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LSTL 2011: Its positives, negatives

LSTL 2011: Its positives, negatives

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An estate surveyor and valuer, Biodun Olapade, has described housing as a barometer to measure the living condition in a country. Besides, he is of the opinion that the huge housing deficit and the importance of housing, may have made many investors to include real estate investment in their portfolio or as preferred investment. This trend, he said, has made the private rental real estate investment the most popular in Nigeria.

However, in order to safeguard the landlord-tenant relationship, Olapade said the government sometimes intervened through enactment of legislation to protect tenants from the arbitrary treatment from landlords and protect landlords’ investment in the property.

This was the crux of his presentation last weekend, at the Lagos State Real Estate Transaction Department (LASRETRAD) forum, which held at the Adeyemi Bero Auditorium, Alausa, Lagos.

At the forum, themed: “Effects of Lagos State Tenancy Law 2011 on Residential Real Estate Investment”, Olapade contended that the Lagos State Tenancy Law (LSTL) 2011, which came into force on August 24, 2011, was one of the efforts of government to protect tenants from the overbearing influence of landlords and at the same time protect the landlords’ investments.

Seven years after the law, which was said to be very controversial at its enactment because of some of the provisions, it is pertinent to ask how the law had fared, especially considering its effect on property investment.

According to Olapade, while the law restricted collection of more than a year rent in advance and subtly brought back rent control; it, however, removed many legal technicalities that prevented rapid recovery of premises. Therefore, he argued, in order for the law to have more positive effects on residential real estate investment, there are certain aspects of the law that need to be revisited.

Firstly, he noted the provision on the collection of only a year rent in advance, which although appeared good, as it tended to remove untold hardship on the tenants. It is, however, not the case in many situations. There were many times when it was the tenant that proposed advance payment of rent above a year, if such tenant considered the accrued benefit of such payment. A total outlaw of advance rent payment above a year, he argued, would only deny the investor the benefits of collecting and paying of advance rent.

In this regard, he said Section 4 of the Law needed to be revised to reflect a situation when the tenant and landlord agreed payment for more than a year. Under the provisions of this section, it is unlawful for payment and collection of  more than a year rent in advance from both the sitting and new tenant. Specifically, the section provides that rent payment should not be in excess of one year for a yearly tenant and six months for a monthly tenant in respect of any premises. The section further provides that any person, who receives or pays rent in excess of what is prescribed in the law shall be guilty of an offence and shall be liable on conviction to a fine of N100, 000 or to three (3) months imprisonment.

Another aspect of the tenancy law, which Olapade frowned at is Section 37, which allowed a tenant to declare an increase in rent unreasonable. For him, this section should be expunged because rents’ determination is a private agreement between the parties involved, and is usually arrived at after series of bargaining, considering the interplay of forces of demand and supply in property market. However, he further argued, if the Section would be retained, then the Court should rely on valuation opinion of the Estate Surveyor and Valuer to determine if the rent increase is unreasonable.

Although part of the positive effects of the LSTL 2011 on real estate investment is the removal of technicalities plaguing prompt recovery of premises, yet stakeholders are of the opinion that it is still inadequate. They argued that needless time and resources are being wasted to recover property from an erring tenant.

Therefore, practitioners in the industry are clamouring that there is need for regulation to speed up the premises or property recovery process. The non existence of clear, explicit rules to regulate recovery of premises under the law, Olapade said, has heightened the degree of discretion by magistrates and judges, thereby causing so much delay in the disposal of recovery of premises. Although Section 46 of the LSTL provides that the Chief Judge may, as required, make regulations for the procedure through which matters relating to the conduct of proceedings shall be carried out, he advocated that such regulations should include time-limit for the disposal of tenancy cases.

Again, he explained, all forms of technicalities that may inhibit easy disposition of cases relating to property recovery should be eliminated in the regulation. Besides, since the legislation allows the use of Alternative Dispute Resolution (ADR) for resolving landlord tenant disputes, the real estate practitioners should be encouraged to explore this option for prompt recovery of premises.

“Tenancy matter is an issue that cuts across every sector of the society. Accordingly, tenancy law must be able to reflect the aspirations of the various groups in the society,” Olapade submitted.

The Estate Surveyor and Valuer in conclusion, said the government, which legislates on tenancy matters that have direct bearing on attractions of property investment, should as a matter of urgency, increase the housing stocks, especially affordable accommodation for the teeming masses in the low class. “This translates that there is an urgent need to continually bridge the gap between private developers’ supply of residential houses with continuous supply by the public sector. It is the only way that the effects of Agency like Lagos State Real Estate Transaction Department can be effective,” he said.

He continued: “Government has not given us anything in housing. Even the houses government is selling to the public is not affordable. With availability of stock of residential properties developed by the government in regulated and controlled districts within the jurisdictions of every local government and local council development area, then a proper stock of available houses can be searched online while the rent payable can be controlled or regulated with effective and clear tenancy law as well.“ He added that through this, the activities of real estate practitioners will also be controlled effectively by an Agency such as LASRETRAD through a centralised data base.

Earlier, Commissioner for Housing, Gbolahan Lawal, said government’s enactment of LSTL 2011 has brought relief to the people of the state. He said from the feedback from the public, it is obvious that the law is having a positive effect on the real estate sector, such that landlords and tenants conflicts have been drastically reduced.

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