Laws on monthly rent payment: Experts, landlords tackle Fashola on proposal

Experts in the built environment sector and landlords have not stopped expressing mixed feelings over the proposal by the Minister of Works and Housing, Mr Babatunde Fashola, calling on states to enact laws on monthly rent payment.

While many condemned the idea on the basis of lack of institution and delay in court judgement to support monthly rent payment in the case of default, few are of the opinion that Nigeria cannot operate in isolation, saying it is the practice globally.

Some of the stakeholders in the sector want the government to lead by example by building affordable houses for people to live and pay monthly rent.

Fashola, had last Thursday, at the 10th Meeting of the National Council on Lands, Housing and Urban Development in Ikeja, Lagos, advised state governments to enact laws to make mandatory monthly rent payments to make housing more available to Nigerian masses.

He said that it was difficult to remove inequality in any society or nations but commitment of governments could reduce the ratio.

“We may not be able to make all people homeowners, but we can reduce the number of those who lack shelter.

“I am sure that our country will be a much better place when three years rent in advance, two years rent in advance or one year rent in advance for middle class and working family residential homes becomes monthly rent, payable at the end of the month.”

“Why we may not get there immediately, this is an area of immense exclusion that we can remedy by legislative action at state level.

“This is a matter in which the Federal Government has no legislative competence. It is a matter for the states, and I urge you not to turn your backs,” the minister said.

According to him, economic indicators have shown that payment for a year or more in arrears affected affordability thereby increasing shelter gap, hence the need for legislation.

He urged that all state legislators must see this as an important area of representation of their people to make life easier.

“So must governors and commissioners through executive bills,” Fashola said.

Reacting to the proposal by minister on the social media platform of Housing Development Advocacy Network (HDAN), the Managing Director, Ace Hi-Teck Construction Company Limited, Okupe Adewunmi, is of the opinion that when government compels monthly rent payment by tenants, it would discourage investment in real estate.

Besides, he said that the landlord who borrowed money from the bank to build the house might find it difficult to repay through monthly payment of rent.

“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 even if he has not borrowed to build the house,” he said.

Immediate Past President, Real Estate Developers’ Association of Nigeria (REDAN), Rev. Ugochukwu Chime, raised posers on why the government wants to legislate monthly rent payment failed to control input costs of housing development.

“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 taxation and the very brutal and scary means of enforcing them?

“Why not assist in domesticating the foreclosure law, so as to give comfort to landlords and investors in the real estate sector? Why not start by asking the Public Sector Organisations like FHA and the various State Housing Housing/Property Development Corporations to lead the way?”

According to Chime, why were the government ministries, departments and agencies (MDAs) involved in the housing sector allowed since 1992 to migrate from affordable/social housing projects for which they were created, and become agents of home ownership/investment for the bourgeoisie?

He wondered why government was not creating and enhancing the operating environment for the private sector investors to see the housing sector as a destination of choice

He queried, “Why are we scaring investors from Nigeria with the very undefined transaction roadmap and emotional/populist/propaganda agenda as a policy of governance?

Chime bemoaned the proposal, saying it was targeted at setting the stage for more extortion, racketeering and corruption

Founder/CEO of Eximia Realty Co Ltd, Hakeem Oguniran, stated that the government cannot legislate and fix rent by fiat, saying it has not worked in the past and will not work now.

He explained that most investors and developers were operating in an economy where the macro fundamentals do not support housing and real estate development.

“The odds are simply too many,’ explaining that the interplay of demand and supply is always the better driver of rent.

Ogunniran said “We all saw what happened in 2016 – 2016 with commercial and retail properties. With some degree of oversupply, the following happened: Rents came crashing down; property owners lured potential tenants with freebies including rent free periods and fit out allowances; monthly and quarterly tenancies suddenly became “realistic” to property owners.

“No legislative intervention was needed to correct the market. The adjustment happened quietly and contractually. If we want rents to become more affordable, we should do the needful. Please read the gospel according to Chime above. This controversy is needless at this time. As I observed here two days ago, I’m in total alignment with the economists who say that “the best way to destroy a city other than through bombing is rent control”.

Principal Partner, Ubosi Eleh and Co,  Mr Chudi Ubosi, said  that lack of institution  and delay in getting judgment in court would make it difficult to collect monthly rent.

“Paying rent monthly is a good thing. After all, no one earns a salary a year or two in advance. But the key thing is that we don’t have the institutions to back it, law court etc.  Even when tenants pay you annually it’s tough getting their rents subsequently. When they default your option is the law courts. No matter how good a case you have, the minimum time frame to get the first judgement is three to five years! Now you think you can collect monthly.”

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