Penchant for annual increase drives landlords demand for one-year rent

Landlords in Lagos, Nigeria’s biggest city state by population, are increasingly demanding and accepting one-year rent from prospective tenants as against the age-long practice of two years’ advance payment.
Industry watchers say the development puts tenants at ease but does not entirely free them from the apron strings of the landlords, pointing out that the one-year rent has no bearing whatsoever with the Lagos State Tenancy Law of 2011 which prohibits landlords from collecting rents in excess of one year.
Lagos State government, however, insists that the Tenancy Law is playing a role in changing the perception of landlords in the state, adding that they have been enforcing the law.The state commissioner for housing, Bosun Jeje, disclosed to BusinessDay that some people had been prosecuted and that some were being prosecuted under the law, noting that, “landlords in many parts of the state are voluntarily complying with the law and some are not; but on the whole, we have recorded some level of success”.
On the contrary, the industry watchers explain that the new rent regime is driven by the landlord’s desire for annual rent increase, noting that though it favours tenants in the short run, the landlords remain the ultimate beneficiaries, especially in the face of the huge housing deficit and high house prices in the state.
An unconfirmed report says Lagos has housing deficit estimated at three million units while a report published in the state by Pison Housing Company, a real estate firm, estimates that internaover 60 percent of the state’s 18 million population lives in rented accommodation.
BusinessDay investigation shows that more property owners are embracing the one-year rent in many parts of the state including the low income areas such as Ojo, Ikotun, Okokomaiko, Egbeda, Satelite Town etc and also some mid-income and up-market settlements like Ikeja GRA, Maryland, Ilupeju, Ikoyi, and a few locations in Lekki.
As attractive as the one-year rent is, it comes at a cost, as the tenant stands the risk of being slammed an increase upon the expiration of the one year or the quit notice option.
“Some landlords are demanding for one year. Even where the tenant opts to pay two years, you see them saying no! But they are doing so to give them the flexibility of annual review of the rent,” said Robert Duru, a real estate who operates within the Satellite Town area.
Francis Uba, a landlord with a property located at Abule-Ado, near the Lagos International Trade Fair Complex, told BusinessDay that he accepted one year payment from all tenants parking into his newly completed property to enable him study them within this period and determine who he allows to stay beyond a year. “Anyone of them who gives trouble leaves on expiration of the one year rent,” he said.
At the high end property market, however, the story is slightly different, because here the landlords are compelled to accept one-year rent by market realities that has seen demand slowing and creating high vacancy rate which Bismarck Rewane, the CEO of Financial Derivative Company, estimates at 32 percent in residential apartments on Victoria Island.