What development agreement means
A development agreement is a joint venture between somebody with land and somebody with money.
The landowner has a plot and no capital to develop it. The developer has capital and construction capability and no land. They agree that the developer will build at its own cost, and that the completed development, or the proceeds of selling it, will be shared in an agreed ratio.
No money changes hands for the land at the outset. The landowner's contribution is the plot, and their return is a share of what is built.
It is a common Nigerian structure and a sensible one. It unlocks land that would otherwise sit undeveloped and it lets a developer build without buying.
What makes it risky is that the landowner parts with control at the beginning and receives value only at the end, which puts them in the weaker position for the entire period in between.
How it is used
A workable agreement addresses a defined list, and Nigerian disputes cluster around the items that get left out.
The sharing ratio, expressed clearly: whether it is a share of units, a share of proceeds, or specified units allocated to each party.
Which specific units each party takes, ideally identified on a plan rather than left to selection later.
The scope and specification of what is to be built, with drawings and a schedule of finishes, so that quality is a contractual standard rather than an argument.
The timeline, with milestones and a long stop completion date.
Who obtains approvals: building plan approval, environmental clearances where required, and any regulatory permits.
What happens on delay or abandonment, including a right for the landowner to terminate and take over the works, and what the developer is entitled to for work done.
Security for the landowner: retaining title until completion, taking a charge, or requiring a performance guarantee.
And the tax and duty treatment, because the transaction involves dispositions that attract stamp duty and may engage capital gains treatment.
Key features
- A joint venture between a landowner and a developer
- The owner contributes land, the developer contributes capital and construction
- Returns are shared as units or as proceeds in an agreed ratio
- Specification, timeline and approvals responsibility should be defined
- The landowner should retain security until completion
- Abandonment provisions are the clause most often omitted
How this works in Nigeria
The failure mode is consistent and it is worth stating plainly: the developer stops.
Funding runs out, the market moves, the developer takes deposits from off plan buyers and diverts them, or the project simply stalls. The landowner has a partly built structure on their land, no completed units, no money, and a counterparty who has stopped answering.
Everything that protects the landowner has to be agreed at the start.
Retain title. Transferring the land to the developer or to a joint venture vehicle at the outset removes the landowner's strongest asset. Where a transfer is required for funding, take a charge back.
Set a long stop date with a clear termination right, and provide for what happens to the partly completed works.
Require a performance guarantee or a bond where the developer's balance sheet does not inspire confidence.
Control the off plan sales. A developer selling units to third parties creates buyers with claims, and a landowner who did not control that finds strangers asserting rights over the property.
Identify the specific units, not a percentage. A ratio expressed as sixty forty produces an argument about which floors and which units. A plan with each party's units marked does not.
And keep the approvals in the right name. Building plan approval and the underlying title should not drift into the developer's name without the landowner understanding why.
Development agreement vs outright sale vs building contract
Three ways a landowner gets a building on their land, with very different risk.
An outright sale is the simplest. The owner sells, receives the money, and has no further interest or risk. They also capture none of the development value.
A development agreement shares the outcome. The owner keeps an interest, contributes the land rather than money, and takes the risk that the developer fails to complete. The upside is a share of a finished development rather than a sale price.
A building contract is the opposite arrangement. The owner funds the construction and engages a contractor to build to a specification for a price. The owner takes the funding risk and keeps everything that is built.
A landowner with capital builds. A landowner without capital enters a development agreement and should structure it as though the developer will not finish, because that is the risk they are actually taking.
Limits and risks
The landowner's return depends entirely on completion, and a partly built structure is worth less than the bare land was.
Enforcement against a developer who has run out of money is also of limited value. A judgment against an insolvent developer does not finish the building.
Off plan purchasers complicate any remedy, because third parties with claims against the developer may assert rights over units on the landowner's land.
And the timeline risk is real. Nigerian construction projects overrun, and a landowner locked into an agreement with no long stop date can wait years.
Worth knowing
Do not transfer the land at the start, and set a long stop date with a right to terminate and take over the works. The Nigerian development agreement failure is always the same: the developer stops, and a landowner who parted with title has nothing but a claim against somebody with no money.
Questions people ask
What is a development agreement?
A joint venture in which a landowner contributes the land and a developer contributes capital and construction, with the completed development or its proceeds shared in an agreed ratio.
How should the sharing be expressed?
By identifying the specific units each party takes on a plan rather than by a bare percentage. A sixty forty ratio produces an argument about which floors and which units; a marked plan does not.
Should the landowner transfer the land at the start?
Preferably not. Retaining title is the landowner's strongest protection. Where a transfer is required for funding, take a charge back or other security.
What happens if the developer abandons the project?
That depends entirely on what the agreement provides. It should include a long stop date, a right for the landowner to terminate and take over the works, and what the developer is entitled to for work done.
Can the developer sell units off plan?
Only if the agreement permits it and on terms the landowner controls. Uncontrolled off plan sales create third party buyers with claims over units on the landowner's land.
Who obtains the building approvals?
Whoever the agreement says, and it should say. Building plan approval, environmental clearances where required and other permits should be allocated expressly, and the landowner should know whose name they are in.