1. Expensive, cumbersome and complicated land tenure and transfer of legal title in land procedures.

1. Expensive cost of funds with high interest rates for construction and mortgages in comparison to the long term rentals expected by an investor in the real estate market.

1. Rent control legalisation for the mass residential rental market.

1. High rate of Tenants default in paying their rentals on schedule due in some cases to diminishing purchasing power.

1. Technical, cumbersome and expensive recovery of possession of premises legislations.

The effort of the Federal Government of Nigeria to address this problem by proposing a Rent Control legalisation has met with criticism as a result of the failure of the supply side of the real estate market and also, the failure of prior and subsisting Rent Control legislations and home ownership schemes to address the problems of minimum housing in Nigeria.

This Alert would provide up-to-date legal information on the last two factors of rent control and recovery of possession of premises which have and continue to challenge and inhibit investments in the real estate market.

Rent Control Law

Rent Control is a residual matter under the 1999 Constitution. As a result, most of the States in Nigeria have their individual Rent Control Laws which for the most part have similar provisions as the Rent Control Law of Lagos State.

In Lagos State of Nigeria, the applicable Law is the Lagos State Rent Control & Recovery of Residential Premises Law, 1997 (\”Lagos Rent Control Law\”).

The Lagos Rent Control Law is intended to mandatorily regulate the rentals that can be charged for residential apartments in certain areas of Lagos State whose residences were at the time of the enactment of this Law not charging annual rental value in excess of N250,000 (Two Hundred and Fifty Thousand Naira).

This Law prescribes the standard rent for each type of residential accommodation in different locations of the State with the caveat that the standard rent shall only be subject to upward review of not more than 20% every three years or at such other duration as the Governor of Lagos State may prescribe.

The Lagos Rent Control Law makes it unlawful for the Landlord or his agent or the Tenant to demand or pay rent in excess of the standard rent. It is also unlawful for a Landlord to demand or receive the prescribed standard rent for a period in excess of six months from an incoming/new Tenant. Equally unlawful is the action of a sitting Tenant offering to and paying the standard rent in excess of a period of three months in respect of any type of residential accommodation to which the Lagos Rent Control Law applies.

Any person who receives or pays rent in excess of the standard rent that is prescribed by Law is guilty of an offence and liable on conviction to a fine of N50,000.00 (Fifty Thousand Naira) or to a term of six months imprisonment.

Agency & Legal Fees

The Lagos Rent Control Law requires that Solicitors and estate agents must not charge more than 5% as Solicitors fees for preparing Tenancy Agreements and 5% as agency fees respectively. Where a higher percentage of fees is charged and received, it shall be unlawful. The penalty on conviction for this unlawful charge is a term of imprisonment for two years.

Recovery of Possession of Premises

Cases of abuses by Landlords in unlawfully evicting their Tenants necessitated the Rent Control & Recovery of Residential Premises Law of Lagos State, like prior legislations before it, to seek to protect all tenancies to which this Law applies.

The protection afforded tenancies by this Law is not intended to deprive a land owner of the fruits of his or her or its investment in real estate.

The protection only requires that a Tenant should only loose his tenancy after due recovery procedure and processes are complied with by the Landlord.

Where there is a default by a Tenant in respect of any aspect of his Tenancy and the Landlord intends to terminate the Tenancy and have possession of his property revert to him the Landlord, a proper notice to quit must be personally served on the Tenant. This is the first and most technical of the procedures for recovering possession of premises.

The length of notice to be given to a Tenant to quit is usually determined by the tenure of the tenancy where no express unequivocal provision is made in a written Tenancy Agreement to such effect. Thus, where the Tenant pays his rent on a weekly basis, a week\’s notice to quit would be valid.

Similarly, where the rental is paid monthly, quarterly, half-yearly or yearly, a month, quarter or half yearly notice as appropriate would be valid to determine the Tenancy.

It is mandatory that the notice to quit must be issued and served personally on the Tenant. It is also mandatory that the notice to quit must be served to expire at the anniversary or expiration of the Tenancy.

