Lessons for Nigerian landlords on rents in time of coronavirus crisis

For Nigerian landlords, there are lessons to learn from other jurisdictions on how to relate with their tenants in terms of rents payment at a time like this when coronavirus has brought all economic activities to a standstill around the globe.

Though Kunle Awobodu, president of Nigerian Institute of Building (NIOB), says the time the world is in calls for understanding on the part of landlords, analysts say Nigerian landlords could go beyond that by adopting what obtains a place like Saudi Arabia where each tenant is viewed as a partner that needs full support during this pandemic.

Both residential and commercial property landlords are increasingly concerned about the economic impact of the coronavirus pandemic on their tenants and property portfolio.

For reasons of the lockdown and social distancing rules, most commercial properties, especially office space, were shut down and the occupiers compelled to work from home. Residential property landlords are also impacted because their tenants who have either lost their jobs or taken pay cuts can no longer afford their rents.

But “commercial landlords need rent money to keep their own businesses afloat. So, we’ve recommended that, while landlords should accommodate rent reductions, they should continue to demand rent in the usual way, while refraining from waiving their right to collect unpaid rent at a future date,” a new report quotes a commercial property solicitor, Paul Hinchliffe, as saying.

This, according to Awobodu, is the position of most Nigerian landlords, explaining that the landlords are also impacted by the deadly diseases. But it is different story in Saudi Arabia where landlords have shown their support by exempting tenants from paying rent to mitigate the impact of Covid-19.

Before the pandemic, as part of incentives to attract tenants, both retail and office space suppliers in Nigeria only supported their tenants during their fit out period. None of these landlords has so far announced a rent-free period for tenants as a result of the Covid-19 crisis.

Unlike their Nigerian counterparts, most Saudi landlords have given few months free for tenants. The landlords explained that the rent-free period for their tenants was a response to the crisis and aimed to mitigate the impact of the pandemic and protect as well as help the tenants.

The rent-free period, however, depend on the level of impact of the crisis on the tenant. Wafi Energy, for instance, is one of the subsidiaries of Al-Tas’heelat Holding Group. It is a fuel station company that rents, operates, invests in and runs fuel stations through long-term investment contracts.

Wafi Energy sublets the facilities of the fuel station to different business activities including grocery stores, oil change shops, cafés, restaurants and ATMs. Ismail Darwish, CEO of the Group, explained that the revenues of a fuel station and the facilities on the premises depended on the flow of vehicle movement which has slowed as a result of the crisis.

So if a crisis, let alone a pandemic, occurs, the business will be definitely impacted, explained Aldarwish, who has been working for 15 years in that sector.

“One of the solutions available to us as investors and tenants of the land is to get discount on the rent from the property owner in order to mitigate the impact of the crisis and provide the owners of other activities with more flexible solutions and exemptions,” he pointed out.

“We assessed the impact on each business activity based on the geographic location of the business. For example, the tenants at a fuel station that is located on the outskirts of the city have sustained more impact than their counterparts within the city. Also, the extent of the impact on an oil change shop is not similar to the one on a grocery store.

“We worked hard to mitigate the impact on the tenants and the lessors. No doubt that the government has borne the brunt of the impact of this crisis and has given more than it has taken, setting a great example to others in terms of unity in the face of pandemics,” Darwish stressed.