No estate agent has powers to fix rent, says Onuorah
Emeka Onuorah is Chairman, the Board of Trustees and a past President, the Nigerian Institution of Estate Surveyors and Valuers (NIESV). He spoke to NKECHI ONYEDIKA-UGOEZE on why the Land Use Act of 1978 should be amended by the next administration and on other critical issues affecting the real estate industry.
There have been several attempts to review the Land Use Act of 1978. Which section of the Act needs to be amended?
AS you know, the Land Use Act was first promoted in 1978 by the then Head of State, General Olusegun Obasanjo and since then, the Act has not been amended in any form or shape. It has been there for the past 44 years and several groups, both professionals and non-professionals, voiced concerns on the impediments contained in the Act even our professional body; the Nigerian Institution of Estate Surveyors and valuers (NIESV) and property developers.
Indeed, when Olusegun Obasanjo came back as democratic president, our institution then headed by Mr. Nweke Umezurike led us to Aso Rock to meet him, believing that being the one that promoted the Act, he would listen to our genuine concerns about the Act. When our president made his presentation, he looked at us and said, “there had been other Heads of States since I left office and none of them found it fit or necessary to amend the Act”; saying that as long as he is the sitting president, he would not amend the Act.
After that, we made presentation to the National Assembly during constitution amendment and up till this moment, nothing has been done. If you look at the Act itself, the intension might be noble being that before the Act, there were two jurisdictions in land matters; the Northern and Southern systems. So, they felt there was need to harmonise both systems, that is how the Act came into being.
After practicing the Act for 44 years, the reasons for promulgating the Act haven’t been achieved. They thought that it would make land readily available by making state governors custodians of the land, but the governors have been using it as a political weapon to the extent of making it difficult for Federal Government to acquire land.
The Act doesn’t give the federal authority powers to acquire land in any state, they have to go through the state governor and if the state governor is not in good terms with the federal authorities, they won’t comply. It happened during the second republic and still happening up till today.
Similarly, the governors are using issuance of Certificate of Occupancy (CofO), as a weapon against their political opponents. If you apply for C of O and the governor doesn’t like your face, they can sit on your C of O and never issue it. Also, the governors have found out that they can raise their internally generated revenue from the issuance of C of Os and have put a price tag on processing them, which has made them expensive.
In some states, the processing is up to 30 per cent of the cost of the land. Although, some states are reducing their rates; while some state governments have reduced their processing time, it is still high and takes a long time. In essence, when one obtains C of O, the property can be used for banking transaction purposes.
Another law also states that the mineral resources in the state are under the control of the Federal Government. Now, for you to have access to the land, you must go through the state governor. So, how would the Federal Government have access to mineral deposits from a land that is under the control of the state governor? So, these are the grey areas that need to be streamlined and corrected.
Another contentious area is that of compensation. The law provides compensation for unexhausted improvement of the land, in other words the structures you have on the land. You will get compensation, if government takes over your land, but there is no payment for the land, even if you bought the land before acquisition, the government isn’t obliged to pay you a dime. The best the person gets is ground rent refund. That’s a Draconian law, as it deprives citizens of their rights to own land in perpetuity.
Do you foresee the incoming government doing the needful by amending the Act?
We don’t know the government that is going to come in, but I think we should extract promise from all the major parties. They should promise, when they come into power, to ensure that the Act is duly amended. Our professional body has asked that this Act should be brought out of the constitution, but there is a clear signal from the government that they don’t want to go that route. Even, if the government decides they don’t want to remove it, they should ensure it is amended in line with observations made by various bodies so that we could have an Act that serves its purpose and the people.
Professionals in the industry have lamented the influx of uncertified building materials and manufacture of substandard ones in the country. What do you think should be adopted to address this issue?
The primary responsibility is to ensure that goods that enter the country are in good condition or rest within the Standard Organisation of Nigeria (SON), as it is the organisation’s responsibility to ensure that the goods meet Nigerian standards. It is the duty of the Federal Government and its agencies to work and collaborate with Customs and others at the points of entry to the country. It is not the work of the professional body to stop the influx of those products; it is primarily the work of the Federal Government to ensure that the products, particularly the building materials that come into the country are of the right quality.
Also, the development control agency of the state has a responsibility in that regard. Before any person erects any structure, he or she is required to get planning approval and the local planning authority needs to supervise the work to ensure the right materials, as approved, are used. So, these two bodies need to be up and doing, while the professionals ensure that building owners don’t cut corners. The building collapse happening around the country is caused by the failure of regulation, as professionals didn’t supervise those buildings. If one has the right professionals, they can’t mortgage their careers to help a client to cut corners.
With the growth in the financial sector, expectations have been rife for the emergence of large firms and partnerships in the estate surveying and valuation practice, but that does not look feasible anymore. Why is it difficult to grow big and well-structured firms to partake effectively in mega businesses?
I really can’t put my finger on the problem why Nigerians find it difficult to come together, particularly in the estate surveying and valuation profession. Everyone seems to be contented having his or her own firm, bearing his or her name, but they fail to understand that there are benefits in bigger practices, where you have other people having their own input and making it effective in serving major clients.
So, we have been encouraging members to come together but it hasn’t happened yet. Some of them will say, “how about the ones that have tried it in the past and failed”. I don’t know if it is a fear factor that is discouraging people from coming together, but we will keep educating them. We should learn from other professions that are going towards this route by encouraging their members to form bigger firms. We will keep trying, it is the right way to go and we will achieve it.
The problem of quacks has remained unresolved by other professional bodies, which led estate surveyors to establish Association of Estate Agents in Nigeria (AEAN), to sanitise agency practice. Several years after, the problems still persist? What are the challenges and prospects of your profession?
