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Why Abuja Property Owners Oppose Rent Collection Bill

By Danlami Nasir Isah

According to the fourth quarter and full-year 2020 GDP data released by the National Bureau of Statistics (NBS), real estate sector returned to positive growth of 2.81% year on year (y/y) in 2020 following six consecutive quarters of negative growth since the last positive growth posted in Q1 2019 (0.93% y/y).

The significant recovery in Q4 2020 reflects the full reopening of the economy as many residential and commercial projects began operations fully following the suspension of activities during the national lockdown. Overall, the real estate GDP FY 2020 contracted by 9.22% y/y which was well below our 2020 estimate of a 13.7% contraction.

The real estate sector like many other sectors of the economy suffers deeply from a dip in macro economic conditions of the country. In 2016, when the economy went into recession, the sector declined by 6.86% compared with the growth of 2.11% recorded in 2015.

In another development, high cost of building materials has been projected by experts to be another reason why the sector suffers from a dip in economic activities. As such, to lessen the harsh economic situation on residents of the Federal Capital Territory who are mostly rent payers,  the Nigerian Senate has introduced a bill seeking to restrict landlords in FCT to only collect 3 month rent from residents seeking new apartments within Abuja city.

The bill titled, ‘Advanced Rent (Residential Apartments, Office Spaces Regulation Bill, 2022’, was sponsored by Senator Smart Adeyemi (APC-Kogi-West).

According to Senator Adeyemi, it became paramount to enact laws that can directly affect the lives of Nigerians.

He said, ”Some of the problems confronting our nation today is the high level of corruption and if you take a look at Abuja in particular, you see so many uncompleted houses, some of them you don’t even know the owners.

“Those, who own these properties, did not secure loans for them, there are free money that people have gotten, illegal monies, and put up structures. And this structures are put out in such a manner that an average Nigerian cannot afford it. Why do you think that some junior people go into corrupt practices, a good number of them is the struggle and effort to get their rent paid. Ask those who are paying rent in Abuja, the landlord will ask them to pay two years rent.

“So I came to the conclusion that we must put the law in place that when you are going to take an apartment, the maximum of what a landlord should ask you to pay must be three months rent payment, after three months, you can then begin to pay monthly.

“You do not allow the society to live in a manner that people can be reckless in the so-called what they have, whatever, they have in the way of assets, you must have the consideration that you have a duty to protect others, not to use your wealth to oppress people and make some people commit suicide.

“There are families that have broken up because the man of the house could not pay the rent, and some have been pushed out because the landlord asked them to pay for two years. If people will have to manage with their spouse to pay, we should be able to put the law in place in such a way that nobody will be oppressed.’’

Going further, Adeyemi said that the bill also seeks to ensure that tenants are not ejected until after 6 months if they were not able to pay, noting that it was important to put laws in place to protect the majority of Nigerians, who are poor.

It would be recalled that in a similar manner, the Minister of Works and Housing, Babatunde Fashola, had in July 2021, suggested the collection of three-month rent by landlords and property owners as against the collection of three years rent which he said made housing unaffordable for Nigerians in urban centres.

Fashola had urged state governments to intervene in the management of rent because as long as people have to pay three years rent from salaries that are earned monthly in arrears, there will be the problem of affordability.

LANDLORDS REACT

A property owner in the Kubwa axis of the FCT, Abdulhamid  Dahiru who owns  three blocks of 3 bedroom flat while reacting to the proposed bill, told Valuechain that  the lawmakers should also consider landlords. According to him, huge investments have been put into these properties and some tenants deliberately do not just want to pay rents.

“While some of these tenants have truly been thrown into deplorable financial situations, some have just chosen to be outrightly wicked to us landlords, placing all their personal needs above the payment of their rent, forgetting that we landlords also depend on these rents for our survival. I have two tenants that perpetually owe me rent and I am trying to eject them. Once they leave, I will do some renovation, review the rent upwards and look for someone to come in”, he said.

Another property owner in Kado Area of the FCT, Mrs. Chiamaka Orjiude lamented the rising inflation and the cost of building items in the market as justification for why landlords should keep collecting full house rents.

“Nearly everything has increased in price, from foodstuff to building materials. For a landlord like me who lives off rents paid by tenants, I have no choice but to transfer this high cost to them, else, my survival may be threaten. I have said it that the government are the ones to be blamed. How can cost of items be high and you say you want us to collect only three months advance, it is almost impossible,” she added

The case was similar with Mr. Ramon Bamise, a landlord in Apo Resettlement of the FCT said the bill will further put landlords in a fix. “My 2-bedroom apartments go for N650,000 naira and for the amenities and furnishing that I have provided in the apartments, it is more than a fair amount to charge as rent. Two of my tenants have, however, failed to pay the rent for close to two years, citing the hardship in the economy. The worst part is that although I have served them eviction notices, they have failed to move out of the apartments because they claim that they cannot afford the exorbitant amount required to obtain a new apartment especially with the additional fees that accompany rents such as agency fee, caution fee and legal fees. I have no choice but to instruct my lawyer at great personal cost, to take the matter to court,” he lamented.

Meanwhile, a Real Estate Expert, Dr. Bashir Muhammad has predicted that the bill may not see the light of the day owing to the current economic situation in the country. He said as building materials are on the high side, it will be difficult for the government to tell landlords not to get their full rents as everyone is making everything possible to get return on investments.

“One of the fallouts of the covid pandemic is our inability to get tenants to pay up their outstanding rents. Many realtors are currently dealing with multiple cases of  rent defaults, particularly among the lower- and middle-income earners. As such, if they can’t pay annually what’s the guarantee that you won’t be dragging with them for the three months advance? I sincerely think houses will keep being on the high side as long as inflation and prices of building materials doesn’t come down”, he said.

He noted that new houses would cost more than older houses because of the high cost of building materials, stating that although professionally speaking, rents should be increased at 3-year intervals, many landlords have become shylocks, always fishing for opportunities to increase rents. He said tenants should expect higher rents as the year goes down; the economy is not friendly. The effects would put apartment prices on the rise.

Another Realtor, Chika Obi said compliance from tenants in 2021 has been very low compared to preceding years because of the current economic situation. “House rents are also likely to go up towards the year’s end because of the rising cost of building materials. However, I have advised my clients for the properties that I manage not to increase rents for now until the economy is stable,” he added.

He however called for concerted efforts towards encouraging local production of building materials to bring prices rather than initiate laws against landlords, advising the federal government to provide a conducive atmosphere to attract Foreign Direct Investment into the sector.

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