THE LAGOS STATE TENANCY LAW: A CRITICAL LOOK

On August 25, 2011, our indefatigable Governor Babatunde Raji Fashola assented to and signed into law a Bill which was to become the Lagos State Tenancy Law. It brought to an end several months of speculation and controversy due to the anticipated, far-reaching changes that the enforcement of this Law would bring to Landlord-Tenant relations as already known and practiced.

This would not be the first time that the Lagos State government would try to regulate Landlord-Tenant relations in the State. Brigadier Mobolaji Johnson, the first Military Administrator of Lagos State after its creation in 1967, blazed the trail when he promulgated the Rent Control Edict. The thrust of this particular decree was to pre-determine rental rates, pegging them at various levels in different parts of the metropolis. Suffice it to say that the decree was not very effective. It is difficult, if not impossible, to control entirely what one does not own.

Several other decrees and laws followed with successive governments, all aimed at similar objectives and yielding comparable results. The current law, however, is significantly different from all the others in that it does not seek to control rent. Rather, by making illegal the offer or collection of anything in excess of one year’s rent in advance from a yearly tenant and six months’ rent in advance from a monthly tenant, Section 4 (its most widely debated provision) seeks to reverse the established trend of Landlords requiring intending Tenants to pay two or more years’ rent in advance for a fresh tenancy, or one year’s rent from supposed ‘monthly’ tenants .

The juxtaposition of ‘monthly tenant’ with a six month rental period is a contradiction in terms. One would have expected that monthly tenants, whether sitting or fresh, would be left as such rather than have them pay six months’ rent in advance. However, with the penchant of Landlords for demanding one year’s rent from supposed ‘monthly’ tenants in recent times, may we suppose that the government chose to ascribe some measure of benefit both ways by conceding six months to either side?

Section 4 of the Law reads as follows:

(1) It shall be unlawful for a landlord or his agent to demand or receive from a sitting tenant rent in excess of six (6) months from a monthly tenant and one (1) year from a yearly tenant in respect of any premises without prejudice to the nature of tenancy held at the commencement of the tenancy.

(2) It shall be unlawful for a sitting tenant to offer or pay rent in excess of one (1) year for a yearly tenant and six (6) months for a monthly tenant in respect of any premises.

(3) It shall be unlawful for a landlord or his agent to demand or receive from a new or would-be tenant rent in excess of one (1) year in respect of any premises.

(4) It shall be unlawful for a new or would-be tenant to offer or pay rent in excess of one (1) year in respect of any premises.

(5) Any person who receives or pays rent in excess of what is prescribed in this Section shall be guilty of an offence and shall be liable on conviction to a fine of One Hundred Thousand Naira (N100, 000.00) or to three (3) months imprisonment.

It is noteworthy that this portion of the Law applies both to residential and business premises.

The masses no doubt seem pleased with this development, believing the Law will result in the lifting of the typical advance rent burden of two years or more from their shoulders. However, on the part of the Landlords, various scenarios have already begun to play out in an attempt to mitigate the effects of the Law, a few of which are listed below:

- There has been a general increase in annual rental values where landlords have chosen to comply with the Law, to cushion the effect of having to accept one year’s rent instead of a lump sum for two years.

- Landlords now employ diverse methods to circumvent the Law without permitting evidence of same. For instance, fresh tenants who have still been required to pay two years’ rent are given receipts evidencing payment for only one year to prevent them from laying a formal legal complaint.

- Some comfortable Landlords have chosen to take their rental properties off the market altogether, waiting to see how the Law will play out over time, as they prefer that alternative to leasing them for less than they consider worthwhile.

Truth be told, the forces of demand and supply may eventually put paid to the Law. We are all very aware that Lagos State has a huge deficit of relatively affordable housing, and the stock is not increasing rapidly enough. One would expect that incentives be introduced by the government to increase the stock of housing. This Law, conversely, is definitely a disincentive to investment in property or housing as it would seem that it is the intention of the government to control the returns on one’s investment. To evade the law, a property black market will of necessity come into existence. As has been the case with similar laws in the past, this will make the law of little or no effect.

In addition, building maintenance standards are likely to drop as Landlords are likely to be reluctant to commit a substantial part, if any, of one year’s rent to renovations or repairs should the need arise.

While it might seem that the masses stand to benefit from the law at the onset, over time one sure effect would be greater scarcity of housing which will result in a general increase in rental values, and could possibly deteriorate into an annual increase in rent by Landlords to compensate for a perceived ‘loss of income’ on their part.

In actual fact, there would be no need for this law if housing supply exceeded demand. One only needs to consider the Lekki axis to verify this claim. Over the past two years, with regard to certain types of property – both residential and business – paying one year’s rent in advance has been the order of the day due to the glut of such property types. In truth, some landlords would gladly let out their properties for six months’ rent in advance. Alas, there are no takers.

It is therefore advisable that the government do everything within its power to encourage investment in the housing sector, whilst contributing its own fair share of social housing to cater for the underprivileged and physically challenged.

There is something of a paradox when one considers the four areas exempted from the operation of the law – Apapa, Ikeja GRA, Ikoyi and Victoria Island. Landlords in these areas should not have been excepted from sacrificing their revenue alongside their counterparts in the other areas, particularly since the locations of their properties guarantees that they have much more than the rest. One would have expected that the same parameters would apply to all.

