Real estate transactions often involve agents, brokers and other intermediaries who help connect property owners with potential buyers. But when is an agent legally entitled to commission? Is introducing a buyer to a property enough?

The Supreme Court’s decision in Philip Kayode Olusegun Ojo v. SDV Nigeria Limited & Anor provides important guidance on these questions and has significant implications for estate agents, property owners, developers, buyers and legal practitioners in Nigeria.

The decision makes an important point: an estate agent does not automatically become entitled to commission simply because they introduced a prospective buyer to a property.

For an agent to successfully claim commission, there must be a legally enforceable basis for the claim, and the agent must be able to demonstrate that their involvement was sufficiently connected to the eventual transaction.

What Happened in Ojo v. SDV Nigeria Ltd?

The case involved Philip Kayode Olusegun Ojo, a professional estate surveyor and valuer operating as P.K. Ojo & Co.

Ojo claimed that he introduced an industrial property at Awodiora Industrial Estate, Kirikiri, Lagos, to SDV Nigeria Limited. The property belonged to SCOA Nigeria Limited.

According to Ojo, he facilitated negotiations concerning the acquisition of the property. SDV subsequently purchased the property directly from the owner without further involvement from Ojo and without paying him a commission.

Ojo consequently brought a claim for agency commission of ₦161,250,000.

Although the trial court partially granted his claims, the Court of Appeal overturned the decision. The matter eventually reached the Supreme Court, which unanimously dismissed Ojo’s appeal and affirmed the decision of the Court of Appeal.

The central issue was whether Ojo had established a legal entitlement to the commission he claimed.

Mere Introduction Does Not Automatically Create a Right to Commission

One of the most important lessons from the decision is that introducing a prospective buyer to a property does not, by itself, create an automatic right to commission.

An estate agent cannot simply argue that they introduced the buyer, the buyer eventually purchased the property, and therefore they are automatically entitled to commission.

There must first be a legally recognizable relationship between the agent and the principal.

This is particularly important in Nigeria, where property transactions are sometimes conducted through informal arrangements, verbal understandings and personal relationships.

The Supreme Court’s decision highlights the risks of relying on such informal arrangements.

Agency Is Fundamentally Contractual

An agency relationship generally arises where one person, the agent, is authorized to act on behalf of another person, the principal.

In real estate, an agent may be engaged to:

• Identify potential buyers
• Market a property
• Arrange property inspections
• Negotiate with prospective purchasers
• Facilitate communication between parties
• Assist in bringing a transaction to completion

However, performing some of these activities does not necessarily mean that the person has a legally enforceable right to commission.

The agent must be able to establish the basis upon which the principal became obligated to pay.

This brings the issue back to contract law.

The Importance of Contract Formation

A valid contractual relationship generally requires the presence of essential elements such as offer, acceptance, consideration and an intention to create legal relations.

In an agency arrangement, these principles can be particularly important.

Offer

There should be evidence that the principal engaged or authorized the agent to provide specific services.

This may take the form of:

• A formal agency agreement
• A letter of engagement
• Written instructions
• Emails or other correspondence
• Other evidence demonstrating the principal’s authorization

In Ojo v. SDV, the difficulty for the appellant was establishing that SDV had actually appointed him to act as its agent in relation to the acquisition.

Acceptance

The principal must accept the proposed agency arrangement.

Simply communicating with a prospective buyer or receiving information from an intermediary does not necessarily establish that the person has been appointed as an agent.

There needs to be evidence of mutual agreement or conduct sufficient to establish the contractual relationship.

Consideration

Consideration is the value exchanged between contracting parties.

In an agency relationship, this will commonly be the commission payable to the agent for successfully performing the agreed services.

The important point is that commission should be agreed upon rather than unilaterally imposed by the agent after the transaction has been completed.

An agent who voluntarily provides information or assistance without an established contractual arrangement may face significant difficulties when subsequently demanding payment.

The “Effective Cause” Principle

Another significant aspect of the case is the importance of the agent’s role in bringing about the completed transaction.

It is not enough for an agent to show that they mentioned a property to a prospective purchaser at some point.

The agent must establish a meaningful connection between their efforts and the eventual transaction.

In practical terms, the question becomes:

Did the agent’s efforts substantially and effectively contribute to the transaction that was eventually completed?

This principle helps prevent situations where several individuals claim commission simply because they had some involvement with a buyer or property at different stages.

For example, imagine that five different intermediaries tell the same company about a property over several months. The company eventually purchases the property directly from the owner.

If every person who mentioned the property could automatically claim commission, the buyer or seller could face multiple and potentially conflicting claims.

The effective-cause principle helps prevent this type of uncertainty.

What Does the Decision Mean for Estate Agents?

