Unapproved Commercial Property in Nigeria: The Legal Risks

In Nigeria’s bustling real estate market, commercial property development is booming across cities like Lagos, Abuja, and Port Harcourt. For developers, investors, lenders, real estate agents, and lawyers, the allure of acquiring or constructing commercial properties—such as warehouses, malls, and office blocks—can be lucrative.

However, a critical but often overlooked factor is the legality of these properties, specifically whether they have been approved by the relevant physical planning authorities. Unapproved commercial property in Nigeria carries significant legal risks that can undermine investments, halt projects, and expose stakeholders to severe penalties.

Gaining a comprehensive understanding of the complex legal landscape and potential ramifications associated with unapproved commercial property is absolutely crucial for professionals who are actively involved in the development, financing, and transactional processes of commercial real estate. This knowledge helps ensure informed decision-making and risk management throughout every stage of a project.

This post provides a comprehensive and detailed examination of the various legal risks involved, thoroughly analyzing each potential issue. It also highlights recent, significant, and relevant policy developments that have a major impact on these risks. Furthermore, the post offers practical, actionable, and well-informed advice designed to help effectively mitigate and manage these potential legal risks proactively.

What is Unapproved Commercial Property?

The Lagos State Building Control Agency (LASBCA) is the principal body responsible for building control in Lagos State, Nigeria. LASBCA’s core functions include approving the commencement of construction after obtaining the necessary development permits, inspecting and certifying various stages of building construction, and ensuring compliance with minimum building standards and safety regulations.

The agency verifies that construction projects adhere to approved plans and structural requirements to prevent incidents like building collapse. In addition to monitoring ongoing projects, LASBCA issues certificates of completion and fitness for habitation once a building meets all regulatory standards.

The agency is also responsible for identifying and ordering the removal of illegal, non-conforming, or distressed buildings in order to protect public safety and health. This comprehensive oversight includes not only ensuring the structural safety of buildings but also maintaining effective public health control within these structures, thereby safeguarding the well-being of the community.

LASBCA works closely with developers and other government agencies to maintain a safe, secure, and habitable built environment under the Lagos State Urban and Regional Planning and Development Law and National Building Codes.​

In Summary

LASBCA functions as the primary regulatory enforcement authority responsible for ensuring that all commercial properties within Lagos State are constructed in full compliance with legal requirements, safety regulations, and approved building standards. The agency plays a crucial role in overseeing the construction process to guarantee that developments meet the necessary codes and guidelines established by the state.

Constructing any commercial property without securing prior LASBCA approval places developers, property owners, and investors at significant risk of facing stringent enforcement measures. These enforcement actions can include substantial fines, the sealing off of the property to prevent use or occupation, and even the complete demolition of unauthorized structures.

Therefore, obtaining LASBCA approval is essential, serving as a fundamental and indispensable prerequisite for ensuring the legality, safety, and overall marketability of any commercial property located within Lagos State. This approval not only guarantees compliance with regulatory standards but also significantly enhances the property’s value and attractiveness to potential investors and tenants.

Why Approval Matters: Key Legal Risks

Unapproved commercial property developments in Nigeria are subject to severe legal penalties, underlining the government’s strong commitment to enforcing strict compliance with the country’s physical planning and land use regulations.

These stringent and carefully crafted measures are specifically designed to effectively deter any unauthorized construction activities and to ensure that urban development proceeds in a well-organized and orderly manner. The primary legal risks and significant penalties associated with the existence or operation of unapproved commercial properties include the following key points:

• Demolition Without Compensation: Under Nigerian law, authorities possess the full legal authority to demolish any structure that has been constructed without obtaining the necessary proper approvals and permits. Importantly, there is no legal obligation for these authorities to provide any form of compensation to the owners or developers of such unauthorized buildings. As a result, individuals or entities found to have built without the required approvals face the risk of losing their entire investment, leading to a complete financial loss if their structures are demolished.​

• Forced Sealing and Cessation of Business: Unapproved buildings are subject to being forcibly sealed off by authorities, which results in an immediate halt to all commercial activities conducted within those premises. This abrupt stoppage can lead to substantial financial losses for business operators, as their revenue streams are suddenly cut off. In many cases, sealing orders are carried out without any prior notice or compensation to the affected parties, further intensifying the economic damage experienced by both business operators and investors involved in the property. This lack of compensation and abrupt enforcement measures contributes to significant hardship and uncertainty for those impacted.

