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Should I buy the property in my personal name or in my company name?
This is a typical poser a client puts before a Solicitor on closing a property purchase. The answer to this would typically be “it depends”. (I am sure you know that lawyers seldom say “Yes” or “No”.) In fairness it really depends on what you want to achieve. Personal name or Company name – there are pros and cons. For the purpose of this article I have chosen to highlight a few advantages of buying property in a company name.

Ease of Transfer
Transfer of Property can be a cumbersome process when we take into account the procedure for obtaining Governor’s consent. There is an easier way round however: buying the property in a company name allows you to transfer the property to a purchaser by selling the company. Procedure for change of company ownership is a piece of cake as com pared to obtaining Governors consent to a Deed of Assignment. This practical tool applies particularly to persons who purchase property for investment or resale. In all cases it is advisable that each property in your real estate portfolio is held by a distinct limited liability company, and these companies should be utilized only for the business of holding one property. If the company is used to hold m ore than one property the company cannot be sold to a prospect interested in only one of the properties. Also if the company dabbles into all manners of transactions it runs the risk of being entangled with liabilities or commitments that make prospective purchasers wary of a company purchase deal.

Perpetual Succession
The typical succession method used in Nigeria today is by Letters of Administration (“LOA”) obtained by the deceased family. Letters of Administration applies to situations where the deceased left a will (died intestate) or did not write a will (died intestate). In both scenarios the family of the deceased cannot legally transfer property of a deceased without first obtaining a Letter of Administration.
A will is a complex legal document fraught with m any legal rules and having even m ore exceptions. It is the subject of much litigation and “contests”. Ironically wills are prepared on the “assumption” that the testator will die before the beneficiary. Who knows? Despite the above a will however elegantly drafted is still subject to payment of estate taxes. The discerning property owner can take advantage of the simple company law concept of perpetual succession.
With this concept a company unless legally liquidated or wound up continues as an entity for as long as there is a surviving shareholder. The surviving shareholder of the company property owner becomes the owner of that property by operation of law. In practice therefore, assume Mr A owns 3 different properties held by 3 different companies he can position his 3 children as shareholders and directors of each company instead of writing a will to bequeath the properties.
Note that this is made easier if the 3 different properties are held by different companies (as advised in 1 above). If properly setup, the phrase “business as usual” m ay aptly describe the succession in a company (and ownership of the property) upon the death of the father. The key is to ensure that the shares of the father are held jointly with the child to whom the shares are expected to be transmitted. Transmission on demise therefore becomes automatic. It is advisable to inform your Solicitor that the company is intended as a vehicle for succession so that the articles and object clauses are formatted to serve the purpose.

Saves transaction costs
The Estate tax payable on a will or the Governors consent fees on a Deed of Assignment inclusive of incidental charges is usually between 10-20% of the assessed value of the property. In most States the property is actually valued by the Government surveyor at the time of application.
However transferring property by simply selling the company or by transmission of shares (discussed in 1 & 2 above) can save millions of Naira in transaction costs. You would only need to pay the fees for filing new form s reflecting the change at the Corporate Affairs Commission and off course some Solicitor fees for documentation. These are a drop in the ocean in comparison to the financial and administrative resources required for obtaining Governors consent or Letters of Administration.

Limited Liability in event of claims against personal property.
A company is a separate legal entity from the individuals who make up the company and the liability of the individuals is “limited” to their contribution in the company. Holding landed asset in a company name therefore protects that asset from distresses arising from transactions entered into in your personal capacity.
For example you gave a personal indemnity on a transaction that has no nexus with the company and the indemnity is about to be called in. In this situation all property owned in your personal name can be attached to cover the obligation, but those owned in the name of the company are spared.

Property Owned by Company is easier to Pledge
Companies by their nature are designed for the marketplace. Therefore the commercial structure of companies permits greater options for borrowing. Asset held in company names therefore gives leverage to the owner in the event that they have to be pledged.
For example debt for equity for deals, and debentures are models that are strictly within the domain of company law.

Property bought in a company name gives a certain level of confidentiality. At least it is not apparent from the name on the title documents who owns the land except your company is a well known brand. In the former case it would take another search at the Corporate Affairs Commission to lift the veil on the owner of the property. If the shares in the holding company or the property itself, is held in the name of a nominee company lifting the veil would prove formidable.

Ease of Joint Ownership
Holding property in company name makes joint ownership easier in the sense that every shareholder is a part owner of property owned by the company – at least to the extent of his shareholding. This proves a very useful tool in consortia real estate investment and financing. A situation where multiple investors own a property or portfolio of real estate can only be envisaged under the company umbrella.

Power to establish Trusts can be given the holding company.
Very often situations dictate that a trust ought to be created before the demise of the property owner. This is most relevant in situations where there are infants involved or there is only one property and m any survivors who ought to share from the derived income. The articles of association of the company holding property very often does permit the company to establish a Trust. In such a case, setting up a trust after the demise of the property owner would be a corporate decision within the ambit of the company’s power.
How do we respond next time to the poser: Should I buy property in a company name? I dare say the answer remains: “It depends”!

Ayuli Jemide, is a Partner with DETAIL.