THE EFFECT OF RENT CONTROL AND RECOVERY PREMISES ACT OF PROPERTY MANAGEMENT

THE EFFECT OF RENT CONTROL AND RECOVERY PREMISES ACT OF PROPERTY MANAGEMENT

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                                             CHAPTER ONE

                                           INTRODUCTION

1.1 Background of the study

Rent control has both intentional and unforeseen consequences, just like any other policy implemented by the government. Renters will bear a modest rental burden as a result of the intended consequence of housing being more affordable. When rental expenses represent a portion of a household’s overall income and do not surpass thirty to forty percent, this is understood to be a moderate rental burden. Each country has a different threshold. According to Jewse and Delgadillo (2010) and Del Pero et al. (2016), the EU countries often adopt a 40% figure as an affordability barrier, whereas Australia and the USA use 30%. The stress of paying excessive rent lowers the standard of living by keeping households from purchasing other products and services. Severe poverty and malnourishment may result in extreme circumstances. As a result, ensuring the affordability of housing is crucial.

Rent control arose as a necessity to curtail landlord’s excesses by preventing the landlords from imposing rent increases that cause residents sleepless nights and eventually leaving the area. Shelter is one of the basic necessities of life alongside food and clothing. Shelter is a structure or building that provides cover from weather or protection against danger. Lagos state being a megacity is annually recording an influx of population as people migrate from their various places to the city in search of better life, and by so doing, the city is bursting at it’s seam because the demand for accommodation exceeds its supply. Infact, a simple apartment search can quickly become a nightmare in Lagos, as potential tenants move from property to property in the blazing sun only to discover they cannot even afford the simplest of apartment either because the rental price is too high or the landlord is demanding a payment tenure that is ridiculous. Even the rent paid by old tenants; that is, existing tenancy are increased by up to 100% in some cases. A very disturbing problem also is a common practice by Lagos landlords of charging rent upfront, demanding a two-years advance payment of rent before a prospective tenant could be offered an accommodation on his premises. The aforementioned led to the promulgation of the rent control Act by the Lagos state Government on the 21^st day of March, 1997. This rent control has thus formed a background for this study.

Rent control is the standard ceiling placed on the rate that a landlord can charge while allowing a landlord to set the rent freely when letting to a new tenant but subject to the tenant’s right not to accept and preventing the landlord from raising the rent or ejecting the tenant (Basu and Emerson, 2003). Compared with other government-mandated price controls, it is the law placing maximum price on what landlords may charge tenants and usually set below that which would have otherwise prevailed (Block and Edgar Olsen, 1981); while it sometimes functions as price ceiling and a collection of laws regulating how much a landlord can raise or must reduce the rent, and limiting the reasons for eviction, working together with eviction protections so that the landlord does not get around a rent limit by evicting the tenant (Carlson, 2006). The rent control is usually an intervention through measures put in place by government on the pretext of protecting the urban dwellers from being pushed off the open market in the course of securing accommodations by putting a ceiling on the maximum rent payable on all classes of residential properties. Such measures include legislation on rent control to check incessant and arbitrary increases brought about through the interplay of demand and supply of residential accommodation. Such demand often rises at geometric rate while supply rises at arithmetic rate thereby causing galloping increase in rent from year to year.

According to Oni et al (2007), prior to the advent of rent control in Lagos State, the Lagos urban poor and low income earners were at the mercy of shylock landlords who often resorted to taking court order through the back door without serving the tenants proper notices, called jankara judgment (in Lagos parlance), to force them out without due process of law. Many of the property owners increased rent on an annual basis and at high rates, demanding advance rent of up to two years, not minding the unsanitary conditions of such accommodation units. Consequently, in 1997 the then military administrator of Lagos State signed into law an edict, which is cited as the Rent Control and Recovery of Residential Premises Edict No. 6 of 1997 (also called Rent Edict) with effect from the 21st day of March 1997. The most striking provision of the edict is the involvement of Estate Surveyors and Valuers in determining the standard rent payable on residential accommodation in each of the zones into which Lagos State has been delineated and stipulated in relations to size of room, number of rooms, facilities provided, and locations.

High demand for rental accommodation has been experienced as a result of the creation of thirty-six States and Abuja, the Federal Capital Territory because of the need to house people moving into new States in addition to new ones being employed to fill up created vacancies in the new State and Local Government Council Departments. There is bound to be an increasing dependency on the private rental market for a long time to come in view of the high cost of various building materials, high interest rates on mortgage loans and the challenges facing applicants for the certificates of occupancy all these challenges coupled with poverty and unemployment in Nigeria has made it difficult for some tenants to pay their rent leading to accumulation of rent arrears. Due to poor enactment of policy and implementation, some tenants are stubborn and difficult refusing to pay their rent intentionally with dubious motive to cheat the landlords (Topham, 2012). The absence of many large corporate or institutional investors in the rental property market has widened the gap.

