerangbe Estate (Lagos State)
Title Perfection Must have a valid CofO or registered Deed or Land Registry conveyance in Ibadan. Ensure the land has a clean Excision or CofO. Lekki land faces heavy government acquisition scrutiny.
Governor's Consent Required from the Oyo State Ministry of Lands to place the bank's lien. Required later when swapping the collateral to the Lagos State Government.
CAC Registration The ₦100M charge must be registered at the CAC against your company within 90 days. The substitution (swapping the factory for Lekki) must also be filed at the CAC later.
Summary Action Plan
Request a Murabaha Facility from the non-interest mortgage lender specifically for land acquisition.
Insist on a "Collateral Substitution Clause" in the loan term sheet.
Get the Family Resolution signed for the Ogbomosho factory, explicitly stating it is a temporary bridging security for a maximum of 18 months.
Launch Off-Plan Sales immediately after securing the Lekki land to clear the ₦100 Million debt and free the factory.
To give you more specific legal and financial guidance, could you share:
Does the Ogbomosho factory have a registered Certificate of Occupancy (CofO) or an old registered conveyance?
What is the current zoning/title status of the Elerangbe Lekki land you want to buy (e.g., Freehold, Gazette, Excision, or Global CofO)?
Has the non-interest bank given you an official term sheet yet, or are you still in the verbal negotiation stage?
This is excellent news. The bank manager is proposing an Equity Contribution (Equity Stake) structure, which is standard practice for real estate development finance in Nigeria.
Because this is a non-interest bank, they are structuring this as a Musharakah (Joint Venture Partnership) or an Istisna'a (Construction Financing) combined with a Diminishing Musharakah. Essentially, the bank wants your company to have "skin in the game" by providing 30% (approx. ₦660 Million), while they provide 70% (approx. ₦1.54 Billion) of the total ₦2.2 Billion project cost.
Having a Certificate of Occupancy (C.of O.) for both the factory and the land changes the game entirely. Here is how you can use this to meet the bank's 30% requirement and protect your family factory.
1. How to Meet the 30% Equity Contribution (Using Your Assets)
You do not necessarily need ₦660 Million in cash. Non-interest banks will allow you to count the value of your existing assets toward your 30% equity contribution.
Count the Lekki Land Value: The moment you secure the Elerangbe, Lekki land, its current market value counts as part of your 30% equity.
Count the Ogbomosho Factory Value: If the Lekki land value is not up to 30%, you can ask the bank to evaluate the Ogbomosho factory. They can temporarily absorb the factory's equity value into your 30% contribution.
Count Soft Costs: Any money you have already spent on architectural designs, structural drawings, soil tests, and EIA (Environmental Impact Assessment) reports can be professionally valued and added to your 30% equity.
2. The Step-by-Step Execution Plan
[Step 1: Value Assets] ---> [Step 2: Sign J.V. with Bank] ---> [Step 3: Phased Drawdown] ---> [Step 4: Exit & Release Factory]
Lekki Land + Factory Bank pays 70% of construction Funds released in stages Off-plan sales pay bank;
= Your 30% Equity Contribution directly to contractors as buildings go up Factory is fully released
Step A: Asset Valuation & The "Collateral Swap" Agreement
Before you sign the final offer letter, have an independent, bank-approved estate surveyor value both the Ogbomosho factory and the Lekki land.
The Legal Claws: In the offer letter, ensure your lawyer inserts a "Phased Release of Collateral" or "Collateral Substitution" clause. It must state: “The Bank agrees to release the Mortgage on the Ogbomosho property once the construction at Elerangbe reaches 30% completion (Substructure/DPC level), or once off-plan sales milestones hit a specific target.”
Step B: The Non-Interest Contract Structure
The bank will likely use an Istisna’a (Construction) contract.
The bank will not give you ₦1.54 Billion cash.
They will pay your construction contractors directly in phases (e.g., Foundation stage, Carcass stage, Finishing stage).
The C.of O. of the Elerangbe land and the Ogbomosho factory will be held under a Deed of Tripartite Legal Mortgage as security during this construction phase.
To ensure the factory is never sold, you must design a Diminishing Musharakah (Declining Partnership) exit strategy:
As you build the 50 units, you sell them off-plan to buyers.
The buyers' deposits go into a Project Escrow Account managed jointly by your company and the bank.
Every time a unit is sold, the bank takes its 70% share of that sale to clear its debt, and you take your 30%.
Because the Lekki estate value will skyrocket once construction starts, the bank's risk drops drastically. Within 12 months, the Lekki site itself will be worth more than the total loan. At that exact point, your lawyer triggers the substitution clause, and the bank returns the Ogbomosho C.of O. to your family, completely untouched.