The main challenge is that there is no clear-cut legislation against anyone that is posing as an estate agent. Yes, NIESV has the mandate to supervise activities of estate surveyors and valuers, which includes the estate agents but the law doesn’t give exclusive right to us to regulate the entire estate agents. So, we now have a situation that a particular aspect of our practice is open to every Tom, Dick and Harry. In Abuja, everybody seems to be an estate agent, including civil servants.
Quackery itself has been with us from time immemorial. In fact, it is in professions, including journalism. So, quackery is not something that can go away overnight, but we will keep trying and making progress. The way things are going now, we would be able to reduce quackery in this estate agency, but there is need to have a proper regulation.
In developed countries, estate agents are regulated. One is required to register with associations that are recognised by government, but here it is not so, and that is why we find it very difficult to control it. We are trying to improve our services to the level that the desiring client will know the difference between a real professional estate agent and a non-professional estate agent.
Recently the Minister of Works and Housing made a proposal for three-month rent by property owners as against the three years collection for rent, as a way of making affordable homes accessible for Nigerians in urban centres. Do you agree with that?
How can you determine the price of what you don’t have? How many houses has the government added to the market besides the ones coming from the private sector? You can only influence what you provide.
Like I said earlier, if the demand is one million units for a particular type of housing and you are able to provide only 200,000 units, it means there would be competition, which is what is presently happening in the country. The cost of building materials has gone up compared to the rent from the property. Look at the margin of increase in rent compared to the margin of increase in the cost of building materials and you find out that the cost of building materials far outweighs that of rent.
With that, investors are not encouraged to invest, while the federal and state governments are adding very little to the housing stock. We are in a situation where tenants are helpless, they can only take what is available and at the rate, which it is put up. So, the Federal Government is saying, “you can’t take more than one month or two months’ rent.” How do you legislate on something you have no control over?
But this is practised in other climes?
But not by legislation, it is by the same demand and supply. If you flood the market with houses, then you can dictate the market and decide on the tenure. Remember some years back, there was a time people used to pay five years’ rent in advance in Lagos, but these days how many people pay even three years’ rent in advance? The highest you would probably get now is two years.
In Abuja, most property rent you can get for one year in advance as against the previous two years or three years. It is coming down, it will come down gradually as long as more houses are added to the stock, then those demands will keep coming down. It is not something you can legislate on.
Nigeria’s over dependence on oil has resulted in total neglect of other sources of revenue. Do you believe effective land administration will help to grow the economy?
Of course, an effective land administration will help in getting the best out of a land and it is not about collecting taxes, but ensuring that things are done the right way.
The biggest problem for our industry is the lack of access to finance at a single-digit interest rate. As you know, our economy is in a very bad shape, interest rates and inflation are rising, creating problem for those of us in the industry on how to provide more houses and commercial properties. It is the government that can reverse this trend. It is not just happening in Nigeria alone, it is worldwide and became even worse when we had the COVID-19 pandemic, many countries are almost going into recession.
So, Nigeria isn’t an isolated case but before the others started having problems ours existed. We have contributed greatly to worsening our own situation. The oil, which we depended upon is been stolen and government is looking helpless as if individuals would be the ones to save the situation. How can a country that is looking for money allow its oil, which is the main foreign exchange earner to be stolen by ‘unknown’ persons, as if oil is something you can put in your pockets?
We are hoping that the next government would address this issues to ensure that we can tap into our resources and not just oil; solid minerals, agriculture and ensuring that people pay their fair share of taxes. These are things that need to be done to ensure that the economy bounces back. If the economy re-bounds, the real estate industry would be able to take a queue and add more to the Gross Domestic Product (GDP) of the country.
There have been accusations by tenants that estate agents aid the high cost of rent as a means to increase their commission. How true is this?
The rent been paid for a property is the function of demand and supply. No estate agent, whether professional or not, has the capacity to fix the rent. The rent that is being charged is determined by what the market is prepared to pay. So, it is abnormal to say estate agents and surveyors increase rent. For instance, let’s say the going rent in Asokoro is N10 million for a duplex. No estate agent will increase it to N20 million; nobody would pay because that is not what the market says.
Primarily our function is to interpret the market, based on the demand and supply, at a particular time that this is what the market can absorb. We usually advise our clients. Some stubborn clients will say, “I spent so much money to build that house, I won’t accept such rent” and that may be the cause of the various vacant houses you have in Abuja. Those landlords will not give out the house for the going rate and maybe because they didn’t borrow money to build, the houses they decide to leave it vacant. The property would remain vacant until the market meets his or he or expectations or he comes down to the market value. It is purely an economic factor; it is the quantity of property versus the demand for such properties. If the supply is low and the demand is high, naturally the price would go up. So, it is not correct to say we influence the rent paid.
The global energy and economic crises are affecting the real estate sector and your members. What new reform measures should be adopted to improve real estate transactions in the country?
Real estate is part of the economy. We are not different from other sectors of the economy. The manufacturing side is suffering, real estate is suffering, even the banking sector that appears to be making money are also having their challenges. So, every aspect of the economy is affected. We don’t have the power to do anything, the government is the ones that have the power to change the microeconomic situation and our duty as professional is to take advantage of what is available.
We don’t have any workable mortgage system. For instance, in developed countries, you don’t buy a property with cash. You go to the mortgage bank and take a loan. The highest you may contribute is 10 per cent of the value, the rest is spread over 20 to 30 years. We don’t have such a sustainable system here; it is not working. We are in a very dicey situation and need a new government that understands to turn it around. As professionals, we are interested in the government that is going to transform the economy.