• Heavy Statutory Fines: Governments, particularly in regions such as Lagos and the Federal Capital Territory, enforce substantial fines on owners of buildings that lack proper approval. For example, in Abuja, there are significant penalties, including fines of up to ₦5 million, as well as additional charges like land use conversion levies. These financial penalties are designed not only to discourage illegal construction activities but also to compel property owners to take necessary steps to regularize and legalize their buildings in compliance with existing regulations.

• Criminal Liability: Developers who deliberately evade or intentionally avoid obtaining the necessary permits face serious criminal charges, which can potentially result in significant fines or even imprisonment. Such legal consequences highlight the critical importance and seriousness of strictly adhering to the proper approval process and meeting all legal requirements without exception. Ignoring these obligations not only jeopardizes the project but also exposes developers to severe penalties that can have long-lasting effects on their professional and personal lives. This strongly illustrates the importance and seriousness of strictly following the established procedures to ensure compliance with the law.

• Loss of Financing and Market Trust: Financial institutions and lenders almost always require complete and verified permits before they consider financing projects or properties. When properties do not have the necessary approvals, they often face outright loan rejections, withdrawal of previously committed funds, or significant challenges in securing any type of financing. Because of these risks, real estate professionals are obligated to conduct thorough and rigorous due diligence to avoid potential liability. This careful examination helps protect their clients from both legal complications and adverse impacts on market reputation and trust.

Specific additional penalties may include the revocation of property titles in cases where illegal land use or unauthorized conversions take place. This has been observed in Abuja, where authorities issue fresh property titles accompanied by new lease terms only after the involved parties have paid the required penalties.

Similarly, Lagos enforces strict penalties on offenses such as illegal change of land use, unauthorized structural modifications, and breaches related to renovations. The Lagos authorities also emphasize strongly that merely paying fines does not replace the necessity of obtaining valid permits before carrying out any such changes or developments.

These stringent enforcement measures clearly highlight that unapproved commercial properties represent highly risky and fundamentally unsustainable assets, causing significant negative impacts on all stakeholders involved in the process.

This makes adherence to building approval processes an absolutely crucial and indispensable step within Nigeria’s commercial real estate sector, playing a vital role in effective risk mitigation, safeguarding investment interests, and ensuring comprehensive legal certainty throughout all stages of development.

The Commercial Property Approval Process in Nigeria

The commercial property approval process in Nigeria is a carefully structured and strictly regulated sequence of steps meticulously designed to uphold safety standards, guarantee proper land use, and actively promote sustainable urban development throughout the country.

Although this process may seem lengthy and somewhat costly to many applicants, it is essential for ensuring that commercial buildings fully comply with all legal requirements, are structurally sound, and remain safe for occupancy by tenants, employees, and visitors alike.

This comprehensive and detailed approach plays a crucial role in safeguarding the interests of property owners, tenants, and the wider community by significantly reducing the risks and potential problems that can arise from poorly planned or inadequately constructed commercial properties. By addressing these issues proactively, it ensures a safer, more reliable environment for all parties involved.

Here are the fundamental and essential steps involved in the entire process:

• Engagement of Qualified Professionals: The process is initiated by hiring highly qualified and experienced professionals such as architects, engineers, and surveyors. These experts are responsible for preparing comprehensive and detailed architectural drawings, precise structural designs, and accurate site plans. Each element is carefully tailored to meet and comply with all applicable regulatory requirements and standards, ensuring that the project progresses smoothly and adheres to legal guidelines.

• Development Permit Application: The carefully prepared and detailed plans are formally submitted to the appropriate local planning authority, such as the Lagos State Building Control Agency (LASBCA) in Lagos or the Federal Capital Territory Development Control in Abuja. This crucial step in the application process involves not only submitting the plans but also paying all the required fees associated with the permit application. Additionally, applicants must provide a comprehensive set of supporting documentation to ensure a thorough and complete review by the relevant authorities.

• Inspections and Approvals: Regulatory authorities carry out thorough and detailed inspections of the proposed development project to guarantee full compliance with all relevant zoning laws, building codes, safety standards, and urban development guidelines. This comprehensive vetting process is essential to ensure that every aspect of the project meets the required legal and safety criteria. Only after successfully passing these inspections and receiving official approval will the necessary permits be issued, granting legal permission for construction activities to commence.