Perhaps, more than anything else, what has been overlooked amidst deliberations and discussions on this issue is the enforcement of the Law. How will it be enforced? A Law that is not enforced is of no effect whatsoever. The Law criminalizes payment or collection of rent in excess of one year. To establish a breach of the Law, therefore, there must be evidence of payment of rent in excess of the mandated period.

Will a Tenant in dire need of accommodation who has already coughed out two years’ rent go and lay a formal complaint against his Landlord? What can he possibly hope to achieve by it? The Tenant certainly is unlikely to ever get to live in the house, and worse still, stands next to no chance of getting his money back after his Landlord’s trial, conviction and possible imprisonment if he fails to pay the fine of N100, 000.00 (One hundred thousand Naira).

Perhaps the Lagos State Government might be willing to send a decoy to an unsuspecting Landlord so that he serves as a scapegoat. They must be equally willing to forfeit the rent paid to ensnare him, as the Law does not provide that the Landlord will be required to refund the rental sum as part of the penalty upon conviction. Interestingly, depending on the sum in question, paying the fine in lieu of imprisonment may be of no consequence whatsoever to the Landlord. I doubt that much more need be said.

In jest, it may be argued also that since the Law illegalizes both the payment and collection of rent in excess of one year, the Law deems both the paying Tenant and the collecting Landlord complicit in its breach. Who then will seek to enforce it? A third party?

However, one does not need to throw out the baby with the bathwater, as certain provisions of the Law are laudable.

Under the law, the notice for Tenants to Quit premises is no longer tied to the anniversary date of the lease but may terminate on or after the date of expiration of the tenancy, except they are tenants at will or monthly tenants – Section 13 (4). Hence, a landlord no longer has to give a tenant six months’ notice in the case of a tenancy for a fixed term (that is, a lease pre-determined by an agreement). He is simply required to serve a written notice of his intention to apply to recover possession seven days prior to when he intends to commence the process of Recovery of Premises - Section 13 (5). Furthermore, service of the said Notice to Quit shall be proper service. Section 18 provides for proper service on residential premises and Section 19 provides for proper service on business premises.

Another very welcome development is the fact that the Law allows for Alternative Dispute Resolution (ADR) in the event of a dispute. This mode of resolution of disputes is fast catching on worldwide and is faster and ultimately less costly than having recourse to the Courts.

Section 30 provides that if a Tenancy or Lease agreement contains an arbitration clause, it will be upheld and enforceable in court and will not be construed an ouster of the court’s jurisdiction. In the absence of such agreement, a written application may be made by either of the parties for a court-appointed arbitrator or tribunal. The Arbitration Award shall be enforceable as a Judgment or Order of the court only upon registration. It should be noted that such Arbitration Award must be registered within three months of the date of the Award.

Section 32 promotes amicable settlement between the parties by means of reconciliation and mediation. The court may also choose to refer proceedings to the Lagos Citizen Mediation Centre or the Lagos Multi-Door Court House.

Of course, this article has not examined the Law in its entirety. However, it is hoped that it has thrown a bit more light on the issues as contained in the Law. Tenants and landlords alike would do well to acquaint themselves with its provisions. More than that it is necessary that the law be reviewed and perhaps revised, but this time with greater input from stakeholders.

VALUERS OPINION AS A BASIS FOR DETERMINING PROPERTY TAXES

INTRODUCTION
Taxation is the system by which money is raised for public purposes by compelling eligible tax payers (individuals and corporate bodies) to pay an amount of money to the relevant tax authority.

Property Tax liability is on ownership and/or occupation of property. The proceeds are traditionally used to offset the costs of providing municipal services such as refuse disposal, provision of motor parks, cemeteries, maternity centres, e.t.c.

The tax to be paid by the owner or/and occupier of the property is determined upon the derivation of either the Capital Value of the property, where the tax is on the capital worth of the property or Rental Value where the tax is on the annual income of the property as in property/tenement rating.

Determination of value whether capital or rental is the sole preserve of the Estate Surveyor and Valuer. He has the backing of the law, Decree 25 of 1975, requisite training, skill and experience to form such opinions of value. It is therefore of utmost importance that his services be put to use by the various tax agencies.


VARIOUS PROPERTY TAXES IN NIGERIA
There is a multiplicity of levies, fees, charges, rates, contributions and development funds being demanded and collected by Government, all in a bid to generate the much needed revenue.

Various property taxes are enumerated hereunder:
A. Capital Gains Tax
B. Stamp Duty
C. Consent Fees
D. Development Levy
E. Withholding Tax
F. Property/Tenement Rate
G. Land Use Charge
H. Probate Tax

A. Capital Gains Tax
Capital Gains Tax is tax charged on capital gains on disposal of an asset, real estate inclusive. Certain proportion of the gains realized is not a direct result of any expenditure incurred by the owner to enhance or improve the property in any way. Such gains accrue as a result of the day to day movement of the economy, which is a direct result of the various inputs/provisions of government.

Capital Gains can also be due to the fall in the value of money or inflation. For proper collection of this tax, the price of acquisition of the real estate in question must be known as well as the disposal price. It is however a well known fact that more often than not, these prices are not disclosed to the relevant authorities. Disclosed figures are usually far lower than the actual acquisition and disposal figures.

Some State Governments are known, probably due to the above to charge this tax on the sale price, as opposed to the gain. This ought not be so. The current rate of this tax is 2% of assessed value in Lagos State.

