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Fresh challenges in housing market as landlords seek agreement, commission fees outside terms

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The lack of sufficient and pocket-friendly accommodation in most Nigerian cities has left many home-seekers at the mercy of some landlords who, according to BusinessDay checks, are taking undue advantage of the challenges in the country’s property market.

Some house owners in the busy mainland of Lagos and Port Harcourt are said to be enacting new terms of renting apartments to prospective tenants that are unfavourable to estate agents and their clients.

BusinessDay survey revealed that some landlords who have highly sought-after apartments with cheaper price ask potential tenants to pay legal (agreement) fees to them instead of a lawyer and the commission which is also supposed to be the agent’s fee for initiating the transaction is split to give a share to the house owner.

“What happened before now was that the lawyer from the landlord was entitled to the agreement fee while the agent was given the commission but now the landlords are taking half of the commission and sometimes more than half coupled with the agreement as they no longer use the services of lawyers and no written agreement is given other than a receipt,” Ade Usman, a real estate agent in Yaba, told BusinessDay.

According to the middle-aged man who gets most of his clients from an online platform, the landlords’ recent behaviour is as a result of the fact that “they feel if  one agent doesn’t collect the amount he is given, another agent will.”

He attributed this to the increase in the number of agents now scrambling for the same business. “These days, anyone can bring a tenant to a landlord and claim that he/she is an agent and is willing to take any amount, thereby stirring unhealthy competition in the market.”

Agency fees are not illegal as some people think it is; it is a reward for the service rendered to both the landlord and prospective tenant or a buyer looking for a house or a piece of land. In fact, if middlemen in manufacturing and trading businesses get rewarded with the additional price to the producer’s price, house agents should not be exception.

Generally, agency fees for tenancy agreements are 10 percent of the tenancy rates. For instance, if a property is going for N800,000 per annum, the agency fee will be 10 percent of the rent which amounts to N80,000 for one year and if the agent is collecting 2 years rent, that will be N160,000.

According to Patience Dokunmu, a young graduate who has just got a job with a consulting firm in Surulere, the 10 percent commission is not applicable to “those agents who charge you whatever they want just because they know you need the house and the landlord too does not consider you when charging agreement fees.”

The young lady  said she recently got a single room apartment for N250,000 per annum but the commission and agreement fees were slammed on her without any calculation whatsoever.

“I paid N50,000 each for both agreement and commission, that is N25,000 more than what I was supposed to pay as commission and also there was no lawyer that signed agreement and my landlord didn’t even give me any agreement document,” Dokunmu told BusinessDay.

According to Boye Ajayi, Chief Operating Officer at Property Communications, and National Public Secretary of Association of Estate Agents in Nigeria (AEAN), things like this happen when people prefer to use shortcut, refuse to contact a professional coupled with the fact that estate agency as a profession is not well regulated, arguing that, if it were well regulated, things like these wouldn’t come up.

“The problem we have is that tenants and home buyers patronize persons who are not supposed to be practicing in this particular profession,” Ajayi said.

He explained that agency issues are the sole responsibility of a professional and they are paid commission for their services while on the other hand, a lawyer take the legal (agreement) fees which he uses to prepare terms and conditions which will be beneficial to both parties.

Ordinarily, an agent is entitled to the entire 10 percent of the cost of acquiring an apartment, without giving any portion to the landlord, whereas the agreement or legal fees is money paid to a legal practitioner who operates in the property industry for the documentation of the agreement between a landlord and his prospective tenant.

For property sales, it usually attracts 5 percent of the total price paid for the property (negotiable in some instances if the potential property owner has a skilled lawyer in pointing out the reasons it should be less than 5%).

Credit Sales reports that the average rent of Nigerians between 20 and 35 years of age is around N82,800($230) monthly and the average price of one bedroom apartment in mega cities like Lagos, Abuja and Port Harcourt is around N90,000 ($300) per month. This means that a lot of people cannot afford to rent by themselves.

Also, there is a problem of upfront annual rent requirement, which means that the product that would break the payments into monthly payment, because a lot of the people earn their salary on a monthly basis, is not available.

Commenting on the subject matter, Philip Ololuka, an agent at Ken Saro-Wiwa Road, Rumuola, Port Harcourt said, “we have more people looking for houses to rent than the available accommodation; unfortunately, this information is available to most landlords and so they can act based of that fact.”

 “Most of the landlords don’t use the services of lawyers and as such the supposed lawyers’ fees now automatically become theirs. As a matter of fact, there are now landlords who are agents of their own houses,” Ololuka told BusinessDay on phone.

The claims by the real estate agents was affirmed by a property developer who is into construction of hostels in the Akoka area of Unilag as he said the landlords are actually helping the agents with jobs and ‘free money’.

“It is very difficult to put up a building in Nigeria; so when one is able to make that happen, it should be able to bring returns on investment; we do the entire work and also create jobs for these agents, they should be grateful for the little they are getting from doing almost nothing,” the landlord who asked not be mentioned told BusinessDay.

On the way forward, Ajayi said professionals should be left to handle the agency job. “When people try to boycott the professional agents with the mind-set not to pay so much, they end up paying too much by the time the landlords do not go by the supposed commission and agreement rate,” he noted.

Endurance Okafor

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