• Ongoing Certification: During the entire construction phase, regular and thorough inspections are conducted periodically to ensure strict compliance with the approved architectural plans and established safety protocols. These carefully scheduled stage inspections play a crucial role in identifying any deviations or inconsistencies early on so that corrective actions can be taken promptly. This proactive approach helps prevent potential legal complications as well as physical hazards that could arise later in the project.

• Issuance of Certificate of Occupancy: After the construction process has been fully completed and a thorough final inspection has been conducted to verify that all building codes and regulations have been met, the relevant authorities proceed to issue a Planning Permit, a Certificate of Occupancy, or a similar official document. This certificate serves as a legal confirmation that the commercial property is deemed safe, suitable, and officially approved for occupancy and use. It validates that the building complies with all necessary standards and regulations, allowing the owner or tenant to begin operations without any legal hindrances.

Skipping any of these crucial steps might seem like a way to save time and money at the beginning, but it actually introduces significant long-term risks that can be far more costly. Properties that lack proper approvals are at risk of being demolished, sealed off by authorities, subjected to hefty fines, losing access to financing options, and even facing criminal penalties.

These significant and serious consequences can ultimately outweigh any initial savings or short-term financial benefits that might have been gained by choosing to cut corners or take shortcuts in the process. In the long run, the negative impacts can far exceed the minor advantages initially perceived, leading to greater costs and complications that were not anticipated at the outset. Therefore, what may seem like a cost-effective decision at first can actually result in much larger problems and expenses down the line.

Thus, engaging the proper approval process is absolutely indispensable for developers, investors, and all other stakeholders who are seeking legal security, enhanced marketability, and sustained, long-term returns within Nigeria’s dynamic and rapidly evolving commercial real estate sector. This thorough approval process ensures that all parties involved can confidently navigate the complexities of the market while safeguarding their investments and maximizing potential benefits.

Current Trends and Policy Developments

Current trends and policy developments in Nigeria reflect a growing governmental focus on addressing the persistent issue of unapproved commercial structures. Recognizing the prevalence of illegal construction and its detrimental effects on urban development, safety, and investment confidence, Nigerian states have introduced targeted initiatives to promote compliance with physical planning regulations.

A prominent example is the reintroduction of the Planning Permit Amnesty Programme in Lagos State and Ogun State. This initiative provides a limited-time opportunity for property owners and developers to regularize previously unapproved buildings by submitting all required documentation and plans to the Lagos State Building Control Agency (LASBCA), the Ogun State Planning and Development Permit Authority (OGPDPA), or relevant authorities.

Under the amnesty, applicants are often exempted from statutory fines or penalties that would otherwise apply to unauthorized construction. The program aims to bring more properties into the formal regulatory framework, allowing owners to secure legal recognition and market clarity for their assets without punitive costs.​

Beyond the amnesty, there is a steady increase in public sensitization campaigns conducted by government agencies and professional bodies. These efforts educate residents, developers, and investors about the critical importance of obtaining proper building permits. Messaging emphasizes that physical planning approvals are not mere bureaucratic hurdles, but vital safeguards for structural safety, community wellbeing, and long-term investment protection.

The rationale behind these campaigns and regulatory enforcement also stems from documented links between unapproved construction and structural failures or building collapses. Such tragic incidents highlight the consequences of bypassing safety codes and proper inspections, underscoring the practical need for compliance.

Together, these developments reflect a collaborative effort among Nigerian states, urban planners, developers, and the public to foster sustainable, safe, and legally compliant commercial property growth, contributing to improved investor confidence and urban resilience.​

These emerging trends clearly illustrate a significant and positive shift towards achieving a better balance between strict enforcement measures and incentive-based approaches. This balanced strategy aims to effectively reduce illegal building practices while simultaneously encouraging and promoting greater adherence to urban development laws and regulations. By integrating both enforcement and incentives, the approach fosters compliance and sustainable urban growth.

Case Study: Unapproved Commercial Property Costs

This case study clearly illustrates the harsh and challenging realities, as well as the significantly high costs, that are often associated with the process of building commercial property in Nigeria, especially when the necessary physical planning approvals are not properly obtained beforehand.