B. Stamp Duty
These are taxes collected on written instruments, leases, mortgage deeds, e.t.c. Non-payment of Stamp Duty does not invalidate or nullify the document. The document however cannot be tendered in a court of law as an exhibit, if there is need to seek redress, except it is stamped. A penalty is usually demanded for deferred stamping.

If the value in the stamped document is less than the open market value, the party who requires redress by reason of the document is at risk. It therefore behoves the said party to ensure that the value indicated is as close to the open market value as possible. This devise can be used effectively to create a database of property ownership, for effective land administration and revenue collection.

C. Consent Fees
These are fees paid by applicants seeking the Governor’s consent for land transactions, e.g. assignment, mortgages, sales sub-leases, sub-division of plots e.t.c. A certain percentage of the capital value of the property in question is charged as consent fee.

D. Development Levy/Capital Contribution
When layouts or estates are prepared, there is a need to provide adequate infrastructure, such as roads, drainage, electricity, water, e.t.c., to service the estates or layouts. Money for the provision of these infrastructures are demanded from those who acquire rights and interests in such layouts and estates. These services are known as a Development Levies or Capital Contributions. Such monies may be collected as huge sum once and for all, or on the other hand it could be spread over the succeeding years as several smaller sums.

E. Withholding Tax
This is the tax deducted at source and paid over to the relevant tax authority as deposit, for the purpose of reducing the amount of tax, which the payer would be called upon to pay when the assessment is finalized. It is payment on account. The provision for withholding tax with respect to rent has not been very effective, since very few persons are complying. One finds that mainly corporate organizations comply, As they easily be detected for non-compliance. Withholding tax is currently 10%

F. Property/Tenement Rate
Levied on ownership/occupation of property based on the rental value of the property. In tenement rating the tax or rate is based on the Rateable Value of the property. This value is derived from the rental value of the property.

G. Land Use Charge
This law was enacted on the 22nd of June 2001. It is a law to make provision for the consolidation of all property and land based rates and charges payable under the Land Rate, the Neighbourhood Improvement Land Charge and Tenement Rate Law in Lagos State into a new Land Base Charge. The Law is aimed at consolidating the three existing Land Use Charges available to the State Government and the Local Government, as enumerated above.

H. PROBATE TAX
This is a subject of the next paper.


DETERMINATION OF VALUERS OPINION

The value of a particular interest in landed property may be defined as the amount of money which can be obtained for the interest at a particular time from persons able and willing to purchase it.

A valuer is requested to give his opinion on various types of interest in various types of property for multifarious purposes. The approach to the determination of value in one case will of necessity differ from the other, depending on the interest to be valued, e.g. leasehold or freehold and the purpose of the valuation e.g. mortgage or annual rental value.

The various approaches, that is, methods of valuation are enumerated hereunder, both conventional and contemporary:

A. Direct Comparison: The simplest and most direct approach in arriving at a value is to compare the property to be valued with the evidence of sale of similar property. The following should be noted when using this method of valuation. The properties must be similar. The properties must be in the same locality and there must be adequate record of transactions. Isolated sales are not sufficient evidence for the comparative method.

B. Investment Method: What is basic to this method is that the property is considered as an investment. The investor wishes to invest capital to obtain an annual return thereon in the form of a rent income, which represents an acceptable rate of returns

C. The Depreciated Replacement Cost Method: Formerly known as the Contractors Method. This is usually used where the property is such that seldom changes hand in the open market. The method is on the assumption that the value is based on the cost of procurement of the property

D. Residual Method: The valuer at times needs to give a valuation of land or buildings which are to be developed or re-developed. This method is used to value properties with development potential. Development potential is present when a property can be improved or developed so that the value will be increased by more than the expenditure.
The residual value is the value of the property after it has been developed less total cost of development. It represents the value of the property in its unimproved state, reflecting the development potential.

E. Discounted Cash Flow (DCF): The principle underlying the valuation of a future income flow within the investment method of valuation is that the future income should be discounted at an appropriate rate of interest to determine its present value.

DFC calculation involves the discounting of all future receipts and expenditures, similar to the investment method of valuation, but they can readily be used to allow for inflation, taxation and frequent changes in the amount of income and receipts as may be required.


DIVERGENT VALUATION OPINIONS

Johnson, Davis and Shapiro (2000) ‘Although the aim of the valuer is to provide an estimate of market value, it should not be assumed that each valuers estimate of value and the market price or market value will always be the same. Different valuers could well place different values on a particular interest at a particular time, because they are making estimates and there is normally room, within certain limits for differences of opinion.’

S. Udo-Akagha (1985) “Valuation is not a precise science. This has never been denied. In fact, it is why this ‘imprecise’ science of estimating (by a professional valuer) of a things worth can only be practiced by people of care and diligence.’

The introduction of the ‘NIESV Guidance Notes on Property Valuation (1985) says in part that ‘It is often discovered that in practice problems do arise where differences of opinion of two valuers on the same property are so wide that the values could not be relied upon. As the society is demanding high standards for the services it receives and for which it pays, it is important our profession ensures that high standards are maintained by all members’.

NIESV Journal 1998 Editorial comment ‘the valuation process has been the focus of recent debate and controversy both within and outside the profession. Cases of two or more valuers giving as many different capital values with wide margins of variation, for the same property abound …. We must respond to the market and if necessary change from long established practices. This is particularly important in our valuation work’.