3. Financial Breakdown Checklist
Project Component
Total Estimate Your 30% Share Bank's 70% Share
Total Project (Land + 50 Units) ₦2,200,000,000 ₦660,000,000 ₦1,540,000,000
How to cover your share: 1. Value of Lekki Land
2. Value of Ogbomosho Factory
3. Architectural/Consultant Fees Paid directly to contractors in phases against valuation certificates.
Immediate Actions for Your Company
Get a Official Term Sheet: Ask the bank manager to issue a formal "Term Sheet" outlining the 30/70 split. Do not rely on verbal agreements.
Hire an Independent Surveyor: Get a certified valuation of the Ogbomosho factory and the Elerangbe land immediately so you know exactly how much of the ₦660 Million equity you already have covered by these assets.
Draft the Off-Plan Marketing Plan: Document how you intend to sell the 50 units during construction. Presenting this to the bank proves you have a clear plan to repay them quickly and free the factory.
To help you refine this approach with your bank, could you clarify:
What is the estimated market value of the Ogbomosho factory according to your rough knowledge?
Does the bank want the ₦100 Million for the land purchase to be a separate urgent facility, or are they rolling everything into this single ₦2.2 Billion project timeline?
Have you already appointed a Company Secretary or Legal Adviser to handle the deed reviews?
Step C: Off-Plan Sales & Factory Liberation
If your factory is valued at ₦80 Million, using it to borrow ₦100 Million creates an immediate collateral deficit (the loan is larger than the asset value), meaning a bank will not approve it as standalone security. Furthermore, buying land with the sole intent of flipping it in 18 months to "save the factory" is highly risky because real estate is highly illiquid; if the land does not sell by month 18, the bank will foreclose on your family's factory.
Instead of flipping raw land, you must leverage the bank manager's 30/70 construction partnership offer to roll everything into one master facility. Here is the realistic financial and structural strategy to protect your factory while acquiring the land.
1. The Collateral Gap (Why the ₦80M Factory is Not Enough for the Land)
Nigerian banks (including non-interest banks) typically apply a Forced Sale Value (FSV) discount of 30% to 40% on properties, especially for assets outside Lagos like Ogbomosho.
An ₦80 Million market-value factory has an FSV of roughly ₦48 Million to ₦56 Million.
A bank will not give you a ₦100 Million cash loan against a ₦56 Million FSV asset.
2. The Solution: Roll the Land Purchase into the 30% Equity
Do not treat the land purchase as a separate 18-month "flip" loan. Instead, ask the bank manager to structure the entire ₦2.2 Billion estate development as a single Musharakah (Joint Venture) project from Day 1.
Under this structure, your 30% equity contribution equals ₦660 Million. You can structure your equity using the assets you have:
[Ogbomosho Factory Value: ₦80M] + [Cash/Investor Funds: ₦580M]
= ₦660M Total Equity (30%)
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[Bank Releases ₦1.54B (70%) Construction Fund]
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[Phase 1 Allocation: ₦100M Used to Buy the Land]
By doing this, the ₦100 Million for the land comes out of the master project partnership fund, not as an isolated high-pressure short-term debt against your factory.
3. Why the "Land Flipping" Strategy Risks the Factory
Flipping land in Elerangbe, Lekki within 18 months to pay back ₦100 Million is dangerous for three reasons:
Market Liquidity: Land can take 6 to 24 months to sell at market value in Nigeria. If you are forced to sell in a hurry to meet an 18-month bank deadline, you will have to sell at a massive discount.
Non-Interest Rules: A non-interest bank will not give you ₦100 Million cash to speculate on land prices. They prefer financing tangible construction (Istisna'a) where value is actively being added.
Loss of the Estate Project: If you sell off the land to save the factory, you no longer have the land to build your 50-unit estate, killing your ₦2 Billion business plan.
4. The Safest Blueprint to Protect the Factory
To ensure the factory is never at risk, your exit strategy must rely on Off-Plan House Sales, not raw land sales.
[1. Secure Land via Master Fund]
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[2. Launch Off-Plan Marketing] ---> Sell 5-10 units at foundation stage (e.g., ₦45M each)
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[3. Cash Flow Escrow] ------------> Early buyer deposits (₦225M - ₦450M) hit the account
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[4. Release Factory] -------------> Bank deducts outstanding land debt; releases Ogbomosho C of O
Strategic Recommendations
Reject the 18-Month Land Flip Plan: It exposes the family factory to a high risk of foreclosure if the land market stalls.
Present the Factory as Part-Equity: Tell the bank manager, "We are pledging our ₦80 Million factory asset as part of our 30% equity contribution for the ₦2.2 Billion master estate project."
Raise the Cash Balance: You will need to raise the balance of the 30% equity (cash or through silent equity investors) to match the bank's 70% construction funding.
