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.

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From Surulere, Gbagada, Yaba, Jibowu, Ebutte-Metta all the way to the Island (Victoria Island, Ikoyi, Lekki, particularly in Lekki/Ajah axis), almost 65% built houses have remained un-occupied due to high rents.

Lagos hinterland like Ikorodu, Ipaja, Alimosho, Ayobo, Oke-Aro, Abesan, Ijaiye-Ojokoro etc. are no better. Property owners remain king and fix rents arbitrarily without recourse to the prevailing dwindling economic situation, control or regulation by the government. Considering that property appreciation is dependent on government’s provision of amenities like good roads, drainages, pipe-borne water, electricity etc., why is the government quiet when the citizenry are being fleeced so brazenly?

The government has been accused of not doing enough in housing provision especially for the low-income earners. It is common knowledge that the houses being built by the government presently is far beyond the capacity of the majority of citizens, particularly salary earners. Since government is a social service and not for profits, then it behoves on it to look inward for delivery of mass houses with a social template. This will surely mitigate the continued arbitrariness of property owners in Lagos State.

I call on the governor of Lagos State, AkinwunmiAmbode to resume work on the unfinished housing estates left behind by his predecessor, specifically in Ijora, Surulere, Ilubirin/Osborne, Gbagada, Lekki, Akerele, Imota, Ikorodu etc. Completion of these estates must be with a social intent that will benefit the majority, mostly low-income earners.

The government owes it a duty to the citizens to protect their interest from inconsiderate property owners who want to exploit them. More than before, the Lagos State government needs to intervene in the control of rents so as to protect the citizens from predators. The government will need to revisit its edicts and tenancy laws, some dating back to the regime of Mobolaji Johnson up until the last attempt by the immediate past government of BabatundeFashola. The laws need to be re-jigged and fine-tuned for optimum performance, implementation and enforcement.

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Explanation that only a room was affected by the fire and the fact that the occupier was ready to effect necessary repairs fell on deaf ears. It was based on this that one had to seek for another accommodation, but what I met demands urgent actions and intervention of the Lagos State Government to avert needless breakdown of law and order.

In the first instance, Lagos property owners have gone out of control. They fix rents arbitrarily without any recourse to rules or tenancy laws. In the course of scouting around, I met a landlord who told me categorically that a two-bedroomed flat was N1m in a house in Surulere built in 1998. Even when other houses within the same vicinity were N500,000. He stuck to his gun telling me he had no apologies since he owned the property.

Another landlord said his own three-bedroomed apartment in a place close to the Lagos University Teaching Hospital was N1.5m when the same apartment in the same vicinity goes for N700, 000. He was adamant and saw nothing wrong, even though the house in question was the old Lagos Executive Development Board built probably in the 1970s. The same went for a landlord who told his tenants in a block of two-bedroomed flats to vacate if they were not ready to pay N800, 000 when their neighbours using the same two-bedroomed flat were paying N500, 000! It is not unusual for a prospective or sitting tenant to witness the above scenarios.

One very common category of property owners in Lagos are the inherited landlords/landladies. This is the group of people who inherit some of these properties from their parents or families. Some of this set of people is so vicious that rent increment on a yearly basis is not considered an issue. In fact, tenants residing in houses managed by this set of owners have little or no rights as any action is met with a threat of ejection. It is in this kind of places that house owners don’t pay any bills, be they waste management, security, house maintenance, water rate and some even electricity bill. Tenants are in most cases consigned to all sorts of illegalities that they dare not complain about.

It is common knowledge that from Surulere, Gbagada, Yaba, Jibowu, Ebute-Meta all the way to the Island (Victoria Island, Ikoyi, Lekki, particularly in Lekki/Ajah areas almost 65 per cent built houses have remained unoccupied due to high rents) the exorbitant cost of letting is shocking and unbearable to most tenants. The Lagos hinterland like Ikorodu, Ipaja, Alimosho, Ayobo, Oke-Aro, Abesan, Ijaiye-Ojokoro among others are not faring better. Property owners remain king and fix rents arbitrarily without any recourse to the prevailing dwindling economic situation or control or regulation by the government. Considering that property appreciation is dependent on government’s provision of amenities like good roads, drainage, pipe-borne water, electricity among others, why is the Lagos State Government quiet when the citizenry are being fleeced so brazenly?

