The Lagos Tenancy Law was passed some weeks back by the Lagos State Governor. The passage as expected had mixed receptions. Whilst tenants loved it, landlords didn’t. The reasons are for their respective views is easy to comprehend. However, third parties who also consider themselves stake holders in this issue mostly viewed it negatively.
Thats not surprising as well as lawyers, estate agents and hustlers who act as go between for the tenants and the lawyers will see their revenues diminish considerably if enforced.
What is surprising however is their line of argument. On Classic FM last week, I listened to their lawyers analyze the issue in a somewhat misleading manner. Their arguments against the law mostly bother around inability of landlords to recoup their money. So let’s address that.
They claim landlords borrow money from the banks to build these houses and as such have to charge 2 year rent to repay. That is a fallacy that is easy to debunk. Banks typically give construction loans for a minimum period or 4 years. They also are very willing extend the tenure of the loan once it can be proven to generate cash-flows periodically. Repayment of such loans are done monthly in arrears or quarterly at the most. I don’t know of any reasonable bank that offer repayment structures of one year in advance not to talk of two.
Therefore, it’s deceptive and fraudulent to tell tenants to pay for an apartment two years in advance when repayment of the loans are done monthly in arrears. What this says is that the landlords have turned real estate into a commodity that must repay itself in 2 years, which is massively untenable for economic growth. Real Estate is a Long term investment with it’s inherent value being the residual asset itself and not necessarily it’s stream of cash-flows.
Another question worthy to ask these guys really is who are the landlords eager to “recoup their investments”? Is it the landlords that have built these houses decades ago or the ones that inherited it? Is it houses built from funds stolen by corrupt politicians? The percentage of housing stock funded by banks can’t be over 50% in Lagos can they? These are just all false arguments.
I actually believe the government was complicit in enacting the law itself otherwise why should it exclude certain areas from obeying the law. This is probably because the ACN govt has been part of the property bubble in Lagos and have massive investment in IKOYI and it’s environs which they also intend to “recoup” soon.
Rent in Nigeria as a whole should be monthly. Given us a 6 month option is just a start. From what I even understand of the law, six month rent only applies to tenants who live in “face me I face you” apartment. For those of us who live in two bedroom apartments and above, we continue to pay yearly. The only respite is we can decide to move apartments without having to pay for 2 years in the new apartment.
So for now, let’s bask in the new law as it is and ignore the haters. At least we do not have to sacrifice that important investment for an extra years rent.
