PROPERTY TRANSACTION GUIDE

How to implement monthly rent payment - Experts
By Akinpelu Dada and Rasheed Bisiriyu

Punch, Monday, 23rd Feb 2009

As the Senate awaits an executive bill seeking to outlaw the collection of advance payment of rents by landlords, experts have taken divergent views on the issue.

Although there are slight variations in the views expressed on the matter, many feel that the idea of paying rent on a property at the end of the month appears a fair deal; the ingredients to make it work are, however, not available yet.

For instance, Mr. Akin Olawore, who is a former Chairman, Nigerian Institution of Estate Surveyors and Valuers, Lagos State Branch, said, "It is not a bad idea and it will actually reduce the pressure on the economy and help with cash flow planning provided affordable credit is available in the system to help landlords meet their financial obligations with repayment tied to incoming rent. Tenancy court should be set up to deal squarely with any difficulty."

A former President, Nigerian Institute of Quantity Surveyors and African Association of Quantity Surveyors, Mr. Segun Ajanlekoko, said, "It will be a welcome development and a big relief for the working class. But it will be tough implementing it, especially within the private sector, when the developer has used expensive funds to build because interest on borrowing is very high."

A former Chairman, Nigerian Institute of Town Planners, Lagos State Chapter, Mr. Toyin Ayinde, said, "If done, it will be one of the sanest things that can happen in the real estate world. Nigeria is probably the only country where you pay for what you have not used. It will leave more capital in the hand for spending. But things got to that level because there is no enough housing units.

"There is about 15 to 17 million housing deficit. We need to produce about 72,000 units per annum, but we are doing less than 10,000 per annum. How can we meet up? That is the issue. The Attorney-General of the Federation should ignore ringworm and attack the real leprosy. It is simple economics - supply and demand."

But some experts, including real estate experts and property lawyers, noted that without the provision of sufficient houses for the masses to be facilitated by government, efforts to fix rents and abolish advance payment would always be frustrated.

The Chairman, Nigerian Institute of Building, Lagos State Chapter, Mr. Kunle Awobodu, said, "Yearly payment is an aberration. But government’s intervention in tenancy matter, like the Brig.-Gen. Mobolaji Johnson policy never yielded results. Naturally, yearly payment is exploitative. Monthly payment will enable tenants meet their tenancy obligation conveniently without borrowing money."

To make the proposed policy succeed, he advised that the cooperation of landlord associations should be sought.

But Mr. Stephen Jagun, an estate surveyor and valuer and immediate past President, International Facility Management Association, Nigerian Chapter, said, "You can’t regulate what you don’t have. Developers need to offset the cost of constructing houses as much as possible. The bill will create a black market for rentable properties and make matters worse. The Rent Control Edict by the Lagos State Government is an ample example.

"The government should instead look for practicable solutions to the housing problem. They said that they wanted to reduce the price of cement to about N700 a bag, but it is not working. They should fix the economy first."

He noted, "In other countries where rent is collected monthly, they have managed their economies well and property owners don’t look for bulk rent payment to survive. Their governments provide credit and mortgage facilities and scholarships for their children. Landlords can borrow and use their monthly rental income as guarantees.

"We need to spread expenditure. Those who take loans here to build need substantial sums like five years’ rent to service the loans."

Jagun has a soul mate in Mr. Clifford Ndujihe, an environmental scientist and journalist, who warned against making a law that could not be effectively enforced.

He said, "How many houses are owned by governments? Some people took loans to build houses and they will have to recoup their investment."

He said that government could force down rent by making mortgage facilities accessible to all categories of workers and provide serviced plots for interested home builders.

He wondered how government would enforce the proposed law when many people were losing their homes to road expansion in major cities like Lagos.

The Chairman, Nigerian Institute of Town Planners, Lagos State Chapter, Mr. Moses Ogunleye, said, "The bill will be similar to the Rent Control Edict, which was introduced earlier and didn’t work. The bill will only ‘throw up’ the market and distort it.

"You cannot control what you don’t have. Don’t forget that over 90 per cent of housing units belong to the private sector group."

He also noted that after taking loans or mortgages at high interest rates to build houses, it would be unfair to subject landlords to the trouble of spending the rest of their lives to repay the loans.

"I am not happy that landlords are taking two-three years rent at once, but the AGF will not achieve result. The solution is for the government to facilitate increased supply of houses," Ogunleye said.