Thus, a notice to quit in respect of a tenancy that begins in January of a particular year and expires in December of the same year must be served on the Tenant on or before the end of June of that year so that from 1st July to the end of December of the same year, the mandatory six months notice would have been properly served on the Tenant. This was the holding of the Supreme Court of Nigeria in the matter of African Petroleum v. Owodunni (1991) 11-12 SC 56 @ 71 lines 5-15.

The inability of most Landlords to comply with the technical requirement of serving the statutory notice to quit to expire at the same time with the tenancy drew the displeasure of the Supreme Court in the above cited case where for twelve (12) years, the Respondent Tenant could not be evicted because the notice of eviction was not properly served by the Landlord on the Tenant.

The view of some Solicitors that a tenancy for a fixed term does not require a notice to quit but only a notice of the owner\’s intention to recover possession of his premises is too risky a position to implement should the matter be placed before a court of law for adjudication.

Unlawful Eviction or Recovery of Premises

The frustration with applying the legal process to evict an unwilling Tenant has lead to many Landlords attempting other unlawful procedures to evict such an unwilling Tenant whose tenancy has been properly determined in accordance with the Rent Control & Recovery Premises Law.

The Lagos State Rent Control & Recovery of Residential Premises Law prohibits any form of demolition, alteration, modification, harassment or molestation of a Tenant where the principal objective is the forceful ejection of the Tenant. Contravention of this provision by the Landlord or his agents or privies is an offence which on conviction attracts a fine of N20,000.00 (Twenty Thousand Naira) to N50,000.00 (Fifty Thousand Naira) and a term of imprisonment of three months.

Business Premises

Up-market residences, that are not listed in the schedule of the Lagos Rent Control Law, with business premises are regulated by the Recovery of Premises Law No. 9 of 1976 (\”Recovery of Premises Law\”).

The provisions of the 1976 Recovery of Premises Law are very similar to those of the 1997 Rent Control Law with the distinct difference being that business premises do not have a mandatory chap on what the land owner can charge as periodic rentals. Up market residences and business premises also have a higher rental collection history as opposed to downtown residences. Investors would therefore do well to ensure that all the provisions in relation to recovery of possession of premises are adhered to whenever the situation arises.

Lagos Mediation Centre

The Lagos State Government has established a Citizens Mediation Centre where disputes including those of Landlord and Tenant disputes are resolved through mediation. Where mediation fails or any of the parties refuses to submit to mediation, the parties would be advised by the Centre to seek redress in Court.

Conclusion

The provisions of the rent control and recovery of premises laws in Nigeria have been held more in disobedience than in obedience for many years as a result of the scarcity of new apartments or the maintenance of existing apartments.

The attempt to regulate rental values for properties in Nigeria has reduced the interest to invest in real estate in Nigeria. Research also shows that rent control schemes in other parts of the world that are not indexed against market forces of demand and supply usually do not maintain the minimum acceptable human standards for good housing.

The Nigerian government must review the land tenure system in Nigeria such that the original owners of so-called communal land and private sector investors are able to collectively work towards meeting the developmental goals set for the people of Nigeria.

The post Real Estate Investments & Rent Control Laws in Nigeria. appeared first on 9japroperty.

The starting point of this income analysis is to ensure that the cost of purchase is appropriate. If a property is overpriced and it is purchased with borrowed funds, the cost of fund could significantly increase to the detriment of the investor. Ideally, it is always better to buy a property a little below its actual value. This ensures that you have bought at a profit from the beginning. Some investors disregard this basic rule and buy properties when the price is not right hoping that it will become profitable in the future. This way of thinking overlooks several important points.

In a rapidly appreciating market, an investor who pays too much for a property might escape the downside of such a decision. However, if you consider the time that it would normally take the property value to attain that of comparable properties, the cost of funds, and the risk of a negative reversal in the market, you will realise that such an investor could lose lots of money.

Although a property does not have a shelf life like a supermarket item, it does have a time span that determines its premium value. This is one reason why you should avoid buying a property that is already nearing its replacement time except you intend to pull it down, renovate or reconstruct it. However, if you are buying the property for use as a rental property, you would want to ensure that you will not need to spend a lot of money on the property. Engage professionals that can determine the structural health of the building before you buy.