The government on its part has been accused of not doing enough in housing provision especially for the low income earners. The celebrated low cost housing model developed by the Jakande administration in the Second Republic was not built upon towards delivering mass houses for the people. Instead, successive governments, particularly the last administration of Mr Babatunde Fashola, (who was accused of elitism), built houses beyond the reach of the common man. Since government is a social service and not for profits, then, it behoves Governor Akinwunmi Ambode to look inward for delivery of mass houses with a social template. This will surely mitigate against the continued arbitrariness of property owners in Lagos.

In addition, I will like to call on Ambode to resume work on the unfinished housing estates left behind by his predecessor, specifically in Ijora, Surulere, Ilubirin/Osborne, Gbagada, Lekki, Akerele, Imota, and Ikorodu. Completion of these estates must be with a social intent that will benefit the majority, mostly low-income earners.

PUNCH.

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The firm said the package was created under a working agreement with TrustBond Mortgage Bank Plc, which would offer 80 per cent of the cost of renting a house at any location in Lagos and Abuja.

“Property Bank is an online real estate marketing platform with arrays of properties covering residential, commercial, industrial, warehouses and plots of land.

“Rent seekers who are currently unable to afford their choice of properties can now live in their choice houses by contacting us for options of houses selectable from the platform, while TrustBond Mortgage Bank Plc will provide funding,” the firm said in a statement.

It added that under the product, the subscriber would contribute 10 per cent minimum equity with no collateral, while one year rent would be repayable in six to nine months, and two years rent repayable in 12 to 18 months.

According to the firm, the disbursement of funds is subject to the subscribers meeting the terms and conditions of TrustBond.

“TrustBond is our mortgage banker with a national mortgage banking licence and offices in Lagos and Abuja.

“Their presence in these cities gives residents the opportunity to access rent loans for properties provided by Property Bank,” the statement added.

The Chief Executive Officer, Property Vault Limited, the holding company for Property Bank, Mr. Andy Morkah, was quoted as saying that the goal of the ‘rent actuation’ plan was to empower consumers with the most thorough information in the market and bring them in direct contact with the agents.

He said, “At Property Bank, we help you find your perfect property. Our listings aim at providing you with as much information as possible and an in-depth insight on each property.

“Our agents are well equipped and they have the direct mandate for each property straight from the owners, bringing greater efficiency to the Nigerian real estate market.

“Searching for properties and full acquisition have been made easier; transactions can now be concluded in a maximum of 48 hours.”

Morkah said the firm had signed on properties from developers and direct brief agents in Lagos and Abuja, and had generated more than 7,000 properties on the portal.

PUNCH.

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Despite the economic situation of the country, and the efforts of the Lagos State Government to discourage the collection of two years rent in Lagos, landlords have doggedly persisted in their demand for two years rent for the following reasons;

Investment purposes: The first reason is that most Landlords demand two year rent because they need the lump sum of money for investment purposes. A year’s rent might not be enough to invest so most landlords insist on two years.

To attract committed tenants: Most landlords believe that a two year lease shows that the individual is serious and willing to commit to their property by committing to stay longer. So most landlords put a two year rent in other to attract people who are financially buoyant, and have plans of staying for a longer period of time.

Peace of mind: Renting a property takes a lot of time. Some properties stay vacant for about 6 months or more in some cases. A two year lease gives the landlord peace of mind that their property will not be vacant for the next two years.

Despite the advantages, a two year lease may pose some problems for landlords. Some of the common problems include;

Difficulty in vacating troublesome tenants: If a tenant is troublesome for example, the landlord may have to bear with such a tenant for a period of two years when their rent expires before he can vacate such person. This could be a sour period that would require patience on the part of the landlord to bear until their rent is due. This is the reason why you should employ the services of a certified real estate agency like RE/MAX when looking for a tenant or a property. Our experts ensure that due diligence is taken and potential clients are screened thoroughly.

Difficulty in yearly rent increment: A two year rent also makes it tough for a landlord to raise the rent. This may only be possible if the landlord puts a clause in the agreement that rent would be increased at a certain percentage after the first year, of which many potential tenants would decline. Otherwise, the landlord would only be able to increase the rent every two years instead of every year.

Property might remain vacant for longer: Taking the economic situation of the country into consideration, not many people have lump sum of money to pay a two year rent, as a result it might take longer to find someone to rent the property. Thus, the property might remain vacant for longer.
As opposed to common believe, a two year contract has some benefits to the tenant. Some of these benefits include;

Stall rent increment: Most notably, the tenant will benefit because the landlord cannot increase the rent until after two years.

