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Monthly rent, cosmetic solution to housing real challenges – Lawyer

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The Minister of Works and Housing, Mr Babatunde Fashola, SAN, has called for the promulgation of a law that allows tenants to pay monthly rent. But looking at the situation in Nigeria, it is difficult to say if this is achievable, a property lawyer, Mr Segun Ajayi, spoke to Onozure Dania on the possibility of monthly tenancy payment

Last year, the Minister for Works and Housing called for the promulgation of a law allowing tenants to be paying monthly rents as applicable abroad. What is your take on this?

While a monthly system of rent payment may hold some benefits, both for the tenant and landlord alike, such as the flexibility; the requirement of short notices to vacate premises which will put an end to the cumbersome process of recovery of premises; the potential for reduced rent and convenience in paying rent, especially by low-income earners, we must, however, weigh the benefits and downsides side by side to know how it would play out in our system here in Nigeria. This should help us make an informed decision. When laws are made, the peculiarity of a country must be put into consideration; the fact that the system works in other countries doesn’t guarantee a seamless operation here. I think the best approach in relation to the issue of monthly rent is the approach adopted by Lagos State. It has come up with a voluntary monthly rental policy, understanding how difficult the enforcement of such legislation will be. Moreover, Nigerian laws on tenancy already recognise monthly tenancy. For instance, section 13 (1) to (6) of the Tenancy Law of Lagos, 2011 makes reference to yearly tenancy, half-yearly tenancy, quarterly tenancy and monthly tenancy. I think making a law to enforce a particular type of tenancy is unnecessary. The laws should remain flexible to enable people decide for themselves the best options.

There were sharp and divergent views and reactions to Fashola’s call for monthly; what do you think made Nigerians react the way they did to the suggestion by the minister?

A lot of people are sceptical about the development, even though there have been claims that surveys carried out show that the majority of people prefer a change in that respect. I do not feel a lot of people agree in reality. There are issues that may make the innovation dead on arrival. The real issue is the cost of the rent itself. The housing deficit in some parts of the country, such as Lagos has brought about high cost of rent, particularly in central areas. Monthly payment of rent will not reduce the cost of rents to be paid, it may even be counterproductive in the sense that it may encourage landlords to increase rents since they will no longer be receiving the stable lump sum they get annually. Some greedy landlords may even take advantage of the situation to extort tenants, knowing how potentially easy it will be to evict them. Moreover, a lot of Nigerians have devised means of saving up money for their rents by engaging in schemes such as thrifts and contributions, which we call “ajo.” I think people do not want to worry about rent on a monthly basis in addition to other financial obligations, considering the harsh economic realities of the country. Also, eventualities do occur, such as loss of jobs and other emergencies, if rents are monthly, how will a person who would have otherwise paid his rent in advance be able to survive?

In 2021, when Mr Fashola advised state governments to enact laws to make mandatory monthly rent payments, he suggested that the law would make housing more available to the Nigerian masses, has that been achieved by any state since the advice was given?

As earlier mentioned, it will be difficult to enforce a monthly rent payment and this has not been achieved so far in any state. However, Lagos State, recognising how impracticable such legislation may be, has come up with its own initiatives to make monthly payments convenient for tenants. It has set up modalities for a social investment scheme that will enable tenants pay rent on a monthly basis; this arrangement is not mandatory; it allows only tenants and landlords who are interested to apply. The state intends to work with financiers, which will pay the yearly rent on behalf of the tenant and allows for the tenant to make a monthly repayment at a low-interest rate over a period of 12 months. The landlords will still get their annual rent. To qualify, the applicants, however, will be screened for creditworthiness; if the tenant is creditworthy, then such a tenant will qualify for the scheme. The scheme allows the state to pay the landlord the usual annual rent while the tenant spreads the repayment to the state. Considering the state of the economy, lack of availability of sufficient credit may be a great drawback for this programme and, as such, the scheme may not be able to accommodate a lot of people. There are also issues such as interest rates and events of default on the part of the tenant or the financier. Nonetheless, it is a welcome development and other states in Nigeria should follow suit.

The provision for yearly tenancy that is applicable in the tenancy laws of Lagos State is mostly applicable in other states of the federation. However, do you think the universality of such provision is practicable in Nigeria as advocated by the minister and what effect will it have on both the tenant and the house owners?

Matters relating to tenancy and rent control lie within the exclusive preserve of state governments, enforcing universal legislation on the issue is not possible. At the moment, the Federal Government cannot make uniform laws relating to tenancy and rent control that will be applicable and enforceable in all states.

The tenancy laws of most states in the federation make provisions for notice to deliver possession. For instance, yearly tenancy goes for six months and half-yearly goes for three months. Now, how many months’ notice will be given for someone paying monthly tenancy?

