Excessive Control on Rents is a Disincentive to Investment in Housing, Says Akomodede - News

Excessive Control on Rents is a Disincentive to Investment in Housing, Says Akomodede

Posted by Administrator /  August 24, 2011 / in News

CHIEF KOLA AKOMOLEDE is a graduate of University of Ife, Ile-Ife, where he obtained a B.Sc in Estate Management. He also has an M.Sc in Urban Land Appraisal from the University of Reading, U.K.  He joined Tope Oloyede & Co. from 1979 to 1986 before he moved to the Lagos State Development and Property Corporation (LSDPC) as a Chief Estate Surveyor and Head of the Estate Department.  He later rose to become the Deputy General Manager (Estates) before retiring in 1999 to establish his practice under the name Kola Akomolede and Company.

He is a fellow of the Nigerian Institution of Estate Surveyors and Valuers (NIESV); served as the National Publicity Secretary of the body and currently heads the Faculty of Housing of the Institution and  is a member of the National Council. He is a former Secretary-General of the Association of Housing Corporations of Nigeria (AHCN) and is currently, President of the International Real Estate Federation (FIABCI), Nigeria chapter. In this interview, he spoke with CHINEDUM UWAEGBULAM, Assistant Housing & Environment Editor on some issues concerning FIABCI and the new Lagos State tenancy law.

THE group, International Real Estate Federation (FIACI) is not new, especially among estate surveyors. What are its benefits to professionals m in Nigeria’s built environment?

FIABCI is a non-political entity whose objective is to help  members add an international dimension to their businesses. FIABCI helps members acquire knowledge, develop networks and optimise business opportunities all over the world. The organisation is 51 years old  and meant for everybody that is involved in property development, management and valuation.

In other countries, FIABCI members have helped to drive the real estate sector such as pioneering property developments. What are your efforts to woe these investors?

During our conferences, we have a special marketing and networking section, which allow members to showcase their properties for prospective investors or partners. At the end of the meeting some countries normally record huge sales. Unfortunately, we have not been able to attract investors because of our peculiar circumstances. I remember one of the conferences, I stood up to talk about the opportunities available in Nigeria, I was bombarded with questions, that Nigeria is not safe.

Lagos State House of Assembly recently passed a new Tenancy bill, which supersedes the one promulgated by the Former Lagos State Administrator Buba Marwa. What are the changes in this new law?

There is not much difference between the new Lagos tenancy bill recently passed by the House of Assembly and the rent edict of Buba Marwa of 1997.   The prohibition of the collection of advance rents for more than one year is in section four of the existing edict, which has not been repealed.  The new law has only increased the fine to N100, 000 as against N50,000 in the old edict probably in line with inflation and present value of money. I therefore wonder why many are rejoicing about it as if it is a new law. A major change that I can see is that the new law covers both residential and commercial properties unlike the old one that was limited to residential properties only. It is a welcome provision but it does not take into consideration commercial users like banks who usually want security of tenure and therefore always willing to pay for five or even ten years in advance.   This is because they usually spend a lot on renovation in order to make the property suitable for their use. This is very unusual with most rent control laws as the conditions for renting commercial properties are not the same as those of residential properties.   It should have been limited to residential properties only. Another minor difference is that unlike the old edict, sitting tenants who are monthly tenants are now required to pay six months rent on renewal. This is strange. A monthly tenant should continue to pay monthly after the initial advance.

What are the major innovations  and who are the beneficiaries?

There is a new innovation in the new law, which will benefit both landlords and tenants. And that is the introduction of Alternative Dispute Resolution (ADR) through Citizen Mediation Centers or Multi-Door courts. It is the trend in the modern world. Instead of both parties spending money and time going to court, many cases will be disposed off by ADR. The law has gone further by making the decision of ADR enforceable like court judgments. This is very much welcomed.

The issuance of quit notice has also been made easier. Unlike before, the quit notices need not terminate on the anniversary of the tenancy. This will remove a situation where you could not proceed to evict a tenant until after he has been owing one year rent. Now, if your tenant defaults, you can issue him a quit notice immediately. This is a welcome departure. Again the need for personal service has been removed. You can now deliver the notice to any adult residing in the premises or by courier where the tenant cannot be found. This will remove a situation where tenants evade service of quit notices.

Unlike the old edict, the law does not stipulate any figure of rent to be collected anywhere. It must have dawned on government that such rent ceilings cannot be enforced in the face of scarcity of accommodation all over the place. However, it prohibits “unreasonable” increase. It also now compulsory to issue receipts for rent collected from tenants. Failure to issue receipts will attract a fine of N100,000.

The law is to assist tenants by re-emphasising the need to only pay one year advance rent, which is a very good move. It shows that government is concerned about the welfare of the citizens of the state.  However, the people will appreciate this more if the government can provide more houses so that would-be tenants will have alternatives.   The truth is that in the absence of alternatives, people will pay whatever the landlords demand irrespective of any law to the contrary.  The law can only be enforceable where a report is lodged by the tenant.  Any tenant who wants to have peace with his landlord will not report him to anybody unless he/she has seen an alternative.

It is reality that urbanisation has taken its toll on cities like Lagos. Do you think the tenancy law will solve the rental crisis in Lagos?

There will be no need for any legislation on rents if houses are available.  Even before the law, landlords in Ikoyi, Victoria Island and Lekki have already started to accept One year rent.  This is happening because there are so many houses available for rent in these areas due to the economic recession.  If the type of houses required by the low and middle classes are available in the same way, there would be no need for this law.

I believe Governor Fashola will be remembered more by the number of houses he provides during his tenure than a tenancy law.  How many people remember Buba Marwa today for his rent edict?  Whereas, everybody remembers  Alhaji Lateef Jakande for his low cost houses which can be seen everywhere from Lagos Island, (Adeniji Adele) to Iponri in Surulere, Amuwo Odofin, Isolo, Abesan, Iba and medium income houses at Maryland and Alapere.   Therefore, if this regime is serious about alleviating the suffering of the masses in the area of housing, let them follow the footsteps of Alhaji Jakande.  The masses will appreciate this more than  a tenancy law that may not work like previous rent control laws.

On the other hand excessive control on rents can act as a disincentive to investment in housing which in the long run will lead to a reduction in the supply of housing with the consequence of increase in rents. In the face of too many taxes and levies on properties in this state, high cost of construction, (cement is now N2,500 per bag), difficulties in securing land and getting building approval, property developers may be discouraged if government limit their income from such investment.

What are the immediate solutions to the housing problems in Lagos and other cities in the country?

Lagosians will appreciate it more if the government can make it easier to secure allocation of land at affordable prices, control the price of cement and other building materials, reduce the excessive payments of many taxes and levies such as consent fees, land use tax, capital gain tax, development levy, regularization fees, stamp duties, registration fees, etc and build more houses that the people can afford as Lateef Jakande did. It will be a better way to alleviate the suffering of the masses as far as housing is concerned rather than dissipating energy on laws that won’t work in the face of scarcity of the commodity.

View more property news from Nigeria.

Source: The Guardian

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