Nigeria ahead peers in estate agency fees at rental market

The huge housing problem in Nigeria comes to the fore more poignantly at the country’s burgeoning rental market where estate agency fees charged by property vendors  are as high as 10 percent of rent for low end properties, placing the country some 70-100 percent ahead of countries like Ghana and Kenya where agent’s commission (fee) is as low as 5 percent and 1.25 percent respectively.

In Uganda, the fee is between 5 percent and 10 percent and it is paid by the buyer;  in United Kingdom, it is between 2 percent and 3.5 percent,  in  France, it is between 3 percent and 10 percent, while in Germany, it is negotiable between 3 percent  and 6 percent.

A corollary to this is easily seen in the ease of registering property, in which Nigeria lags behind countries like Ghana, Thailand and New Zealand, in ease of registering property, just as its mortgage sector has the least contribution to Gross Domestic Product, (GDP) relative to other countries of the world.

Registering a property in Nigeria takes an average of 12 procedures, lasts nearly four  months (except in Lagos State which has improved on this) and costs about 15 percent of the property value as against neighbouring Ghana, where it requires just  five procedures, 34 days and 1.3 percent of the property value. In New Zealand, property could be registered online in two days at a cost of 0.1 percent of property value.

“Housing delivery in Nigeria is fraught with challenges including unstructured and informal housing market, legal and regulatory issues, poor institutional framework and the need for relevant government interventions”, said Olusola Olubode, former managing director of Refuge Homes Savings and Loans Limited (mortgage bankers), adding, “from all these it becomes clear why the housing market growth rate in Nigeria is still very low”.

Acute housing problems in the major cities of Nigeria like Abuja, Lagos and Port Harcourt ,where majority of residents rent rather than buy houses has created opportunities for estate agents to fleece home seekers, demanding outrageous commissions, sometimes from the landlord and the prospective tenant, or the buyer and the seller as the case may be.

Ade Ipaye, Lagos State Attorney-General and Commissioner for Justice observed at an estate agency stakeholders forum in Lagos recently, that there seemed to be an abuse of what he called ‘freedom of contract’, explaining that “freedom of contract is the ability of parties to bargain and create the terms of their agreement as they desire without any interference from government”.

Such freedom, he however pointed out, is not absolute, “because the determination of agency fee is a contractual matter that is to be agreed between the principal and the agent and should be subject to industry standard”.

Out of concern for the residents who are at the receiving end of the estate agents and their principal’s exploitative tendencies, the Lagos State government has set out to ensure a uniform standard for estate agency fees in the state, and according to Ipaye,  “it is in the interest of all the stakeholders to agree on an average standard as this facilitates doing business and creates confidence in the industry”.

Jimoh Ajao, Special Adviser to the Lagos State Governor on Housing, disclosed recently, plans by the state government to identify quacks in estate agency practice in the state through the creation of a uniform advertisement platform and a roll out of approved bill-board advertisement for properties.

Ajoa added that the state was also planning  an Estate Agent Academy to deal with issues of housing management and maintenance, modern approach to fixing rents on various categories of properties, collection of rents with minimum default, when and how to issue quit notices and how to carry out tenant eviction legally.

CHUKA UROKO