Lagos State’s One Year Rent Rule - Making A Positive Impact?

Written by  Propertygate Published in Editorial Thursday, 05 April 2012 11:45
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When the Lagos State tenancy law came into effect around mid last year, it was greeted with mixed reactions. A notable provision of the law made it illegal in the State except in exempted areas to collect more than a year’s rent from a new tenant in advance. Almost a year of coming into effect, the one year rent rule appears to be making positive impact.

 

Property owners (landlords) were not particularly thrilled by the new law. The law stripped them of ability to collect rental income of more than 1 year in advance. While that is a minus from the landlords’ perspective, assessment on ground suggests an upward swing in take-up of rental properties in some places may not be unconnected with the new rule. Potential tenants who do not have capacity to pay beyond one year’s rent at once are now brought within effective demand walls, thus increasing rental activities. In addition, landlords are relieved of the problem of revenue loss arising from void periods while waiting for tenants with 2years rent. With heightened demand stimulated by reduced rental outlay, the rental market will be more dynamic. This should encourage more participation in property investment, and thus provide a positive trigger for real estate development activities.

For potential tenants, the rule has granted access to housing with considerate rental outlay. Several individuals and families currently sharing accommodation with friends or relatives, but desirous of rental homes of theirs are now fulfilling their dreams. Those in current rental accommodation but seek better homes are now enabled more than before. The net impact for these people is improved living condition.

So far, the one year rent rule seems to be holding sway at least in number of areas. It may however not be unconnected with mass vacancies in housing in areas with oversupply from the boom era. As nations including Nigeria are rallying to economic recovery after the global financial crisis that crippled economies round the world, the question is, will the demand-supply divide, traditionally in favour of demand not return? If this happens (which is likely in view of supply constraints), will the rule still hold, as pressure mounts on available housing stock? Only time will tell.

Read 1358 times Last modified on Sunday, 17 March 2013 22:20
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