According to Burke (2000), the relative poor quality of tenancy management coupled with the polarization of estate agency practice have led to conflicts and disputes between or among landlords, estate agents and tenants as a result of refusal of some tenants to pay their rent areas. Bad tenants can be a real problem for not paying rent on time or leaving properties in a mess. In advanced countries, lodged information about bad tenants in tenancy databases assists estate agents and landlords make more informed decisions before taking in new tenant because some tenant will never abide by both oral and even written agreement leading to problems between the landlord and the tenants. Accordingly, a landlord who seeks to recover his rent areas from a tenant must strictly comply with the provisions of the statutes guiding landlord and tenancy agreements in Nigeria. In other words, the slightest deviation from the requirements of the law will frustrate an attempt to recover possession of rent areas and the premises no matter how troublesome and terrible such a tenant may be.

Every State in Nigeria now has its own law on recovery of rents, areas and premises. The law in Nigeria is Recovery of Premises Act. Cap 544 Laws of the Federation of Nigeria (Abuja) 1990. Section 2, Recovery of Premises Act Cap 544 Laws of the Federation of Nigeria (Abuja) 1990 states that a landlord is a person entitled to immediate reversion of the premises and includes the attorney or agent of any such landlord or any person receiving (whether in his own right or as an attorney or agent) any rent from any person for the occupation of any accommodation in respect of which he claims a right to receive same. This section further states that a tenant includes any person occupying premises, whether on payment of rent or otherwise, but does not include a person occupying premises under a bona fide claim to be the owner of the premises. It is however imperative that landlord must operate within the confines of the law in the recovery of areas and treatment of difficult tenants in both residential and commercial properties which is what this study is focused on.

1.2 Statement of the Problem

Every day with the increase in population, there is a concurrent need for houses to accommodate this rising population. As a result, there has always been the need for individuals, corporations and governments to build and lease or rent houses to fill this void. These houses could either be for residential or commercial purposes. This has brought the need to regulate the relationship between landlords and tenants so as to avoid arbitrary increments in rents, non-payment of rent areas, wrongful eviction and illegal holding over of premises. The procedure for recovery of rent areas and premises is largely regulated by statutes. On any day following the day the rent was due, when the tenant failed to pay, the landlord can serve a termination notice to be effective ten days after the date the notice was served. The tenant may within five days after receipt of the notice pay all rents due and the notice of termination is then void (University of British Columbia, 2004). If the tenant refuses to pay or move out, eviction procedure may commence. Rent arrears are the commonest of all the reasons for tenant eviction and disagreement between tenants and landlords. (ACN, 2011; Nigeria Property Centre, 2012; Topham, 2012), the researcher will however examine the process of rent areas recovery and treatment of difficult tenants in residential and commercial properties in Nigeria.

1.3 Objective of the Study

The following are the objectives of this study

1. To ascertain the impact of rent control on property management
2. To examine the relationship between rent control and property management
3. To examine the benefit of recovery premises act of property management
4. To ascertain the forms of rent control

1.4 Research Question

This research will be guided with the following research questions

1. Does rent control has any impact on property management?
2. Is there any relationship between rent control and property management?
3. Does recovery premises act of property management has any benefit?
4. Are the different forms of rent control?

 

1.5 Significance of the Study

The following are the significance of this study:

Outcome of this study will educate the landlord on the process of recovery of rent arrears from the tenants and how difficult tenants can be treated in residential and commercial properties in Nigeria.

It will also enlighten the tenants on the need to maintain adequate cooperation with the landlord with respect to prompt payment of rent.

The result will be useful for the government and policy makers on the need to formulate an effective policy that will solve any problem that may arise between the landlord and tenant of residential and commercial properties in Nigeria.

This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.6 Scope/Limitations of the Study

This study on the effect of rent control and recovery premises act of property management. The study was limited to both landlords and tenants recently residing in Lagos state.

1.7 Limitation of Study

Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8 Definition of Terms

Rent: a usually fixed periodical return made by a tenant or occupant of property to the owner for the possession and use thereof.

Rent Control:  a government program that places a limit on the amount that a landlord can demand for leasing a home or renewing a lease. 

Recovery Premises: relates to the determination of a tenancy and, by implication, the reasons for the recovery.

 

 

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