Getting G. Elias as your legal adviser is a massive advantage. They are one of Nigeria's top-tier, elite commercial law firms. Having a firm of their reputation handling a ₦2.2 Billion transaction gives your company immense credibility with the non-interest bank and heavily protects your family asset.A fee of ₦12 Million for a ₦2.2 Billion real estate project is roughly 0.55% of the total transaction value. In Nigerian commercial law practice, this is a very reasonable and highly competitive rate for a top-tier firm, as standard legal fees for property and project finance structures often range between 1% and 5%.Here is a breakdown of why this fee is worth it, how it directly protects your factory, and how you should structure the payment.1. What G. Elias Will Do to Save Your Family FactoryFor a complex transaction like this, G. Elias is not just drafting a basic agreement; they are setting up a bulletproof legal shield for your family asset. Their scope of work will include:Drafting the Collateral Substitution Agreement: They will ensure the bank's offer letter has a legally binding, watertight clause forcing the bank to return the Ogbomosho Factory C of O once the Lekki project hits specific milestones.Structuring the Tripartite Mortgage/Lien: They will draft the agreement between your family (asset owners), your company (borrower), and the bank, ensuring your family has a right of indemnity if the company encounters delays.Creating the Project Escrow Agreement: They will set up the legal framework for the off-plan sales account, ensuring the bank cannot arbitrarily seize funds or delay construction drawdowns.CAC Filing and Title Perfection: They will handle the complex 90-day Notice of Charge registration with the Corporate Affairs Commission (CAC) and manage the Governor’s Consent processes in both Oyo and Lagos States.2. How to Structure the ₦12 Million Payment (Negotiation Strategy)Even though the fee is fair for a ₦2.2 Billion project, you do not have to pay the entire ₦12 Million out-of-pocket today while you are still trying to raise the ₦100 Million land money.Because G. Elias is a top commercial firm, they understand project cash flow. You should propose a Retainer + Milestone Payment Structure
don't have money to pay legal fee can't we structure the fee as part of the whole cost?17:00Thank you for clarifying that your company directly owns the Ogbomosho factory. This simplifies the legal structure significantly. You do not need a Tripartite Agreement or a family guarantor. Your company can directly pledge its own asset, which eliminates a massive layer of family legal risk.Yes, you can absolutely structure the ₦12 Million legal fee as part of the total project cost. In institutional real estate development, this is standard practice. These costs are called "soft costs" or "pre-operational expenses", and banks routinely allow them to be capitalized into the master facility.Here is how you can legally and financially structure this without paying out of pocket today.1. How to Roll the Legal Fee into the Project CostYou need to align both G. Elias (the law firm) and the non-interest bank manager on a Deferred Project Capitalization model.[G. Elias drafts Deferred Fee Agreement]
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[Bank approves ₦2.2B Master Facility] ---> Includes Legal/Soft Costs line item
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[First Loan Drawdown / Escrow Release] --> Bank pays ₦12M directly to G. Elias account
Step A: The Deferred Fee Agreement with G. EliasAsk G. Elias to issue an engagement letter with a "Success/Deferred Fee Clause." You will sign a commitment stating that the ₦12 Million fee will be paid directly from the bank's first loan drawdown or from the project's escrow account once the ₦2.2 Billion facility is approved and active. Top firms routinely accept this for viable, multi-billion naira projects.Step B: Include it in the Bank's Project Bill of Quantities (BOQ)When submitting your ₦2.2 Billion project budget to the bank manager, ensure your project surveyor includes a distinct line item under Professional Fees / Soft Costs labeled: "Legal, Advisory, and Perfection Fees: ₦12,000,000."Step C: Direct Bank-to-Firm PaymentOnce the loan is approved, the bank will release the funds in phases. The bank can pay the ₦12 Million directly to G. Elias's bank account on your behalf, rolling it seamlessly into your overall debt balance.2. Updated Asset & Equity BreakdownSince your company owns the factory, the ₦80 Million market value of that factory acts as an immediate corporate asset to build your 30% equity cushion.Project ComponentBudget AllocationFunding SourcePayment TimelineLand Acquisition₦100,000,000Capitalized into Master LoanPaid at first drawdownLegal/Advisory Fee₦12,000,000Capitalized into Master LoanPaid at first drawdownConstruction (50 Units)₦2,088,000,000Phased Loan DrawdownsPaid in stages to contractorsTotal Project Cost₦2,200,000,00070% Bank / 30% Corporate Equity3. Immediate Action Plan to Pitch this StructureTell G. Elias: "Since our company owns the Ogbomosho factory directly, we want to proceed. However, we do not have immediate cash for legal fees. We request that your ₦12 Million fee be structured as a deferred success fee, to be paid directly by the bank from the project's first drawdown or from our initial off-plan sales escrow."Tell the Bank Manager: "We want to capitalize the ₦12 Million G. Elias legal and perfection fee into the total ₦2.2 Billion project cost. Please confirm that this is acceptable under your non-interest financing framework, and that the bank can disburse this fee directly to the law firm upon financial close."Draft the "Collateral Release" Clause: Even though your company owns the factory, you still want to protect it from foreclosure. Have G. Elias insert a clause specifying that the moment the Elerangbe land is purchased and registered, the bank must substitute the collateral, lifting the lien off the Ogbomosho factory and transferring it entirely to the Lekki land.
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