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.
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