The developer in Lagos, eager to fast-track project delivery and reduce upfront costs, skipped critical steps in securing permits from the Lagos State Building Control Agency (LASBCA). Initially, this approach seemed to offer financial efficiency and speed. However, the consequences quickly unfolded:

• Stop-Work Order: During the middle of the construction process, LASBCA stepped in and issued a stop-work directive, effectively halting all ongoing activities on the site immediately. This intervention did not just cause significant delays in the overall project timeline but also brought to a sudden stop the anticipated cash flow that was expected from the planned lease agreements or potential sale activities. The halt affected not only the construction schedule but also the financial projections tied to the development.

• Structural Non-Compliance: Comprehensive inspections conducted on the construction site revealed significant deviations from the approved architectural standards and established building codes. These discrepancies have raised serious safety issues as well as critical legal concerns that must be addressed immediately to ensure compliance and protect all stakeholders involved.

• Demolition Order: Without obtaining the necessary approved permits and because of significant structural breaches that compromised the integrity of the building, LASBCA officially ordered the complete demolition of the structure. Importantly, there was no compensation provided to the developer for this action, which meant that the entire financial investment made in constructing and developing the building was completely lost without any reimbursement.

• Withdrawal of Financing: In light of the property’s illegal status, the financing bank decided to recall or withhold the allocated funds. This action significantly increased the financial pressure and strain on the developer, making it much more difficult for them to continue with the project.

• Financial and Reputational Damage: The developer experienced significant and substantial monetary losses due to the cessation of work on the project, as well as penalties imposed for various violations. These financial setbacks were further compounded by the costs incurred from demolition activities and the loss of numerous business opportunities that could have otherwise generated revenue. In addition to the direct financial impact, the failure of the project caused serious damage to the developer’s reputation within the industry. This reputational harm led to a noticeable decline in investor confidence, making it more challenging for the developer to secure funding and support for future ventures and projects.

This scenario highlights and emphasizes several crucial lessons that all stakeholders involved in Nigeria’s dynamic and ever-evolving commercial real estate sector should carefully consider and take to heart:

• Cutting corners on obtaining necessary approvals to save on initial costs is a risky approach that can lead to significant problems and is often counterproductive in the long run. Skipping these important steps may seem like a quick way to reduce expenses upfront, but it frequently results in costly delays, legal issues, or the need for costly rework later.

• Compliance with physical planning regulations is not merely optional; it is absolutely foundational and essential to ensuring the overall viability of any project as well as securing the confidence and safety of investments involved. Without adhering to these regulations, projects risk significant delays, financial losses, and potential legal challenges that can undermine their success and sustainability in the long term.

• Engaging with regulatory agencies early in the process and proactively obtaining all necessary permits and approvals is crucial to help avoid costly enforcement actions, potential fines, and unexpected project disruptions. Taking these steps ensures smoother project execution and compliance with all applicable regulations.

• Banks and investors consider approvals to be an essential and highly important component of the due diligence process, significantly influencing their decisions regarding financing options and overall willingness to participate in the market. These approvals serve as a key factor in assessing the viability and risk associated with potential investments and loans.

Ultimately, this case clearly highlights the crucial importance of legal compliance in the development process, as it not only protects the financial investment but also preserves the valuable reputation of the developer.

The initial upfront investment of time, effort, and resources in obtaining the necessary proper approvals and permits is thoroughly justified by the significant benefits it brings, especially the prevention of potentially devastating financial and legal losses that can arise from constructing buildings or making developments without the required authorization.

This proactive approach not only guarantees immediate progress but also ensures sustained long-term success and stability for developers as they work on their projects over time. By anticipating challenges and addressing them early, developers can create a solid foundation that supports continuous growth and reliable outcomes throughout the entire lifecycle of their projects.

Recommendations for Stakeholders

Recommendations for stakeholders involved in the commercial property sector in Nigeria are absolutely essential to guarantee full legal compliance, effectively mitigate potential risks, and safeguard their valuable investments.

These guidelines play a crucial role in navigating the complex regulatory environment and market dynamics, ultimately supporting sustainable growth and security for all parties engaged in the commercial real estate industry.

Real Estate Developers

• Prioritize Permits: Always obtain all necessary permits and approvals before commencing construction. This includes development permits, building permits, and structural certifications.
• Engage Professionals: Work with certified architects, surveyors, and legal consultants knowledgeable about local regulations to guide the approval process and ensure compliance.
• Risk Management: Treat obtaining approvals as an integral part of project risk management and a way to enhance the property’s legal and market value.

