Cases of default in payment of house rents across different market nodes in Nigeria today are said to be on the rise such that neither landlord who is increasing their house rent nor the tenant who is finding it difficult to pay is smiling or happy.
Galloping inflation and other macro-economic indicators, including high interest rate, unstable exchange rate and petrol price hike have been blamed for the rise in building materials prices, leading to increase in construction and maintenance cost, hence the increase in rents.
BusinessDay findings show that landlords are worried over increasing inability of their tenants to meet up with their rent obligations which has caused a backlog of arrears running into months and, sometimes, years.
The situation, according to the findings, has put many of them who rely on the timely payment of these rents for their survival in dire straits, while tenants are struggling for survival amid shrinking income.
A landlord in the Ojo areas of Lagos,who introduced himself simply as Adeduro, told BusinessDay that, though some tenants have truly been thrown into dire financial situations, some others have just chosen to be wicked to their landlords, placing all their personal needs above the payment of their rents, forgetting that landlords also depend on these rents for survival.
“Nearly everything has increased in price, from foodstuff to building materials. For a landlord like me who lives off rents paid by tenants, I have no choice but to transfer this high cost to them, else, my survival may be threatened,” he said.
Confirming the trend in a telephone chat on Monday, Olalekan Akinwumi, President, International Facilities Management Association (IFMA), Nigerian Chapter, said, “we have seen cases of some monthly tenants refusing to pay since March this year and some others since December last year.”
He said that the reason commonly cited by these tenants is the prevailing adverse economic condition, especially inflation which, according to them, has shrunk individual and household income and, by extension, their purchasing power.
Akinwumi noted that besides the adverse economic condition, which has given even the rich a leeway to default in their rent payment, tenancy laws in Nigeria are weak and porous. “The laws, especially at the state level, is skewed in favour of tenants as they do not give landlords enough power to recover their rents in the event of default ,” he said.
He added that the government in the country was not interested in real estate, just as the judiciary is weak and fails to enforce property and tenancy laws to help get government’s property tax to grow its revenue.
“House rent should be a major priority for tenants, but because they know that the law is weak and cannot come after them, some default deliberately. We have seen cases where tenants owe rents up to three years only to walk away from the property and there’s so little the landlord can do,” he noted.
“If a monthly or yearly tenant knows that he would be thrown out of his apartment in seven days when he defaults in payment, he will take his rent serious. That’s what is done in advanced countries where the law takes its course not only in rents payment, but also in other areas of social contracts,” Akinwumi added.
He pointed out that rent default affects not only the landlords whose investment suffers, but also those engaged in estate agency practice whose income is also affected when tenants default. He advised that, in order to stem the rising cases of default, organizations should be paying rents for their employees and deduct same from their monthly salaries.
On his part, Ayo Ibaru, CEO, Northcourt Real Estate, told BusinessDay that on account of the hash economic conditions in the country at the moment, the residential sub-market would see further surge in rent defaults because, according to him, households now prioritise spending on groceries and energy.
He added that tenants would struggle to meet rental obligations in the short term as they were forced to navigate increased petrol pump price which has caused increase not only in transportation cost, but also in commodity prices.
“Barring any efficiently executed interventionist policies by the government in the short term, the removal of petrol subsidy and the increase in pump price will inevitably lead to a reduction in individuals’ purchasing power. This will continue into the mid-term,” Ibaru said.
He stated that projects that relied on subscribers making installment payments might encounter delays in delivery due to some subscribers being unprepared for the expected change in project cost.