Why Your Off-Plan Property Price Just Went Up

We begin with the most prevalent mechanism used to exploit Nigerian real estate investors: Price Escalation with Vague Triggers.

The Problem: Ambiguous Escalation

Many Contract of Sale (COS) agreements contain clauses that allow a developer to increase the purchase price if "construction costs rise." The danger lies in what these contracts fail to define:

The Threshold: How much must costs increase (e.g., 5% or 20%) before the price is adjusted?

The Evidence: What documentation must be presented to prove an increase has occurred?

The Cap: Is there a maximum limit to how much the price can be raised?

Without these parameters, an unrepresented investor may receive a sudden demand for additional payment without any accompanying financial justification or right to audit the claim.

The Solution: Controlled Adjustment Mechanisms

When an investor has professional advisory or legal backing, these ambiguous statements are rewritten into controlled clauses. A secure contract specifies:

1. Specific Indices: It identifies which cost categories trigger an adjustment—typically cement, reinforcement steel, or imported finishing materials.

2. Defined Thresholds: It sets a percentage (e.g., a 10% market surge) that must be exceeded before a price review is permitted.

3. Strict Verification: The developer must provide a "Condition Precedent" of proof, such as supplier invoices, certified cost reports, or contractor variation orders.

4. Financial Caps: A hard ceiling is established (e.g., "not to exceed 5% of the total purchase price").

The Result: Accountability

Under this structure, a developer cannot simply demand more capital via a casual notification. They must issue a formal notice, attach documented proof, and demonstrate that the calculation aligns with the contract. If the evidence does not meet the agreed-upon threshold, the investor’s financial obligation remains unchanged.

Price escalation clauses do not have to be open-ended liabilities. With proper drafting, they become transparent, manageable risks.

While price is the most immediate financial risk, the physical characteristics of the property are equally critical. In the next post, we will examine how variation clauses are used to justify one-sided design modifications.

Mary Edet

Private Real Estate Advisor, Edet Real Estate