CAUSES OF DIVERGENT VALUATION OPINIONS

1. Use of different methods of valuation
Valuers are yet to agree as to what method of valuation to use when valuing for a particular purpose. Use of different methods, expectedly give varying values. Clients are at a loss as to how we are unable to have a consensus of opinion as to what method to apply when valuing for a particular purpose.

2. Arbitrary Valuation Variables
The accuracy of our valuation opinion is further undermined by the fact that there is also no consensus as to the determination of variables upon which the valuation opinion is based. The variables differ from firm to firm. Basic data on costs, property yields, rate of depreciation do not reflect the true time market situation, owing partly to inadequate information on the property market. It is therefore not far fetched that the resultant valuation opinion is divergent, when valuing the same property, for the same purpose, at the same point in time.

3. Towing the Clients Opinion of Value
Some valuers are pre-disposed to reflecting valuation opinion of their client as opposed to their determining and insisting on the actual valuation opinion. This is particularly so when undertaking mortgage valuations or valuations for compensation.

4. Unavailability of Relevant Data
Data is a key requirement for valuation analysis. The collection of representative data, giving a clear indication of market activity, has been an uphill task. Buyers and sellers, lessors and lessees, refuse to disclose the actual amount of property transaction. Obtaining the actual figure is nigh impossible, as this more often than not is a closely guarded secret. Furthermore, even when available the ‘Nigerian Factor’, which should be more appropriately called corruption, more often than not ensures the figures are inflated, so as to allow for ‘settlement ‘.


RECOMMENDATIONS AND SUGGESTIONS

B. T. Aluko (1998), ‘What will endanger the valuers reputation more than anything is a belief that his methods are incorrect, illogical and by deduction capable of leading to inaccurate valuation. The profession must therefore evolve to meet the challenges on it will wither away’.

1. Bridging the gap between the Academia and the Practitioners
The Academia must be allowed to play a central role whilst ESVARBON and NIESV pay an overseeing role without asphyxiating the academia. They must be given ample room to do what they know how to do best, whilst giving room for needful practical input from the practitioners.

It is a known fact that over the years the Academia has been at the forefront in developing new approaches to property investment and valuation. Practitioners must give these efforts a chance, whilst lecturers must not fail to give practitioners their due all in the interest of the profession.

2. Research
Research is expensive business. Research must be initiated and it must be sustained. Neither ESVARBON nor NIESV can do this with its limited funds earmarked for so much, it therefore behoves us, Estate Surveyors and Valuers to make the said funds available, by making regular and worthwhile contributions to research. As we do this our profession will make meaningful development and we will handover, an enduring legacy to the next generation.

3. Property Data Bank
There is a need for the establishment of a property data bank. A property Data Bank will provide property indices for valuation, performance measurement and accuracy tests. The market cannot be analyzed accurately without a good data bank of market information.

4. Unbiased/Independent Valuer
Valuers must resist the influence of clients on their valuation opinion at any cost. Only when this is the case, will their valuation opinion reflect actual market conditions.


CONCLUSION

This professional skill, valuation, is our sole preserve and we do indeed, have the backing of government on same. It therefore, behoves us to be seen as thoroughly competent and above board in the discharge of this ability to our clients, private and public.

All hands, Estate Surveyors and Valuers Registration Board of Nigerian (ESVARBON), Nigerian Institution of Estate Surveyors and Valuers (NIESV), practitioners, academia, must be on deck, to ensure that we sustain competency in this core area of our discipline, by doing all that is needful.

The recommendations and suggestions enumerated above, will go a long way in helping us achieve this.

PROPERTY MANAGEMENT WITH EASE: POSSIBLE?

* CONTENT*

INTRODUCTION

COMMON CHALLENGES TO PROPERTY MANAGEMENT

a) Rent Collection

b) Inadequate Remuneration

c) Lack of Maintenance

d) Recovery of Possession

e) Various Outstandings

f) Tenant Selection

g) Retaining & Increasing the Management Portfolio

h) Service Charge

i) Landlords and Tenants Obligations

j) Estate Records

k) Failure to separate company and client accounts


v PROPERTY MANAGEMENT WITH EASE

1) Clients interest paramount

2) Your client must pay you

3) Letter of appointment

4) Selection of tenants

5) Repairs and renovations

6) Collection of rent

7) Client & company accounts

8) Utilities & Rates

9) Service Charge

10) Estate Records

11) Expiration of Lease/Renewal of Lease


v CONCLUSION



PROPERTY MANAGEMENT WITH EASE: POSSIBLE?


§ INTRODUCTION

Property Management is a field of real estate that most practitioners avoid, primarily because of the perceived (real and imagined) difficulties that is associated with the practice of property management.

It is noteworthy to mention here that no real estate practice can have a clean bill of health without a guaranteed fee income on which annual projections can be made to take care of re-curring expenditure such as salaries, rent, utility bills, e.t.c.

The company’s management fee income for the year can be determined at the beginning of the year, based on the management properties in the company’s portfolio, at the point in time this fee being a percentage of rent. All that would be required of the real estate company is that a system is put in place, to ensure that the said rent is received as at when due. This would satisfy the client i.e. the property owner and also provide the company’s mainstay – the foundation of the practice so to say.

By the time we are through with the lecture, we shall see that practicing property management with ease is not only a real possibility, but also tested and proven.

