LAGOS STATE TENANCY LAW: HOW POSSIBLE?

Recent media reports suggested that the Lagos State Government has just signed into law, a bill that amongst other things, seeks to stipulate the minimum amount of rent payable on a residential property to one year, after which rent will then be paid monthly. No doubt, a lot of Lagosians are already hailing the government of Fashola in this regard. However, pertinent questions still remain! Does this law make sense? Is this law implementable? Does the Lagos State government have the moral right to enforce such a law on landlords?


Ordinarily, this law might make some sense. Unfortunately, Nigeria is a country that has never fallen short in lawmaking. The challenge has always been implementation of the various laws at our disposal. Another stumbling block, which usually goes unmentioned, is the massive level of illiteracy and lack of access to information in Nigeria – especially as it relates to the public sector. This usually means that the citizenry is usually unaware as to his or her rights and the available laws with which to seek redress! Who on earth is going to implement this law? A quick fix will be to set up another agency (we have too many already) with the mandate of ensuring that the law is followed to the letter. You and I however know that more often than not, such agencies start of well, but in a matter of months…at best a year or two, the civil service bug bites them and they fade away into obscurity, content to come to work, do little or nothing and collect their salary at the end of the month.

The laws of economics even suggest that such a law may be counterproductive. Without a doubt, the design of such a law is to protect the citizenry by reducing the amount of money paid as rent as a lump sum, seeking rather to stretch the payment of such sums over the life of the tenancy. The possibility however remains that while it seeks to reduce the amount paid in the short term, it may likely increase the amount paid in the long term. How do I mean? Well, a landlord who is content to collect N500,000 per annum for a flat, may not necessarily be willing to collect N60,000 per month, which is N500,000 divided by 12 months. Forcing such a landlord to collect his rent per month and thereby taking away the opportunity to utilize the bulk sum and enjoy economies of scale may mean that he may now increase his rent to say N80,000 per month to compensate for the loss of the benefits accruable from bulk money. This translates to N720,000 a year. In this scenario, has the law improved the finances of the man on the street or has it worsened it?

This law also begs the question of whether the Lagos State government has done all it can for the housing sector? The genesis of the insistence one 1 year, 2 years and even in some cases 3 year rent is borne from many factors. One is the attitude of tenants who are often unwilling to pay up on time – no doubt exacerbated by the poor economic situation in the country. Not to mention the difficulty in evicting them once it has become established that they cannot pay up! Another is the high rate of inflation, which makes monthly rental income pretty useless, while the last, but by no means the least is the law of demand and supply. In this case, the demand for housing in Lagos far exceeds the supply. But what has government done about all this? Not all of these circumstances are within the purview of the LASG to correct. Inflation and general economic growth and development rest largely on the shoulders of the Federal Government. However in terms of balancing out the demand and supply dynamics, has the LASG done anywhere near enough? My answer to this is a capital NO!!

I believe that there are thousands of professionals and other middle class individuals who work in Lagos who would be willing to build their own houses if only they could have access to land. Although, the attitude of many of our people is often to seek to build what they cannot really afford, as they try to measure themselves against the size of house that their friend, neighbors etc occupy, there are still many who would be satisfied with building a nice bungalow, rather than overstretching themselves to build a duplex in order to fit in!! But this can only be done if land is available upon which to build!! In this regard, the LASG is lacking. Although there is a lot of estate developments in the Lekki/Ajah axis, these are private sector driven and are designed for the high and mighty and at cut throat prices. Or how else can you explain someone trying to sell a 3 bedroom “serviced” flat for N50mln!! A model I would like to see the LASG adopt is the FCT style, where land is compartmentalized into districts and developed one after the other as detailed below:

• LASG should acquire most of the land in Lekki/Lasu-Iba axis and segment into specific districts the way it is in Abuja (see attached), with plots clearly laid out and land use clearly defined. i.e. based on a number of residential plots in a district, areas that can be used for churches, mosques, schools, commercial activity etc should be defined in a manner and quantity that makes them easily accessible to and sufficient for the residents.

• Infrastructure should then be provided for each district (roads, drainage, water, electricity poles and wiring) and the plots sold. The sales of the plots should cover for the cost of infrastructural development. A friend in Abuja told me that it costs about N20-25bln to develop a district in Abuja - and that is with JB doing the infrastructure! If a competent local firm handled the infrastructure, perhaps it might cost say N15bln. Besides, I don't think the average resident needs infrastructure to the very high quality that JB provides in Abuja. Let me put it this way, if JB quality of infrastructure is rated at 100%, I'm sure that most people would be happy with infrastructure levels of say 65-70%- once the road is one that will last and the drainage actually discharges water. Therefore, if a district were developed with N15bln and is 1000 residential plots, then a plot could be sold at N15mln. It could even be cheaper at say N10mln or less, because some plots within each district could be sold to developers at a higher price with the licence to build terraced or semi high rise building from which a developer would recover the extra cost (while 1 plot may sufficiently house 1 family, 3 plots sold together to a developer and used to build a set of 2 blocks of 4 terraced duplexes can house 8 families), whereas the extra income from combined plot sales to developers (at a higher price per plot, since the same space would yield a developer more income) could be used to subsidise for those buying individual plots.

• Once a district is developed and sold out, the money should be used to develop the next district. It would therefore become some sort of a revolving fund.

• In order to avoid undue speculation, the purchase of plots in these district schemes should be limited to 1 plot per family i.e if a husband has bought a plot, the wife cannot buy one. Only developer’s building blocks of flats/terraces etc would be allowed to by multiple times based on evidence of delivery on past plots sold. This would be fairly easy to do in this modern age of technology. Simply take the bio data (picture, finger print, retina scan) of both husband and wife, perhaps with their marriage certificate, before processing the sales documentation and cross reference future purchase applications against a data base of those who have bought before.

• In order to ensure quick development of each district, purchasers and developers could be given a time limit of 5 years to finish construction, failure of which would result in a revocation of the title with 75% of initial purchase price refunded. The land would then be sold at the current market rate to any other interested party who has not purchased before, providing some income for the govt (however, in a scheme such as this, income should not be the primary concern of the govt).

I think with a determined, focused government, the points enunciated above are easily doable and would resolve many of the frustrations that people have with purchasing land in Lagos. The problem with Nigeria is that our government is full of people with little plans, focus, creativity, and competence. Such a model would even help to control prices, because if people know that every year government develops and sells a scheme of 1000 plots, people could tell private speculators to go to hell and when those peddling land at N30mln a plot see that govt is selling comparable land for N7.5mln, they will have no choice but to adjust their prices.

As it is, rather than be proactive and creative in solving the housing problems in Lagos for the benefit of the people, the LASG is more interested in deriving maximum benefit for itself from development of a few GRA (in name only) type estates at exorbitant prices. Yet, the LASG, having failed in its own responsibility of developing reasonably priced estates, making land available and reducing the difficulties in accessing the available land, is trying to “control” the housing market! All said and done, the most logical conclusion I can draw from the facts available is that as in the past, this latest effort will not succeed.