In addition to this, you have to factor into your costs what savvy real estate investors refer to as the net operating income of the property.  The average investor focuses on the income that could be derived from a property without regard for the total cost of maintaining the property. The net operating income of a property is what is left after you add together the total rental income that you will make from a property less the various expenses that you have incurred in generating that income. Some of the expenses that you should deduct are agency fees and any regular government charges that you are expected to pay.

It is equally important to consider and factor into your calculation the time when the property will be vacant and will not generate any income for you. This is especially important if you intend to use the income from the property to pay off any loan or mortgage. Although it is the desire of every landlord to have his or her property occupied every time, this is impractical. Tenants will move out when you expect and when you do not expect. More often than not, the property will stay unoccupied for a few days or months before a new tenant moves in. This means that the property will not generate income for you during that period. You need to keep this in mind.

Furthermore, you should take as much precautions as possible to avoid litigation relating to possession of a property. In Nigeria, there are some loopholes in the system that, if not properly managed, could inadvertently keep a tenant on your property while you are not making any income from the property. The time that a lawsuit takes cannot be determined ahead .Some proactive steps that you can take in this regard is to prescreen tenants before renting and to ensure that there is a signed tenancy agreement that clearly defines the responsibilities as well as rights of both parties.

There are many factors that come into play that could influence the amount you realise from a rental property and how any of the factors discussed above could affect your investment. For instance, the effect of a slow economic climate is more pronounced in high-brow areas than in areas with cheaper rents. In many places with expensive rents, the vacancy ratio is very high during periods of economic downturns while low and medium income areas are relatively more stable. When you understand the context of your investment, you are better able to evaluate and analyse the possibilities.

PUNCH.

The post How to analyse real estate investments appeared first on 9japroperty.

I’d like to walk you through some of the different areas of real estate investing so you can get a general lay of the land if you decide this is an area you might want to devote significant time, effort, and resources to in your own quest for financial independence and passive income.

Before We Talk About Real Estate Investments …

Before we dive into the different types of real estate investments that may be available to you, I need to take a moment to explain that you should almost never buy investment real estate directly in your own name.

There are a myriad of reasons, some having to do with personal asset protection.  If something goes wrong and you find yourself facing something unthinkable like a lawsuit settlement that exceeds your insurance coverage, you and your advisors need the ability to put the entity that holds the real estate into bankruptcy so you have a chance to walk away to fight another day.  A major tool is structuring your affairs correctly involves the choice of legal entity.  Virtually all experienced real estate investors use a special legal structure known as a Limited Liability Company, or LLC for short, or a Limited Partnership, or LP for short.  You should seriously speak with your attorney and accountant about doing the same.  It can save you unspeakable financial hardship down the road.  Hope for the best, plan for the worst.

These special legal structures can be setup for only a few hundred dollars, or if you use a reputable attorney in a decent sized city, a few thousand dollars. The paperwork filing requirements aren’t overwhelming and you could use a different LLC for each real estate investment you owned. This technique is called “asset separation” because, again, it helps protect you and your holdings.  If one of your properties got in trouble, you may be able to put it into bankruptcy without hurting the others (as long as you didn’t sign an agreement to the contrary, such as a promissory note that cross-collateralized your liabilities).

With that out of the way, let’s get into the heart of this article and focus on the different types of real estate.

From Apartment Buildings to Storage Units, You Can Find the Type of Real Estate Project That Appeals to Your Personality and Resources

If you’re intent on developing, acquiring, or owning, or flipping real estate, you can better come to an understanding of the peculiarities of what you’re facing by dividing real estate into several categories.

Residential real estate investments are properties such as houses, apartment buildings, townhouses, and vacation houses where a person or family pays you to live in the property. The length of their stay is based upon the rental agreement, or the agreement they sign with you, known as the lease agreement.  Most residential leases are on a twelve-month basis in the United States.

Commercial real estate investments consist mostly of things like office buildings and skyscrapers.  If you were to take some of your savings and construct a small building with individual offices, you could lease them out to companies and small business owners, who would pay you rent to use the property.  It isn’t unusual for commercial real estate to involve multi-year leases.  This can lead to greater stability in cash flow, and even protect the owner when rental rates decline, but if the market heats up and rental rates increase substantially over a short period of time, it may not be possible to participate as the office building is locked into the old agreements.