§ COMMON CHALENGES TO PROPERTY MANAGEMENT

A. RENT COLLECTION
Collection of rent as they become due, is of utmost importance to the property owner, however more often that not collecting rent after the initial two or three years rent paid in advance is a herculean task, with the property manager having to beg the tenant and plead with him before rent is paid. Furthermore, the rent is atimes remitted in bits, at the tenants convenience, causing the property manager work related stress

B. INADEQUATE REMUNERATION
Unwillingness to pay fees as stated in the Scale of Professional Charges of The Nigerian Institution of Estate Surveyors and Valuers. Scale 11 of the schedule tilted Management of Property states:
1. When the property is let, the fee shall be 10% of the gross rent collected
2. When there is a re-letting in the course of management, the re-letting shall attract an additional 5% of the rent income of the area re-let.

What we find in practice is that some practitioners are paid management fees of 2% or 3%. The more fortunate ones receive 5%, the majority are not paid 10%, whilst the additional 5% on re-letting, is simply impossible.

C. LACK OF MAINTENANCE
It is a known fact in this country, that we lack a maintenance culture. This is also true of property owners, who do not want to plough back any part of the returns on their investment into the property. If a property owner keeps his property in a good state of repairs and maintenance, then he can be sure of many years of income. However, getting property owners to renovate their property is difficult, hence the property manager prefers to let as – is. This immediately creates management problems for the property manager, since the incoming tenant feels shortchanged, right from the inception of his lease.

D. RECOVERY OF POSSESSION
In the event that the tenant has to be ejected from the premises, whether as a result of a breach of his covenants and obligations, or the landlord requiring the space for personal use, the entire process of recovery of possession can be quite tedious. Where persuasion fails, the only legal and professional option would be by court process. This could take a while resulting in loss of income both for the landlord and property manager.

E. VARIOUS OUTSTANDINGS
Taking over management of property on which are huge oustandings, PHCN bills, Lagos State Water Corporation (LSWC) water charges, Tenement rate, e.t.c., or allowing tenants run up such huge outstanding in the course of their occupying the premises.

The common attitude of the managing agent is to refuse to address these issues, leaving the tenant to redress the problems as best as possible. At the inception of the lease the tenant is usually assured of a resolution of the outstanding issues, but once payment is made, the tenant is left to face the music.

F. TENANT SELECTION
When letting vacant spaces, there is usually a rush to let to whoever is able and willing to pay, particularly where it is a property on which several agents are trying to secure the management brief. Enough care is not taken with respect to the selection process. This thereafter creates problems if the wrong kind of tenant is brought into the premises.

G. RETAINING & INCREASING THE MANAGEMENT PORTFOLIO
It is a known fact that firms, big and small are losing their management briefs. Clients are taking back their properties and are either managing them themselves establishing property companies where they own several properties, handling them over to lawyers and occasionally to estate surveyors and valuers. Increasing the management, portfolio is becoming more and more difficult for estate firms.
Some now go to properties that they know are managed by other estate firms and use all manner of means to persuade the owners that they can do the job better, edging out the former management practitioner, their professional colleague. Others hang their ‘TO LET’ boards on property without the approval of the owner hoping to corner the brief when they get a tenant.

H. SERVICE CHARGE
This is a levy collected from tenants and occupiers of a property in multiple occupation for the discharge of those liabilities and functions, which each occupier would have had to perform if he were a sole tenant, but which he cannot now perform by virtue of the existence of several other tenants who have similar liabilities. For example each tenant would realise the need to secure the premises, but it would be counter productive, if each hires his own team of security guards. Other service charge heads include maintenance of the garden, cleaning, lighting and re-decoration of common parts, dislodgement of septic tanks and soakaway pits, maintenance of lifts, generator, air-conditioning and other installations, e.t.c.


A revisable sum is collected at the beginning of the service charge year or in the case of a fresh lease, at the inception of the lease. An account is rendered at the end of the year, resulting in credit or debit to the account of the tenant. Accounts could also be rendered quarterly on bi-annually as deemed fit by all parties. The most problematic issue on service charge accounts usually is the accumulation of a huge deficit, which is usually cushioned by the non-remittance of rent, since both rent and service charge are usually paid into the same account.

I. LANDLORDS AND TENANTS OBLIGATIONS
Both parties from time to time, breach the covenants of the lease agreement, if and when a lease is in place. These covenants include payment of rates, electricity bills, alter the structure e.t.c., the major covenant is of course the payment of rent. The tenant is usually reluctant to sign the lease agreement where one is drawn up. Worse still some practitioners do not prepare lease agreements, even after having collected a fee for the preparation of same. Enforcement of covenants is more difficult, when executed leases are not in place.

J. ESTATE RECORDS
Available estate records fall far short of that required for the management portfolio. There is a lack of needful correspondence and data. Inadequate or total lack of a filing system, whether manual or computerized. Details of leases of the management portfolio are kept haphazardly.

K. FAILURE TO SEPARATE COMPANY AND CLIENT ACCOUNTS
The lack of separation of these two accounts conveys a sense of financial well being, which may be totally baseless. The property manager is unable to ascertain the true position of either account, since company funds and client funds are together in the same account.
The challenges enumerated above are not exhaustive of the property management challenges that most practitioners face. Can these challenges be instigated, thereby bringing about ease in the practice of property management?