Commercial Property Investors

• Due Diligence: Conduct thorough investigations into the property’s legal status, including verifying all building permits and approval documents before acquisition or leasing.
• Expert Assessment: Involve professional surveyors and legal experts to assess the legality and structural compliance of the property to avoid acquiring unapproved or illegal assets.
• Avoid Risky Properties: Steer clear of properties with questionable or missing approvals to safeguard your investments and prevent legal complications.

Lending Institutions

• Verify Compliance: Require clear evidence of full compliance with planning and building regulations as a condition for loan approval or fund disbursement.
• Loan Appraisal Integration: Incorporate physical planning permit verification into your appraisal and risk assessment processes for commercial real estate projects.
• Offer Advisory Support: Assist clients in understanding and regularizing unapproved properties by providing advisory services and guidance on navigating approval processes.

Real Estate Agents and Lawyers

• Rigorous Checks: Conduct meticulous verification of permits, land titles, and ownership documents when facilitating transactions to ensure clients do not acquire unapproved properties.
• Client Education: Inform clients about the significant risks associated with unapproved commercial properties, such as fines, demolition, and financing difficulties.
• Professional Consultation: Encourage clients to seek professional help from surveyors, architects, and legal experts to verify and, where necessary, regularize property approvals before completing transactions.

Following these important recommendations helps to protect all parties involved in the process, significantly minimizes exposure to potential legal risks, and actively contributes to the growth and development of a safe, compliant, and sustainable commercial real estate sector in Nigeria.

By carefully adhering to these comprehensive guidelines, all stakeholders involved can significantly contribute to fostering a much more secure and highly trustworthy environment that encourages and supports investment activities as well as smooth business operations within the industry. This approach helps build confidence and reliability among all parties engaged.

FAQs

What documents prove a commercial property’s approval?

The essential documents include the Development Permit, Building Permit, and Certificate of Occupancy issued by the relevant state or local physical planning authorities. Additionally, certificates demonstrating structural integrity and Non-Destructive Testing (NDT) reports may be required to confirm safety and compliance.

Can unapproved commercial properties be legalized?

Legal regularization is possible through government amnesty programs or by submitting detailed building plans and paying applicable penalties. For instance, Lagos State offers a Planning Permit Amnesty Program that allows owners of unapproved buildings to obtain official approval without penalties if they apply within the specified time frame.

What happens if an unapproved commercial building is discovered?

Authorities may seal the building, forcing cessation of business operations, or order demolition without any compensation to the owner or developer. Legal actions, including fines and possible prosecution, may also be initiated against those responsible for the unlawful construction.

Are financial institutions willing to fund unapproved commercial properties?

Banks and lending institutions always require comprehensive verification of all necessary permits and approvals before they approve any financing in order to significantly minimize their risk exposure. Properties that lack proper and complete approvals very rarely qualify for loans, mortgages, or any type of financial assistance from these institutions. This strict requirement helps ensure that all properties meet legal and safety standards before any funds are disbursed.

How do I confirm if a commercial property is approved?

The best practice is to request all original permit documents (Development Permit, Building Permit, Certificate of Occupancy) from the seller or developer. To be certain, engage professional surveyors or legal experts who can verify the authenticity of these documents with the local physical planning authorities.

In Conclusion

Unapproved commercial property in Nigeria presents significant legal and financial risks that all stakeholders must carefully consider and cannot afford to overlook. The possibility of demolition without any form of compensation, the imposition of statutory fines, forced sealing of premises, and potential criminal liabilities highlight the crucial need for strict compliance with physical planning and zoning laws.

For developers, investors, lenders, real estate agents, and legal professionals, conducting thorough due diligence in verifying all necessary approvals and permits is an essential safeguard. This diligence not only protects investments from unexpected losses but also contributes to promoting sustainable and orderly urban development in the long term.

Rather than seeing the approval process as an obstacle, it should be embraced as an essential step toward risk mitigation and long-term asset viability. Taking professional counsel from architects, surveyors, and lawyers early in the project lifecycle can save significant losses down the line.

By consistently adhering to established regulatory frameworks and actively leveraging recent policy innovations, such as the introduction of planning amnesty programs, the Nigerian commercial real estate sector has the potential to significantly build trust among stakeholders, attract substantial investment, and ultimately thrive responsibly and sustainably.

This approach not only fosters a significantly more transparent and accountable environment but also opens up numerous opportunities for sustained long-term growth and continuous development within the industry, ensuring a stronger foundation for future success.