Chijioke Iremeka writes that the plan by Governor Babajide Sanwo-Olu administration to introduce monthly tenancy in Lagos State with a view to alleviating the financial burden in rent payment to landlords by tenants is generating mixed reactions from landlords, tenants, estate developers, property lawyers and other stakeholders.
The recent pronouncement by the Lagos State Governor, Babajide Sanwo-Olu, that his administration would enforce a monthly tenancy on property occupancy from 2022 to alleviate yearly financial pressure on tenants is generating mixed reactions from renters, landlords and other stakeholders.
The governor said the initiative was part of the resilience policy of his administration, which was agreed after a rental survey that revealed that about 88 per cent of tenants would prefer to pay their rent monthly than yearly.
At the 10th meeting of the National Council on Lands, Housing and Urban Development in Lagos, Sanwo-Olu posited that the prevailing rental model in which people pay yearly rent in advance to property owners had become inadequate to address contemporary realities in the housing sector, especially in cities where demand for properties is high. He advocated a monthly rental system, which, he said, would be affordable to low and middle-income earners who are pressured by yearly rent obligations. Sanwo-Olu was supported by the Minister of Works and Housing, Babatunde Fashola when he (minister) declared that the yearly rental system had created inequality in housing supply and widened the affordability gap for low-income earners. Fashola had brought the rent down from two years to one year during his administration as the governor of Lagos State to ease rent burden, but the forces of demand and supply hiked the prices of apartments. The Commissioner for Finance, Rabiu Olowo, said the state government would implement the new policy by working with different relevant stakeholders.
“Now, Lagos State has a model that will work and enable residents to pay their rent with ease.
“Landlords have nothing to lose because they will continue to receive their rent and their default risk is zero. The monthly tenancy is a pro-people plan to reduce financial pressure of yearly rent on tenants. The goal of this policy is to equate rental arrangements with the mode of earning which is by and large monthly.” He noted that the percentage of residents depending on tenancy arrangements for housing in Lagos is high, while landlords charge double rent for an apartment every two years. The Special Adviser to the Governor on Housing, Mrs. Toke Benson-Awoyinka, said the monthly rent payment scheme would benefit landlords as they would be paid promptly, while tenants would be free from the burden of yearly payment of huge amount of money.
Benson-Awoyinka explained that for tenants to come on board, they must meet the requirements, which include ensuring that they have the capacity to make the payment monthly. “We know we cannot enforce monthly rent collection on landlords but we have created a platform that will make monthly rent payment possible for tenants. When the system begins and runs fine, many more landlords will come on board.”
A real estate company, which has been an advocate of bit-by-bit payment of rent, Rent Small Small Ltd., said eight in every 10 residents of Lagos preferred to pay their house rent monthly. The Chief Executive Officer of the company, Mr. Tunde Balogun, said the preference for monthly payment was revealed by a survey conducted in Lagos, which polled 1,389 adults, of which 851 were working class youths between the ages of 20 and 40 years.
“It is not surprising that many will not like to continue the cycle of yearly rent payment. This is due to financial pressures ranging from raising quarterly school fees to footing basic bills that families experience in Nigeria.
“Naturally, it’s easy to assume that Nigerians will like to pay their rents upfront for one or two years in some cases. This is because it has always been the pattern, considering that it is what the landlords want.
“This time, however, it is amazing to see that more Nigerians want something different from the norm. Personally, I do not believe funds that have not yet been worked for should be tied up as rent for a year. Such money could still be put to use to work for you and make you enjoy a level of financial stability.
“When people can rent monthly, it makes it easier for them to pay their bills, make investments, take vacations and make plans for long-term projects,” Balogun, a co-founder of Rent Small Small explained. For James Ojurongbe, a FESTAC-based renter, if properly implemented, the planned monthly tenancy will be highly commended. “Have you ever wondered why life is so difficult to live in Nigeria? It’s because we earn monthly incomes but our key expenses are yearly – rent, school fees and others. In advanced countries, payments for rents are done weekly and monthly. Bills are paid weekly in the United Kingdom and monthly in the United States. This is because salaries are mostly earned weekly and monthly in those countries. This policy will also reduce the number of empty apartments that litter the Lagos landscape while many people are sleeping under the bridge. “For instance, a person sleeping under the bridge may not be able to afford a house of N150, 000 per year, but if asked to pay N15, 000 monthly for the same apartment, he would most likely be able to afford it,” Ojurongbe said. Also, a teacher and a mother of four, Mrs. Bisi Ajani, who hails from Ogun State, said most Nigerians were largely daily or monthly income earners, therefore, bills should be paid monthly to ease cash flow. “The monthly tenancy is a welcome development. I believe that landlords will accept the monthly payment if Lagos State government enforces a system that will guarantee zero-default by tenants such as direct-debit payment and prosecution,” she said.