Industrial real estate investments can consist of everything from industrial warehouses leased to firms as distribution centers over long-term agreements to storage units, car washes and other special purpose real estate that generates sales from customers who temporarily use the facility. Industrial real estate investments often have significant fee and service revenue streams, such as adding coin-operated vacuum cleaners at a car wash, to increase the return on investment for the owner.

Retail real estate investments consist of shopping malls, strip malls, and other retail storefronts. In some cases, the landlord also receives a percentage of sales generated by the tenant store in addition to a base rent to incentivize them to keep the property in top-notch condition.

Mixed-use real estate investments are those that combine any of the above categories into a single project. I know of an investor in California who took several million dollars in savings and found a mid-size town in the Midwest. He approached a bank for financing and built a mixed-use three-story office building surrounded by retail shops. The bank, which lent him the money, took out a lease on the ground floor, generating significant rental income for the owner. The the other floors were leased to a health insurance company and other businesses. The surrounding shops were quickly leased by a Panera Bread, a membership gym, a quick service restaurant, an upscale retail shop, a virtual golf range, and a hair salon. Mixed-use real estate investments are popular for those with significant assets because they have a degree of built-in diversification, which is important for controlling risk.

Beyond this, there are other ways to invest in real estate if you don’t want to actually deal with the properties yourself.  Real estate investment trusts, or REITs, are particularly popular in the investment community.  When you invest through a REIT, you are buying shares of a corporation that owns real estate properties and distributes practically all of its income as dividends.  Of course, you have to deal with some tax complexity – your dividends aren’t eligible for the low tax rates you can get on common stocks – but, all in all, they can be a good addition to the right investor’s portfolio if purchased at the right valuation and with a sufficient margin of safety.  You can even find a REIT to match your particular desired industry; e.g,. if you want to own hotels, you can invest in hotel REITs.

You can also get into more esoteric areas, such a tax lien certificates.  Technically, lending money for real estate is also considered real estate investing but I think it is more appropriate to consider this as a fixed income investment, just like a bond, because you generating your investment return by lending money in exchange for interest income.  You have no underlying stake in the appreciation or profitability of a property beyond that interest income and the return of your principal.

Likewise, buying a piece of real estate or a building and then leasing it back to a tenant, such as a restaurant, is more akin to fixed income investing rather than a true real estate investment. You are essentially financing a property, although this somewhat straddles the fence of the two because you will eventually get the property back and presumably the appreciation belongs to you.

The post Different Types of Real Estate Investments You Can Make appeared first on 9japroperty.

According to him, Dangote has spurred the industrialisation of many African economies through the establishment of integrated cement plants which are geared towards making those countries self-sufficient in cement production.

Oshiomhole was quoted to have stated at the inauguration of the 1.5 million metric tonnes per annum Dangote Cement Grinding Plant in Douala, Cameroon.

He said the real sector was the engine room of any economy, therefore investments in the sector would have a multiplier effect on other sectors leading to massive direct and indirect job opportunities.

He noted that the growth resulting from Dangote’s investments has propelled job creation which African countries needed.

“Many of the so called entrepreneurs are mere traders whose business activities could hardly rejuvenate the economy, that is why when they reel out figures to indicate there is a growth it does not reflect on the economy and the people,” he was quoted as saying.

He said Dangote was the true symbol of black capital, where capital for investment in Africa is expected to flow from Africans into the African economies.

“It is better for the likes of Dangote to invest in Africa than African countries looking for loans which come with outrageous interest rates,” he said.

Dangote Cement had recently inaugurated plants in Ethiopia, Zambia and Cameroon with each capable of producing 1.5 million metric tonnes per annum.

The said it had also set machinery in motion to commission its plant in Tanzania, followed by Senegal with another 1.5 metric tonnes per annum capacity cement plant.
PUNCH.

The post Oshiomhole lauds Dangote’s investments across Africa appeared first on 9japroperty.