§ PROPERTY MANAGEMENT WITH EASE
The answer is yes. Property management with ease is actually possible. I however wish to state that it will require a paradigm shift on the part of as many practitioners as desire to experience it. Kindly note that your success with this is predicated on entirely ethical conduct. The format for ease is as stated hereunder.

1. CLIENTS INTEREST PARAMOUNT
Who is your client? You cannot have both tenant and landlord as your clients at the same time. Collecting fees from both parties predicates an immediate conflict of interest since you cannot protect the interest of both parties. Your client is none other than the owner of the owner of the property to be managed by you and his interest paramount. You may want to ask what then is the relationship between you and the tenants. They are not your clients. You have no business collecting agency fees from them. They are tenants in a property managed by you. This is the first bitter pill you need to swallow, if you are to attain ease in property management.

2. YOUR CLIENT MUST PAY YOU
You must not work for someone who behaves like he is doing you a favour by giving you his property to manage, hence his refusing to pay you your due. I can assure you that you will actually work real hard for every kobo he pays, and he certainly will derive great benefit from using your services. Never work for a person who does not respect you enough to pay you. If you your client advices that you collect fees from both himself and the tenants refuse to do so. Doing so will make both the tenant and the landlord your client. Nobody can serve two masters successfully. Your client, if you are to work for him must pay you a management fee of 10% and a letting fee of 5% in addition when a re-letting takes place. This is stated clearly in the Scale of Professional Charges of The Nigerian Institution of Estate Surveyors and Valuers.

Consultation fees must also be paid when you are taking over a management property that is not a new property. The fee to be demanded is determined by the extent of work that you must do to correct all the inherited management problems for which it is only fair that you be paid. You will therefore need to inspect the property and available records, to access the scope of work, to enable you determine the consultation fee you will charge.

3. LETTER OF APPOINTMENT
Do not manage property on a verbal instruction. It makes you less vulnerable to this excesses of the client. If the client does not appoint you in writing, stating the terms of the agreement, you do a letter to him stating same, requesting for your consultation fees, if not a new building. Most clients cannot make out time to write the letter or do not even know what to write hence your needing to write same for him. See Appendix IA. Once your consultation fee is forwarded you know you are in business, or in the case of a new building, once the keys are forwarded, you have been appointed as a letting and management agent, by the landlord, further to the receipt of the letter of appointment forwarded by you.

A meeting with the tenants is arranged, thereafter if an already tenanted building. See appendix IB, whilst marketing of the new building commences with the hanging of a ‘TO LET’ sign and placement of a paid advert on the pages of a property newspaper, if considered necessary.

4. SELECTION OF TENANTS
The clients’ interest is paramount. You are looking for the most responsible tenants to occupy the vacant units, whether residential or commercial. This is a most crucial aspect of management, hence you cannot afford to be in a hurry to bring in a tenant. This you would already have intimated your client. The prospective tenant must be invited for discussions, to enable a decision be taken as to the suitability or otherwise of the tenant.

An offer is made out, if suitable. See Appendix IIA and remittance of rent to the landlord is made as soon as it is received. See Appendix IIB and Appendix IIIF

5. REPAIRS AND RENOVATIONS
It has been made clear in the letter of appointment as managing agents that the Landlord will be expected to fulfill his contractual obligations with respect to repairs and maintenance of the space to be leased out. This is insisted upon, hence the landlord undertakes all of the needful repairs, resulting in the handing over of the lease space in a fit and proper state.
- An inventory of fixtures and fittings is taken and this is signed at the point of handing over by the tenant and the representative of the managing agent.
- If on the other hand the landlord does not want to undertake the repairs himself, this is done on his behalf and a fee of 10% of the contract sum is charged by the managing agent as supervisory charges.

The managing agent ensures that both landlord and tenant keep all the covenants of the lease agreement (which is signed at the point of handing over) by regularly inspecting the premises to ensure compliance on the part of the tenant and constantly updating the landlord on the state of the property whether verbally or in writing.

Note that a neglected property that runs into a state of disrepair cannot attract the right kind of tenants, hence property maintenance is vital if one is to be sure of many years of income. Furthermore, when property is not well maintained, getting tenants to fulfill their contractual obligations, becomes much more difficult

6. COLLECTION OF RENT
The tenant has already been put on the defensive by reason of the fact that the landlord is your client and he is simply a tenant in a property managed by you. He therefore does not have any hold on you, in any form whatsoever. He does not joke with the payment of his rent. Never accept post dated cheques. Rather advise that it be brought when it is backed by funds. Also do not collect part payment. Both payments if accepted give the tenant a sense of relief, which translates into complacency with respect to the rent owed. Non-acceptance on the other hand compels them to find the money in full as soon as possible.

The process of collection of rent is set in motion six (6) months before the rent is due, by correspondence. A letter is written to the tenant requesting that he confirm in writing whether or not he wants to remain on the premises for another year. See Appendix IIIB. If the tenant is to exercise a renewal option, a similar, but different letter is written to him requesting that he confirm. See Appendix IIIC. Upon confirmation of his intention to remain on the premises a reply is sent requesting for the rent payment. See Appendix IIID.

Failure to confirm intention to remain on the premises, is not taken lightly and a pre-vacation letter is written on the assumption that the tenant is leaving and informing him of dates for the two pre-vacation inspections, which are to enable the determination of the work to be carried out by the tenant, barring fair wear and tear and the inspection to ascertain whether or not the said works have been undertaken. See Appendix IIIG.