But other residents of Lagos who spoke to newsmen felt that the monthly payment of rent would put more pressure on the tenants. To them, the government is coming up with the new policy to cover up for its failures. They are of the view that the renters and tenants will be able to pay their rents promptly if there are good jobs for them to do and save money. Blessing Morgan, a hairstylist who operates at Isolo in Oshodi-Isolo Local Council Development Area, said: “I prefer yearly tenancy, though it’s hard to gather, but it has a way of taking your mind off rent for the next 12 months. At least, you will be able to focus on another thing. “Monthly rent will put too much pressure on the tenants because you will be thinking of your rent daily. It will make you not eat good food because you will always remember that you have a rent to pay at the end of the month, especially when you don’t have the money. Yearly rent payment helps you push this through.” For Ovie Ewekheme, a trader at Balogun Market, Lagos Island, payment of rent monthly is not ideal. According to him, the yearly tenancy allows him to focus on his business without putting his hands in his capital. “Before the rent expires, I would have planned where the money will come from. I don’t need to start pulling money out of my business monthly. I want to separate my capital from my personal expenditures. Once you pay it at a stretch, you have some peace for the rest of the year. Spending such money on regular basis is sickening. It’s like sucking one’s blood,” he said. A civil servant and a father of two, Mr. Lekan Ibrahim, who lives in a rented apartment at Oshodi, said the move would hike rent as landlords would want to collect monthly rent in round figure amounts. “For instance, N1million rent per year, if divided by12 months, is N83, 333 per month, but no landlord will want to collect that amount per month. Almost all of them will push the rent to a round figure of N100, 000. If that happens, the rent will have to go up.
“I know how these landlords reason. Paying this every four weeks, tell me how many tenants can afford N100, 000 to N150, 000 every four weeks? It is easy for the governor to come up with laws because he gets free living on taxpayers’ money. This policy is funny. Who advised the governor on this?” he queried. Mr. Phil Iyatse described movement from yearly tenancy to monthly tenancy as a total cultural switch, which implies that renters will have to re-plan their spending patterns to fit into the new order.
“You can imagine what the situation will be when you begin to pay your bills, school fees, power and water utility bills on a monthly basis.”
According to Iyatse, the new regime is not going to be easy, especially as the landlords will soon realise how cheap the rents they collect are.
“I believe some things are better left untouched. Do they have the means of sustaining monthly tenancy? The general outcome of this will be increased cost of real estate.”
To Mrs. Chibuzor Agozie, the new tenancy policy will make it easy for the monthly rent to be increased without much resistance. “If someone pays N240, 000 per year, the person shouldn’t expect the rent to be N20, 000 per month, which is the correct calculation, instead, the tenant should expect something in the neighbourhood of N30, 000 and N40, 000 monthly. “This is for a start. Then, in two years, you will see how easy it is for the landlords to increase the rent. As far as Nigeria is concerned, yearly tenancy is ideal. What should be abolished are things like two years upfront, exorbitant agency and agreement fees, among others,” she said.
Bayo Olaniyi, pondering on how the monthly tenancy will affect the people, said the state government should not bring Lagosians into another level of suffering.
“The payment of rent yearly or every six months is better for Nigerians. “Salary payments in Nigeria are not consistent; payment for contracts executed are also not assured. You sound a bit good with a good intention, I’m afraid that our environment does not support such a policy.” A landlord by inheritance, Mr. Obinna Nwagu, said: “Seeing what landlords of monthly tenancy go through, there is no landlord who will want to collect its rents monthly because it has always been laden with crisis. “I know how much my father had to fight to get his rent monthly. My father, who was a pensioner, wanted monthly rent to ensure he had money at hand but it was always a fight. That experience alone will not make me to opt for monthly tenancy.”