Better deal on the long run: In return for promising to stay a two year term, a tenant could save a reasonable amount of money on the long run. Filling a vacancy can be stressful for landlords – they have to paint the walls, clean, fix damages, etc. which can cause serious financial strain in between tenants. Sometimes the risk of not finding a new resident quickly is enough for your landlord to offer you a less expensive rental rate than what you would get with a one-year lease.

Stall the stress of packing: The best thing about signing a two-year lease: You won’t have to go through the painstaking process of packing and moving all of your stuff again for at least two years.

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The most expensive real estate in Africa is in Angola’s capital, Luanda, according to a report released by the global property consultancy, Knight Frank. Prime office space there will set you back about $150 (R1 775) per square metre a month.

It’s one of the most expensive office rents in the world, according to Knight Frank’s Africa Report 2015. The high prices are driven by demand in the oil and gas sector and an extremely limited supply of stock, the company said in a press release.

Oil seems to be the common denominator for cities at the most expensive end of the list of 35 African cities compiled by the company.

For example, office space in Nigeria’s two major cities, Lagos and Abuja, come in at second and third most expensive on the continent. But even at $85 and $60 a square metre, it’s still significantly less expensive there than in Luanda.

Tied for fourth on the list are the capitals of Equatorial Guinea (Malabo), Gabon (Libreville) and Chad (N’Djamena), at $40 a square metre. The key export for these countries is petroleum.

Office space in Johannesburg seems cheap at the price of $22 a square metre. There is more prime office space available in South Africa’s commercial hub which drives down the price. “Office vacancy rates drifted upwards in many key South African markets during 2014, as a result of continuing development activity and moderate demand for space,” said the report.

Gabon, on the other hand, has had an undersupply of office space and companies have had to adapt residential properties or hotels. “There is a strong demand for the relatively small supply of good quality buildings,” states the report.

Even Maputo, at $37.50 a square metre, is more expensive than Johannesburg. Maputo is a relatively new entrant in the oil and gas sector.

Two of the cheapest cities on the list to rent office space are Malawi’s Blantyre and Zimbabwe’s Harare.

Office uptake in Harare is poor because of the country’s weakening economy, the report states. Void rates are in excess of 30% and space in new office parks remains largely unlet.

Residential property
It’s not just Luanda’s prime office space that’s among the most expensive in world, its residential property rentals are right up there as well. A four-bedroom executive flat is likely to cost between $15 000 and $25 000 a month. At the current exchange rate that’s R177 500 to R296 000 a month.

Johannesburg and Cape Town are cheap in comparison, at $4 500 (R53 000) and $5 000 (R59 000) a month respectively for an executive home with four bedrooms. In fact, it is more expensive to rent an executive home in Kinshasa ($8 000), Addis Ababa ($6 000) and Maputo ($6 000 a month) than it is in Cape Town.

Residential property in the oil-producing countries are again the highest, with Abuja at $8 500 and Lagos, Malabo and Libreville at $8 000 a month.

Gaborone, Harare and Blantyre have the cheapest rental rates for executive-level homes listed in the Africa Report. In Gaborone you’ll get a four-bedroom home for $2 180 a month and in Harare and Blantyre you’ll pay $1 500.

Urban growth
Africa’s cities are among the most rapidly growing in the world, according to the United Nations. Last year, about 60% of the continent’s population was rural but, by 2050, about 56% will probably live in urban areas.

South Africa is ahead of the curve in Africa: by 2012, 62% of the population was urban. There was a 50/50 urban/rural split in Nigeria in 2012, according to World Bank development indicators cited in Good Governance Africa’s Africa Survey 2014.

Nigeria is one of just three countries – the other two are India and China – that together are expected to account for nearly 40% of the projected growth of the world’s urban population between 2014 and 2050. India is projected to add 404-million urban dwellers, China 292-million and Nigeria 212-million, according to the UN World Urbanisation Prospects 2014 report.

Cairo, Kinshasa and Lagos were the only megacities in Africa in 2014, but three more are expected to emerge by 2030, according to the UN report. They are Dar es Salaam in Tanzania, Johannesburg and Luanda.

By 2025, the populations of Kampala (Uganda) and Lusaka (Zambia) are expected to double.

The number of African cities with populations between five million and 10-million is also expected to increase, from three in 2014 to 12 in 2030, the UN report states.

These demographic and economic growth prospects in Africa are attracting increasing numbers of international investors investigating opportunities in African real estate markets, according to Knight Frank.