These letters are quite intimidating and very effective. The result is that rents are paid as at when due, with minimal delays in payment. In the event of inability to pay due to cash flow problems tenants request that they be given between a week and a month after the rent due date to pay their outstanding rent.

Receipt of cheque that bounces is sanctioned. See Appendix IV. There is a lot of disrespect for real estate practitioners. Force the tenant to respect you by insisting he pays his rent as opposed to him asking you to come and pick up the rent cheque. We must learn to master money. Money has mastered us for long enough. Everyone of your

actions sends a message which makes management of property easier or harder for you. The choice is yours.

7. CLIENT AND COMPANY ACCOUNTS
The separation of both accounts is a must. Apart from the fact that it is required by the regulatory bodies overseeing the profession, it also will enable you see clearly the state of your account and not misappropriate funds. If you receive a rent of N1,000,000.00 (One million naira only), your fee on the rent is N100,000.00 (One hundred thousand naira only). If you spend the entire sum it means you must undertake nine other such transactions to pay back the debt. You and I know that this is not an easy task.

Several property managers are already neck deep in debt as we speak, robbing Peter to pay Paul. It is in your interest that you separate the accounts and spare yourself needless stress. This will also teach you financial discipline as well as make you more prudent. Far more than this your reputation will remain intact, thus assuring you of continuing and increasing patronage.

8 UTILITIES & RATES
The tenant should be handed over the accommodation on a clean bill, there should be no outstanding whatsoever to his account. He should not be made to pay for services he did not consume, not PHCN outstandings, LSWC water charge outstandings, tenement rate outstandings, e.t.c. Anything to the contrary creates problems. Tenants should be monitored constantly to ensure that bills are not run up and demand must be made for water bills and tenement rate as at when due. See Appendix VI and Appendix VII.

If at the point of vacating the premises the tenant has any outstanding to his account, this should be debited from his Refundable Deposit and the balance if any, thereafter released to him.

9 SERVICE CHARGE
It is advisable that a separate account be created for this, distinct from the client account and the company account. The major challenge of the service charge account is the huge deficit, which is not too obvious when paid into the client account, since the un-remitted rent, cushions the effect of the deficit. If in a separate account the property manager will be aware of the deficit early and will be able to advice the tenants in good enough time as to reduce the deficit or eliminate it entirely.

A problematic issue due to the constant PHNC power outage is purchase of diesel for fuel generators. This almost always accounts for a huge chunk of the service charge. It is advisable that records of power cuts be kept religiously in the course of year, (since account must be rendered to tenants periodically) on a daily basis, having records of outage and the diesel consumption, so as to allow for accountability and transparency.

10. ESTATE RECORDS
An efficient system must be put in place, whether computerised or manual to ensure that all the records of the management portfolio can be readily assessed. Records of existing and past management portfolios should be maintained. The property manager should be meticulous in this regard, leaving nothing to chance. The estate records is the backbone of the management portfolio.


11. EXPIRATION OF LEASE/RENEWAL OF LEASE
It is advisable that fixed term lease agreements are made with tenants as opposed to open ended leases, which makes tenants tenants at will, after the initial rent paid in advance. Fixed term leases enable both the property owner and the tenant plan. We have adopted a three year term with the tenant paying two years rent in advance and having an option to renew for an additional year. Occasionally, clients insist on a two year term, however this is the exception rather than the rule.

If after the initial three year term they are willing to stay on and the landlord does not require his property for personal use and the managing agents are satisfied with the tenant, an offer of another three (3) year lease, rent payable annually, is made to the tenant. See Appendix IIIE.

§ CONCLUSION
Likelier than not, all the above is not like anything you are used to. I however wish to say that I have been in practice for almost fourteen (14) years now and have practiced in this manner right from day one.

No doubt it has been challenging. If you are rowing upstream with every other person virtually, rowing downstream, one cannot expect that it be otherwise.

I must say it has worked, it is working and there is every indication that it will continue to work.

Furthermore, it is a must fulfilling mode of practice, with your self respect and self esteem intact. I recommend it to everyone who seeks to make a lasting impact on the real estate sector, desires to have a fulfilling career and an enduring legacy.

ETHICAL CONDUCT AND PROFESSIONAL EXCELLENCE

INTRODUCTION

Ethical conduct and professional excellence are intertwined - one is a derivative of the other. Professional excellence cannot be attained with ethical conduct, in other words ethical conduct is foundational if professional excellence is to be achieved.

The effects of unethical conduct may not be obvious in the early days of a practice, however with time the practice will rise to a point and stagnate or plateau, afterwhich a decline that cannot be remedied ensues.

The conduct of estate surveying and valuation professionals has a direct effect on the reputation of the profession. A good reputation is earned on a continuing basis by performing ones duties in an ethical manner. This good reputation once earned has far reaching benefits, that translates among other things, into a continuing means of livelihood.

No doubt there is a lot of unethical conduct in the real estate sector today, it however behoves practitioners who have the requisite training to raise the standards thus showing an example of ethical conduct on their part. This with time will translate into professional excellence that will be visible to all and sundry, thus separating the wheat from the chaff.


WHAT IS ETHICAL CONDUCT?
Morally correct behaviour, the application of moral principles to how an activity is conducted. Doing the right thing, the proper things all of the time. Personal characteristics of honesty, sincerity, impartiality and trustworthiness.

