Nine months later, Lagos monthly rental program fails to start

EDIDIONG IKPOTO writes about how the proposed monthly rental scheme in Lagos is slowly falling into oblivion nine months after it was announced

Nine months after announcing the take-off plans, the Lagos State government has yet to launch its monthly rental scheme project which was introduced to reduce the burden of rent payment for the residents of Lagos.

Findings from The PUNCH showed that despite committing the sum of N5 billion to help the project get off the ground, the program has failed to get off the ground in any part of the state.

At the second Lagos Property Market Conference and Expo held in December 2021, the Governor of Lagos State’s Special Adviser for Housing, Mrs. Toke Benson-Awoyinka said that the initiative to a monthly rent payment system would start soon in the ‘soon’ state.

She said the new initiative will significantly ease the annual payment burden for residents. Benson-Awoyka also assured state landlords that they would receive their annual home rent payment in advance, while tenants would no longer have the burden of paying a huge amount of money annually. .

She said: “Tenants can therefore use the annual payment for other forms of investment or for the payment of school fees, as the burden of paying the annual rent is completely removed from them. So it’s a win-win social investment program, it’s a good program, and it’s being applauded. »

Speaking exclusively with The punch in an earlier interview, the Lagos Information and Strategy Commissioner, Mr. Gbenga Omotoso, said that all the necessary arrangements had been worked out to ensure the success of the project.

He however noted that although the scheme is not available to all categories of Lagosians, those who fall within the threshold of requirements to enroll in the scheme would no longer have to face the daunting task of having to pay annual rent.

Omotoso said: ‘The SA Housing Office, Ms Toke Benson, is handling this and the process is very simple. It’s up to tenants and landlords to have a smooth relationship so that if you come to Lagos to find accommodation, you don’t have to pay through your nose looking for a year’s rent and all that.

“So what the government is going to do is deposit a lump sum. From this money, anyone who signs up for the program can charge their owner annually while they can continue to pay monthly.

“Some people have a regular source of income. It will be like a revolving fund. So it’s very simple and the idea is to make everything easy for people.

He added: “If you get a house that is bigger than you can afford because you know the government is going to pay the annual rent, it won’t work. It must be the type of accommodation that can match your income.

A bill regulating the payment of rent is tabled in the Senate. The bill was sponsored by Senator Smart Adeyemi, who represents Kogi West and passed one of five required readings. The bill came amid complaints about the high cost of rent in Abuja.

The bill made it an offense for a landlord to require payment of rent in advance and replaced the annual rent with a monthly plan in which the first three months would be paid, followed by subsequent monthly payments.

Traditionally, rents in virtually all parts of the country are paid on an annual basis. In some cases, landlords even demand rents two years in advance. This status quo has made it difficult for many Nigerians to raise the necessary funds to rent apartments.

The bill does not mean lower rental costs, only that the method of payment will be different. However, it would help most people move to new cities to easily pay for their accommodation needs instead of having to resort to less-than-ideal options like hotels or hustling with relatives.

Surprisingly, a social media poll conducted by Dataphyte showed that only 38.1% of respondents preferred a monthly rent payment. A significant proportion, 61.9%, still preferred to pay their rent annually.

Sometimes tenants need housing but don’t want to make a long-term commitment. For these tenants, finding a landlord willing to sign a month-to-month lease is ideal.

In reality, residential tenants can rarely afford to advance rent by an entire year. People with this amount of money are much more likely to use it as a down payment on a home they own. Paying rent every month is much more acceptable to the vast majority of tenants.

On the other hand, experts have argued that short-term leases are unstable. The flexibility that month-to-month tenancies give the tenant also applies to the landlord. Neither of you are tied to a long-term contract, so there’s nothing stopping your landlord from raising your rent or ending your lease while you’re living in the apartment.

According to NigeriaRealEstateHub, landlords generally prefer longer apartment leases as it ensures they won’t have to spend money or time remodeling the unit for the following year.

Each time a tenant moves out, the landlord must advertise the unit and have it ready for the next tenant, which may include cleaning, painting, and fixing any wear and tear.

Similarly, a real estate research firm, Estate Intel, believes that when rents are paid monthly, the risk of tenant churn is higher. This means that the periods during which rental units are unoccupied may increase. Given that the current dynamic makes rental space a market for owners, they have the possibility of prioritizing the security of their income. The annual upfront payment reduces administrative costs that might otherwise be spent managing or tracking lease payments.

There is also the potential loss of monthly revenue if the owner cannot fill the unit quickly. Ultimately, short-term leases aren’t as profitable and are more risky for property managers, which is why you don’t see them as often.

As the market evolves, some landlords are ready to make their properties available to monthly renters. A big concern for them, however, is avoiding defaults or at least understanding and verifying a potential tenant’s financial capability.

An EI report also notes that in Nigeria the credit system is only developing and central credit agencies that can provide quick ratings to tenants or validate their ability to pay consistently are not yet in place. generalized.

Conversely, in Western economies, these credit ratings and systems provide the basis for welcoming a new tenant and facilitating the extension of that trust. Although there are new technologies that try to solve this problem, like Mono and a few other agencies, some owners still see it as a blind leap of faith.

Speaking to The PUNCH on some of the bottlenecks that could hinder the successful start of the program, a real estate lawyer, Promise Umoh, said that some legal technicalities would need to be ironed out before the launch of the social investment program.

According to her, the government should iron out these vagaries with stakeholders to allay the obvious apprehensions that would surround non-payment of rent, among other issues.

She said, “I just know that the government has to meet the stakeholders first; and who are the stakeholders? Landlords, property developers, people who understand how these things work because if you stay calm you will notice that the government is trying to do a good thing for residents and trying to find a way to help ease the hardship of have to pay annual rent.

Umoh further stated that without a proper framework, the social investment program could end up creating several disputes between defaulting landlords and tenants.

She added: ‘What guarantee do you have that if you do it monthly tenants will be open to it? Have you also thought about it from the angle of the owners? What recourse do you have for the landlord when a tenant does not pay? Will the law allow the owner to use self-handling? »

Another real estate lawyer, Segun Ajayi, in an interview with our correspondent, said that a monthly rent payment system could have certain advantages for both tenant and landlord, such as flexibility, requirement of short notices to leave the premises, which would put an end to the cumbersome procedure of recovering the premises.

He said, however, that these benefits must be weighed against the potential downsides that would come with the initiative.

According to him, when drafting laws, the particularity of a country must be taken into consideration, stressing that the fact that the system works in other countries does not guarantee flawless operation here.

He said, “I think the best approach to the issue of monthly rent is the approach taken by Lagos State. He has come up with a voluntary monthly rental policy, understanding how difficult enforcing such legislation will be. Moreover, Nigerian tenancy laws already recognize monthly tenancy.

“For example, Section 13 (1) to (6) of the Lagos Tenancy Act 2011 refers to annual tenancy, semi-annual tenancy, quarterly tenancy and monthly tenancy. I think it is not necessary to make a law to enforce a particular type of tenancy. Laws must remain flexible to allow people to decide for themselves on the best options.

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