“Large volumes of good quality commercial and residential property are needed to support the continuing African growth story,” said Francois Staples, joint chief executive and co-founder of Galetti Knight Frank, the company’s South African branch.

Shopping malls are a relatively new concept in much of Africa, but a spate of new malls has developed in cities such as Accra and Nairobi. South Africa is by far the most mature retail market in Africa and continues to see significant development, said the company.

“While many African countries remain challenging … to do business, there are high-growth opportunities across Africa for those able to those able to navigate their way through the markets,” said Staples.

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1. The Right Rent Is Based on the Desirability of the Unit

Do not set a standard price for all one bedrooms, or set a standard difference in price between one bedrooms and two bedrooms. Unless the units are exactly identical, this strategy will hurt you in the end. You should charge slightly different rents based on the desirability of the unit.For example:
You have a house with two one bedroom units for rent. One unit is on the ground level and the other unit is on the second floor. The units are identical except for the fact that they are on different floors and the unit on the second floor has an extra storage closet.You may think that setting the same rental price for both units would make sense, but this is not the case. Prospective tenants who see both units will jump on the second floor unit with the extra closet because they think they are getting more for their money comparatively. Once the other prospective tenants learn the “good unit” is taken, they will likely search for apartments elsewhere because they now feel the ground floor unit is overpriced. Charging an extra five to ten dollars a month for the second floor unit would be reasonable.

Set the Rent Based On:
View- apartments with a garden view are more desirable than those with a view of the parking lot.
Updates-units with updated appliances, hardwood floors or other amenities are more desirable than those without.
Square Footage- a 1,000 square foot one bedroom is more desirable than a 700 square foot one bedroom.
Layout- railroad style apartments are less desirable than other layouts.
Floor Level- higher floors are more desirable. The exception is a walk up, where after the third floor, you will have to start lowering the price because people will not want to go up and down all of the stairs.
An extra closet, balcony or window makes a unit more desirable.
2. The Right Rent Is on Par With the Competition

Check out local newspapers and online ads for apartments in your area that are similar to yours. This will give you an idea of the going rent in your area. Do this for a couple of weeks. Keep track of which apartments are getting rented quickly, which apartments have lowered their rent and which ones have been listed for many weeks.If you see several landlords in your market offering rental incentives to attract tenants, such as a free TV, it may mean that your area is over-saturated with rentals and you may not be able to command the rent you had hoped.You may even want to go check out some of the apartments in person and compare them to your unit. Ask the landlord if there is a lot of interest in the property. You should also talk to realtors or other landlords in your area to see what they think a fair price for your unit is. Once you have looked at these factors, you can adjust your rent accordingly.
3. The Right Rent Will Attract Tenants

Has anyone come to look at your property? If not, the price of your rental may be to blame. If your rent is set too high, or too low, prospective tenants will steer clear.Although people often equate a higher price with status, if your apartment does not have the location or amenities to back up the higher price tag, prospective tenants will have no desire to see your property. If your rental is priced too low for the area, believe it or not, people will not come because they may think something is wrong with your property. To succeed as a landlord, you will need to find the perfect price point.
4. The Right Rent Is Based on Market Demand

You will not just set a one-time price for your rental and then forget about it. You must constantly look at the market and adjust the rent based on demand.For example, when the economy is bad, the demand for rentals can go up because people can no longer afford their homes and are forced to rent instead. A bad economy can also cause a greater demand for smaller, cheaper apartments because people have to downsize. Another example is, in the summer, the demand for larger apartments may be greater because families are trying to move before the school year starts.The basic rule of thumb is, when there is greater demand for your particular unit, you can charge a higher rent. When there is less demand, you may have to lower the rent to attract tenants.
5. The Right Rent Leads to Profits

Everyone has a different goal when owning property. Regardless of your desire, the right rent should, at a minimum, be enough to cover all your expenses for the property. The rent should cover your PITI mortgage payment (if you have one), maintenance and repairs on the property and vacancy costs. In addition to this, landlords may be able to put, on average, zero to six percent of the rent in their pocket each month as a profit.Keep in mind that many property owners, especially those with large mortgages or construction loans, do not see an actual profit until they sell their property or until they have owned the property long term. Regardless, if the unit is not benefitting you in some way each month (paying down your mortgage, reaping tax benefits, putting money directly in your pocket), you have not set the right rent, or worse yet, you have overinvested in the property.

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