*Pertinence Group leads by waving 3 months rent for its tenants
-By Danlami Nasir Isah
With the excruciating impact of the Coronavirus pandemic on every sector of the economy, Landlords and property firms have been urged to consider rent relief for tenants.
In fact, as a way of cushioning the impact of COVID-19 on their citizens, some governments in the advanced countries of the world have suspended rent payment while the crisis lasts. France is one such country.
In Nigeria, there are indications that many tenants whose house rents are due from April up to September when experts are estimating a vaccine for COVID-19 will be available, will struggle to pay considering that junior civil servants and non-essential traders alike are now staying at home due to partial lockdown imposed by government.
It is predicted that what will happen after the pandemic in terms of income and job losses is better left to the imagination as tougher times have been predicted ahead.
Nigeria already has close to 7,000 cases of COVID-19 as reported by the Nigeria Center for Disease Control, NCDC, and government is taking stringent and far-reaching decisions aimed at containing and preventing the spread of the virus.
All social gatherings have also been banned, leading to the cancellation of many conferences and social events, inter state travel, ban on all passenger flights as well as non-essential businesses ban is still fully in place.
A tenant in Abuja, the capital city of Nigeria, Musa Abdul says it will be difficult for landlords to get their rents as and when due owing to the current situation on ground.
Abdul believes that the landlords must be considerate in this trying times.
“If we look at, or think about all that, there is huge loss of income. Many companies may not be able to pay salaries immediately after all this crisis. The traders’ income comes from what they sell in a day. So, you don’t expect somebody who has no income to be thinking of paying house rents,” he said.
But an estate surveyor and valuer, who did not want his name mentioned, believes that, “what is paramount in the mind of everyone now is survival. There is no economic activity anywhere now; even those paying rent will have to generate economic activity to have the capacity to pay.”
He noted that the present situation was going to affect the ability of some tenants to pay and would pose a further challenge of rent collection as and when due. “Some people may even lose their jobs as things are going. But they’ll still live in a house,” he noted.
The estate surveyor pointed out that it was going to be “wide landlord lamentations” because both the residential and commercial property office space, retail malls, sundry shops, and warehouses will be affected.
Already, events centre operators are counting their losses arising from the ban on social gatherings. The social distancing rule is also affecting offices where most workers have been asked by their employers to work from home. “So, it is going to be really tough when this storm is over,” the estate surveyor stressed.
In another development, to cushion the effect of COVID-19 lockdown across the country, Pertinence Group, a real estate firm with penchant for people empowerment, has declared three months free rent for all her tenants nationwide.
The rent relief, according to the General Manager, Mr. Jeffrey Ehikioya, in a statement, will cost Pertinence several millions of Naira.
Ehikioya explained that the gesture was the company’s thoughtful economic relief initiative, as the world faces COVID-19 pandemic.
The General Manager, Jeffrey Ehikioya noted that this became necessary to cushion the effect of the global fight against the Pandemic, which has affected Nigerians’ means of livelihood by forcing major economies to a lockdown.
He said, “This is a corporate social responsibility to see our people through this hard season of the fight against the coronavirus scourge.
Subsequently, stakeholders in the real estate industries are calling on property owners to also replicate the same gesture offered by Pertinence Group.
However, they call on landlords to carefully take into cognizance some factors before they give rent deferral or relief to tenants.
A property expert, Chibuzor Nwankwo says that there is a need for landlords to make some considerations first before taking any decision.
“Landlords should carefully consider the type of relief they may offer a tenant. Is it in the form of a rent deferral or is it an abatement? If the rent is deferred, how quickly must the tenant repay and over what period of time? Forcing a tenant to repay rent too early could have a detrimental impact on the tenant’s post-COVID-19 recovery, jeopardizing its ability to perform under the lease for the remainder of the term.
Is it better for a landlord to collect partial rent (e.g., an amount sufficient to pay monthly debt service) or is it more advantageous to defer all base rent for several months and extend the term of the lease proportionately? A property owner should analyze the financial impact each proposal has on the landlord’s cash flow, and should not hesitate to offer alternatives to the tenant that are more viable from the landlord’s perspective,” he further explained.
Speaking further, Nwankwo says “When analyzing rent relief proposals, landlords should understand the financial viability of each tenant and ask for supporting financial information to verify each tenant’s claims.
“Understanding whether the tenant’s business is likely to recover is integral in determining the rental arrangement moving forward. For example, while many restaurants are completely closed due to government order, others have been able to recoup some of their lost revenue by offering take-out and delivery options.
“Landlords should also consider whether a tenant has applied for any other forms of relief. Has the tenant sought to recover under its business interruption insurance? Has the tenant applied for any of the loan programs in the CARES Act? Landlords may consider conditioning any rent relief provided to a tenant on that tenant first exhausting other, non-lease-related options,”
He added that understanding each specific tenant’s situation can help determine what type of relief a landlord should consider.