In the case of a monthly tenancy, the length of notice to quit is one month. This was the position of the Supreme Court in Adetayo v Coker (1996) LPELR-879 (SC). The Tenancy Law of Lagos also makes provisions for one month’s notice to quit in the absence of any contrary agreement between the landlord and the tenant.

Don’t you think the proposal for monthly rent will be practicable and will not have viral effects on mortgage systems, especially when most developers or house owners borrow money to build and in the end charge high and bulk rents to enable them settle their creditors as and when due?

That will depend on how the policy is implemented. If the Lagos approach is adopted, the mortgage systems in place will not be affected as landlords and developers will still get their rent on an annual basis. It’s a win-win situation for them.

What will be your proposal that will be probable and advantageous for both tenants and house owners regarding rent issues in the country, particularly with the prevailing economic situation in Nigeria?

Though the monthly rental system may be a noble attempt by the government to tackle the menacing housing and rental challenges in the country, I think it only scratches the surface as far as proffering a lasting and efficacious solution to the issue is concerned. It is a cosmetic solution to the problem at best, it only makes rent payments convenient.  The real issues are high cost of rent and housing deficits in the country. The respective state governments should take steps to ensure cheap and affordable housing by building low-cost houses and creating affordable mortgage schemes that can even enable people own their own homes. Thinking outside the box, the government should also invest more in infrastructures such as roads and better transportation systems, this is because one of the reasons for excessive rent is high concentration of people within certain areas. For instance, rents are relatively more expensive on the Island in Lagos, because a lot of people work there and as such would want to live closer to work to avoid the hectic Lagos traffic situation. If the transportation systems were effective, people would not mind living in more affordable but less developed parts of the state thereby freeing up the population around certain commercial areas. For instance, a person who works in Lekki or Victoria Island can now live in a less expensive area such as Ikorodu because the transport system is functional.

The Land Use Act of 1978 put all land under the management of the government. The decree was to be advantageous for the country and its citizens with regulations to protect public interest, as well as create efficiency of land use all over the country. But, purchasing land in Nigeria today without acquiring Certificate of Occupancy from the government puts you at a disadvantage since the land is not really yours. What is your take on this?

The Land Use Act of 1978 vests all land in states in the federation in the governor of the state to be held in trust and administered for the benefit of all citizens. The introduction of the Land Use Act brought about the nationalisation of all lands in the country, converting all landowners’ rights to a status similar to that of a tenant. It abolished the freehold system of land ownership which involves absolute ownership of land and introduced an interest in land known as a right of occupancy which has the semblance of a lease. This is because the right of occupancy, which is usually issued through a certificate of occupancy, is generally granted for a period of 99 years for residential purposes.  A Certificate of Occupancy is usually issued by the government on new land, and cannot be issued twice, therefore, subsequent buyers/owners of a property with a certificate of occupancy only have to obtain governor’s consent. Since all land in a state is vested in the governor of the state for the benefit of the citizens, the Land Use Act, therefore, prohibited the transfer of title to land without the consent of the governor being first obtained. Any such purported transfer without the consent of the governor is void, Sections 22 and 26 prohibit the transfer of interest in land without the consent of the governor.  This is important because, in the event of forceful acquisition by the state government, such landowners will have a right to compensation by the government. Section 28 of the Land Use Act empowers the state to revoke a right of occupancy for overriding public interest, such as building of infrastructures and other projects for the benefit of the public. Section 29 however requires that compensations be made to those persons affected, also section 44 (1) (a) and (b) of the Constitution of the Federal Republic of Nigeria 1999 provides that no immovable property or interest in an immovable property shall be taken possession of compulsorily except in a manner prescribed by law and upon payment of compensations. A person without a registered title will not be entitled to any compensation in the event of such acquisition because the person does not hold a legal interest in the land in the first place by virtue of the Land Use Act. It is, therefore, important that after purchasing land, the buyer should proceed to perfect his title which includes obtaining governor’s consent, stamping and registration.

Also, the process of documentation and property registration takes too long. This makes people cut corners and when due process is not followed, it becomes a problem for housing development, what can be done to end this?

High transaction costs, corruption, inadequate technical and human capacity, nonchalant attitude exhibited by staff and unnecessarily long and bureaucratic processing time, are some of the main problems associated with land registration in Nigeria. These factors make title registration a long and arduous task. Using Lagos as a case study, usually, the timeline for obtaining governor’s consent is officially 30 days but, in reality, the process may take as long as six months to one year. Perfecting one’s title in Lagos is a very cumbersome and expensive venture. A lot of people also get discouraged by the associated cost, an applicant is expected to pay assessment fee, which consists of consent fee, Capital Gains Tax, Stamp Duty and Registration fee, this is why a lot of persons don’t even bother.

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John Oshioke

web developer, Content Writer

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