The case provides a strong practical lesson for estate agents:

Do not rely on assumptions. Document the relationship before doing substantial work.

Before introducing a prospective buyer to a property, an agent should, where possible, establish:

• Who has appointed the agent?
• What exactly is the agent authorized to do?
• Is the appointment exclusive or non-exclusive?
• What commission will be payable?
• When does the commission become payable?
• Who is responsible for paying the commission?
• What happens if the buyer purchases the property directly from the owner?
• How long does the agent’s protection period last?
• What evidence will demonstrate the agent’s involvement?

A properly drafted agency agreement can significantly reduce uncertainty.

Why Written Agency Agreements Matter

A written agreement does more than establish the commission percentage.

It can clearly define the entire relationship between the parties.

For example, an agreement may specify that an agent is entitled to commission where a buyer introduced by the agent subsequently purchases the property within an agreed period.

It can also establish whether the agent has:

• Exclusive authority
• Sole agency rights
• Non-exclusive authority
• A limited role as an introducer

These distinctions can become extremely important when a transaction is eventually completed.

Protection for Property Owners and Buyers

The decision is not only beneficial to estate agents who want clarity. It also provides important protection for property owners, developers and buyers.

Without clear contractual requirements, a party could potentially face commission claims from several people who participated only minimally in the transaction.

The judgment reinforces the principle that legal liability should be based on established obligations rather than unilateral expectations.

A property owner should therefore be cautious about accepting services from agents or intermediaries without clearly defining their role.

Similarly, buyers should understand who is representing them and who may ultimately be responsible for professional fees.

Encouraging Professionalism in Nigeria’s Real Estate Industry

Nigeria’s real estate sector includes sophisticated corporate transactions as well as smaller transactions conducted through informal networks.

The decision highlights the importance of moving towards greater professionalism and documentation across the industry.

Estate agents and other property professionals should maintain proper records of:

• Client instructions
• Property introductions
• Inspection arrangements
• Emails and messages
• Negotiations
• Offers
• Commission agreements
• Transaction milestones

These records can become critical evidence if a dispute later arises.

A Challenge for Informal Real Estate Practice

Although the decision promotes certainty, it also raises an important practical concern.

Many real estate transactions in Nigeria are initiated through informal conversations and relationships. Agents may introduce buyers to properties based on verbal assurances that they will be paid if the transaction succeeds.

If the arrangement is never properly documented, the agent may later struggle to prove the existence and terms of the agreement.

This creates a difficult balance.

On one hand, requiring evidence of contractual agreement protects property owners and buyers from speculative claims.

On the other hand, overly rigid reliance on documentation could potentially disadvantage genuine agents who have made significant contributions to transactions based on informal commercial arrangements.

The safest approach for all parties is therefore to establish the terms before substantial work begins.

Practical Lessons for Real Estate Professionals

The Ojo v. SDV decision provides several practical lessons.

For Estate Agents

Get the appointment in writing.

Do not assume that introducing a buyer automatically guarantees payment.

Clearly establish your commission, authority and responsibilities before proceeding.

For Property Owners

Define the agent’s role clearly.

If you engage an agent only to introduce potential purchasers, make that clear. If the agent is expected to negotiate or manage the transaction, document that as well.

For Buyers

Know who is acting for whom.

Where intermediaries are involved, understand their relationship with the property owner and the basis upon which they expect to be compensated.

For Companies

Maintain proper transactional records.

Corporate buyers and sellers should retain correspondence, engagement letters, offers and negotiation records that establish the parties’ respective roles and obligations.

For Legal Practitioners

Pay attention to evidence.

When advising clients on property transactions, lawyers should ensure that agency arrangements, commission structures and authorities are clearly documented.

Key Takeaway

The Supreme Court’s decision in Philip Kayode Olusegun Ojo v. SDV Nigeria Limited & Anor sends a clear message to participants in Nigeria’s real estate market:

An introduction is not necessarily an entitlement.

An estate agent seeking commission should be able to establish a contractual or otherwise legally enforceable basis for the payment and demonstrate the connection between the agent’s services and the completed transaction.

For agents, the practical solution is straightforward: document the engagement, agree the commission, define the scope of authority and maintain evidence of your contribution to the transaction.

For property owners and buyers, the lesson is equally important: clearly define the role of every intermediary involved in a transaction to avoid unexpected commission disputes.

Ultimately, the decision promotes greater certainty, accountability and professionalism in Nigerian real estate transactions. It also reinforces a fundamental principle of commercial law: parties should not be subjected to contractual liability merely because another person voluntarily provided assistance or information without an established legal basis for payment.

Legal Disclaimer

This article is provided for general informational purposes only and does not constitute legal advice. Parties involved in real estate transactions should obtain advice from a qualified Nigerian legal practitioner based on the specific facts and circumstances of their transaction.