An estate agent, Femi Ogundele, who is based at Ikeja, said he did not have any problem with the new policy as long as his two years upfront commission would be paid.
Ogundele, who is the Managing Director of Femos Properties Ventures said: “We are going to be affected by this if the government decides to tamper with our upfront payment.
“Ten per cent a month will not do us anything. The government should also know that this is our source of livelihood from where we feed our families.
“We are important in this chain because many tenants need somebody to help them get the property, while the landlords need us to rent and market their property. What we are charging is for our services, the leg work, and the money spent in the search for a suitable apartment for the clients.”
However, Chinedu Agbo, listed two-year agent fees, two-year legal fee and caution fees, among others, as the reason for high rent in Nigeria, especially in Lagos.
“I got a house in FESTAC for N600, 000 per year but I had to pay N150, 000 agency fees; N60, 000 legal fees; and N50, 000 caution fees which they say you will get back. But they don’t give you this caution fee when you are leaving. I paid N810, 000.
“While the house owner takes N650, 000, those who didn’t buy a block or contribute labour to the construction of the property will now go home with N200, 000. I think this is what our government should look into and not monthly tenancy.
“I’m aware that some people, sometimes, have to pay higher than the cost of the rent, especially when it’s a room or two-room apartment,” he said. Reacting from the professional point of view on the social media platform of the Housing Development Advocacy Network, the Managing Director, Ace Hi-teck Construction Company Limited, Okupe Adewunmi said monthly rent payment by tenants might discourage investment in real estate if the government tries to enforce it. To him, monthly tenancy will make it difficult for a landlord who borrowed money to build the house to recoup his money and pay back.
“When tenants pay monthly, we have further reduction in housing provision because the landlord has no incentive or part capital to start a new one. That is if he has not borrowed money to build the house,” Adewunmi explained. A real estate developer and Managing Director, M.I. Okoro and Associates, Dr. Meckson Okoro said monthly tenancy would not work in Nigeria.
“Most Nigerians are not honourable enough to keep to their commitment to pay as at when due. It will never work in Nigeria. It is possible to work in the UK, USA and other countries in Europe and other Western countries because there exists a certain level of ethics and integrity in these countries. In Nigeria, the reverse is the case. “Apart from the administrative inconveniences, it will make investments in real estate unviable ventures, which will make developers and real estate investors to move their funds away from real estate. “The implication is that within a very short time, there will be scarcity of houses for residents but that of commercial will boom. In the long run, the government will forever regret introducing this policy. It will never work and succeed in Nigeria,” he argued.
President of Real Estate Developers’ Association of Nigeria, Rev. Ugochukwu Chime, wondered why the government would legislate on monthly rent payment when it has failed to control the cost of building materials.
He asked: “Why not build more houses and allow the laws of supply and demand to apply? Are you controlling the cost of other commodities in the market? Why not reduce the transaction cost and fees charged on the value chain of housing development? “Why not remove or reduce the cost of planning approval and title perfection and transfer costs? Why not reduce or remove the multiple taxations and the very brutal and scary means of enforcing them? Why not assist in domesticating the foreclosure law, to give comfort to landlords and investors in the real estate sector?
“Why not start by asking the public organisations like the Federal Housing Authority (FHA) and the various housing/property development corporations to lead the way?” Chime wondered why the government ministries, departments and agencies involved in the housing sector were not allowed since 1992 to migrate from affordable/social housing projects, for which they were created, to agents of home ownership/investment for the bourgeoisie. He also wondered why the government was not creating and enhancing the operating environment for the private sector investors to see the sector as a destination of choice. “Why are we scaring investors from Nigeria with the much undefined transaction roadmap and emotional/populist/propaganda agenda as a policy of governance?”
A property lawyer and Managing Partner, Lawrence Ndukwe and Co., Emeka Ndukwe, who holds the same view as Chime, said until the issues and recommendations raised are attended to, the policy would not see the light of the day.
“The government has to start with reducing charges on building plans, perfection and other fees,” he advised.