ETHICAL CONDUCT PRE-SUPPOSES THE FOLLOWING:

1. Respect for the laws of the land and the regulatory body overseeing the profession ESVARBON, NIEVS

2. Conducting ourselves with integrity, being fair, honest and impartial in our dealings

3. Treating others with dignity and respect. Giving our clients, colleagues and the generality of the public that we come across, in the execution of our duties, the care and courtesy that we would wish to receive.

4. Ensuring that possible conflicts of interest are avoided and declaring conflicts of interest when they are unavoidable

5. Maintenance of confidentiality of information. Not using information for personal gain, nor to the detriment of others

6. Exercising due skill, care and diligence in performance of duties and ensuring that currency of knowledge, skills and technical competencies are maintained

7. Being fair and honest in all relationships incidental to the carrying out of duties, whilst avoiding the appearance and reality of being influenced by any party or being prejudiced or biased in our dealings with clients and third parties

8. Not actively soliciting any gifts, benefits or hospitality, neither accepting gifts of benefits which could in any way compromise or be seen by the wider community to influence one’s official capacity.

9. Declaring the benefits or gifts or gratuities that occur in the normal course of business.

10. We represent the Estate Surveying and Valuation profession in the performance of our tasks and avoid all conduct which detracts from the reputation of the profession.


INDCIATORS OF PERSONAL ETHICAL BEHAVIOUR
1. You must not allow dishonesty, personal prejudice or bias to influence you in the conduct of your duty/work
2. You should not accept or give gifts benefits or hospitality, if their nature and value many be seen as compromising your objectivity and influencing you in your official capacity


ATTAINMENT OF PROFESSIONAL EXCELLENCE
As stated before now, ethical conduct is basic to the attainment of professional excellence. Below are other factors that are critical to the attainment of professional excellence:

1. PROFESSIONAL CERTIFICATION
Obtains the professional certification in the shortest time possible. Makes is a matter of priority, because he understands that it is what gives all he does the needful legitimacy.

2. COMPETENCE
Professional competence is imperative, furthermore it must be sustained over the years. Continue to acquire an appropriate level of professional knowledge and skill. The desire for immediate gratification does not enhance acquisition of competence. There is a need to understudy senior colleagues over time, so as to acquire the needful know-how and experience.

Furthermore, availing oneself of continuing education seminars and workshops and keeping abreast of developments in the real estate sector, is necessary to ensure high quality, service delivery, thereby maintaining the respect and confidence of both the clientele and the general public.

3. RELATIONSHIP
There is a need to nurture the relationship between the practitioner and his client. This built up over a period of time via a series of contracts with respect to continuing /varying brief undertaken by the practitioner on behalf of his client. This nurtured relationship forms a bedrock for other briefs. It also guarantees the recommendation of the practitioner to colleagues, friends or relative of the client.

4. DISCIPLINE
The practitioner is disciplined. His word is his bond. He is punctual and meets all deadlines. Clients funds are never spent, the funds are remitted as at when due and duly accounted for. Misappropriation of funds is a tattoo. He does not allow undue influence of his professional judgment, be it for monetary gain or for fear of reprisal.

5. INTEGRITY
I am mentioning this here again for emphasis. A man of integrity is a man of who practices honestly and with accuracy in all dealings without engaging in any activity that would prejudice his ability to carry out professional responsibilities competently and fairly. Avoids conflicts of interest or the appearance thereof. Discloses fully all relevant information that could reasonably be expected to influence real estate property decisions. Not influenced by money, power or fame. A man of integrity charts a course that others follow.


EXAMPLES OF UNETHICAL CONDUCT

1. SIDELINING
The act of edging out the practitioner who introduced a brief on client to you, thereafter taking over the brief completely and denying the said practitioner of any and all claims to the said transaction.

2. WITHHOLDING
Not providing the client with sufficient information to enable him take an informed decision on the brief he gave the practitioner resulting in the practitioner taking undue advantage of his uninformed decision, thereby ripping him off in the process.

3. MISAPPROPRIATION OF FUNDS
Unauthorised spending of clients funds in the custody of the practitioner and/or failure to remit monies received as at when due.

4. MULTIPLE BOARDS
The display of multiple TO LET/FOR SALE Boards on one and the same property at the same time. Where instructions have been given to more then one firm, a joint letting board should be displayed.

5. CHARGE/CONCLUSION
Practitioners have an obligation to their employees, employers, co-workers, colleagues, clients, the profession and themselves, to maintain the highest standards of conduct and to encourage their peers to do likewise.


Situations may arise in the conduct of professional activities whose influence is attempted in order to achieve a particular outcome. This influence may be a financial inducement, other favours, or threats including harassment.

Other circumstances may arise where a practitioner may have private and/or pecuniary interest s which may lead to an actual or potential conflict of interest in the execution of the brief.

Whatever the case may be practitioners should act with honesty, sincerity and integrity, in their approach to their work as well as professional relationships. Situations which may affect ones integrity and objectivity should be avoided.

The effectiveness of our regulatory body’ policies – The Estate Surveyors Registration Boards of Nigeria (ESVARBON) relies on all practitioners taking responsibility for their own behaviour and being committed to ethical conduct.

This is the only way forward for the professional who desires to excel.

EXCEL YOU WILL!

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