INTRODUCTION
In February 2022, the Lagos State Government signed the Lagos State Real Estate Regulatory Law 2021 (the "Law") into law. The Law is aimed at regulating and ensuring consumer protection in real estate transactions. This newsletter highlights some salient points to note about the Law.
- ESTABLISHMENT OF THE LAGOS STATE REAL ESTATE REGULATORY AUTHORITY ("LASRERA")
The Law establishes the Lagos State Real Estate Regulatory Authority (the "LASRERA" or "Authority") as the agency responsible for administering its provisions. Some of the functions of the LASRERA include: (i) formulation and recommendation of policies for the enhancement of real estate transactions; (ii) registration of tenancy agreements; (iii) monitoring and conducting inspections in order to ensure compliance with the Lagos State Tenancy Law; (iv) investigating complaints and petitions against registered persons or organisations dealing in real estate transactions; and (v) mediating and resolving disputes in respect of real estate transactions.
- REGISTRATION OF STAKEHOLDERS DEALING IN THE REAL ESTATE SECTOR AND ISSUANCE OF PERMIT
The Law stipulates that a person or organization dealing in real estate business shall be eligible for registration and issued a permit upon the payment of a fee prescribed by the Authority. Going by the definition of real estate transactions in the Law1, an individual or organization may upon fulfilling certain conditions, be eligible to register if such an individual or organization is engaged in any service, mortgage or financial exchange between a person or an organisation and the public with respect to matters pertaining to real estate including, any transaction in which an agent is employed by one or more principals (landlord or any person that owns a building or structure) to act.
Furthermore, the Law2 specifically provides that a stakeholder dealing in the real estate sector as a — (a) property developer; (b) facility manager; or (c) property management company; whether as an individual or an organisation shall register with the Authority, specifying any project it is undertaking as at the time of registration before it can be issued the necessary permits to engage in real estate transactions.
The Authority shall issue different categories of permits based on the classification of the applicants whether individual or corporate. All permits issued shall be valid for a period of one (1) year and may be renewed not later than two (2) weeks before the expiration of the permit.
A penalty is prescribed for an individual or organisation dealing in real estate transactions who fails to register in accordance with the provisions of the Law. Defaulting individuals are liable on conviction to a fine of not less than Two Hundred and Fifty Thousand Naira (N250,000.00) while organizations are liable to pay the sum of One Million Naira (N1,000,000.00).
- ELIGIBILITY AND CONDITIONS FOR REGISTRATION
The eligibility criteria for registration under the Law are listed below;
i. An individual applicant who proposes to deal in real estate in Lagos state shall:
a. be a Nigerian;
b. possess a valid work permit if a non-Nigerian;
c. be at least eighteen (18) years of age;
d. possess Lagos State Residents Registration Agency (LASRRA) number;
e. have an ascertained business premises or office within Lagos state;
f. possess a minimum educational qualification of WASC, GCE or NECO;
g. have proper records of transactions and operate a separate client account;
h. have three (3) years Tax Clearance Certificate preceding the date of registration; and
i. register at least a business name with the Corporate Affairs Commission (CAC).
ii. In addition to the above, a corporate applicant shall:
a. be registered with the CAC;
b. have proper records of transactions and operate a separate client account;
c. have one of its directors possesses the conditions stated in (i) above;
d. ensure that all non-Nigerian directors have valid work permits and comply with all laws in respect of foreigners; and
e. have three (3) years Tax Clearance Certificate preceding the date of
- RESTRICTION OF FOREIGNERS' INVOLVEMENT IN REAL ESTATE TRANSACTIONS
Foreigners who wish to invest in real estate must seek and obtain the permission of the Governor through the Authority. However, subject to the provisions of Acquisition of Land by Aliens Law and all relevant laws in respect of real estate in Lagos state, investment in land by a foreigner shall not exceed twenty-five (25) years including any option to renew.
- REGISTER OF TRANSACTIONS
The Authority is mandated to maintain a register of operations relating to transactions containing details of persons or organisations dealing in the real estate sector and to make such register available for inspection to members of the public and update the list of all realtors and, transactions forwarded to it by a person or organisation dealing in the real estate sector.
- OPERATIONAL STANDARDS
There are prescribed operational standards which must be maintained by permit holders while dealing in real estate transactions. Some of these standards of operation are as follows:
(a) an organization that holds a permit shall register any broker working under that organization with the Authority; (b) an agent shall obtain the consent of a principal before receiving payment from a prospective client; (c) a permit holder shall ensure that clients perform all obligations to the Government under the existing laws by informing them of the statutory obligations, such as the deduction and remittance of Withholding Tax, Value Added Tax or other charges payable in respect of transactions; (d) a property developer shall collect consideration based on a fair market value and rate as may be determined by an estate surveyor and valuer, etc.
- APPLICABLE FEES
A person or organisation dealing in real estate shall not demand a fee exceeding ten (10%) percent of the total rent or purchase price received from a client in respect of a lease or sale.
For instance, if in a tenancy transaction, the rent of the property is Eight Hundred Thousand Naira (N800,000) per annum, by implication the permit holder cannot demand an amount exceeding eighty thousand naira (N80,000) from the tenant.
Furthermore, if there are two or more permit holders retained by a principal in the same sale or lease, the permit holders shall jointly demand an amount not exceeding fifteen (15%) percent of the total proceeds in a sale or lease of interests in property. This will help to protect members of the public against extortion.
- ESTABLISHMENT OF A COMMITTEE OF INQUIRY
The law establishes a Committee of Inquiry ("Committee") that is charged with the duty of hearing and determining reports of misconduct, complaints or petition from the public against persons or organisations dealing in real estate.
The Committee shall after considering the report from the public, invite the concerned permit holder to make an oral or written representation within two (2) weeks of receipt of the notice or complaint and may invite any other person to make a representation relating to the matter.
Where the Committee confirms the allegation to be true, it shall have the option of recommending suspension or revocation of the permit to the Lagos State Real Estate Regulatory Authority Governing Board (the "Board"). The Authority shall serve the affected parties the decision of the Board not later than one (1) month from the conclusion of the hearing.
An aggrieved party has a right of appeal against the decision of the Committee to a court of competent jurisdiction.
- ACQUISITION OF ABANDONED OR UNCOMPLETED BUILDINGS
Under the Law, a building or structure may be considered abandoned if it: (a) has not been developed due to lack of funds; (b) constitutes a nuisance; (c) is a safety risk; (d) contributes to environmental degradation; and (e) is used as a ground for perpetration of criminal activities. The Law provides that where it appears to a Ministry, Department or Agency (MDA) of Government that any abandoned or uncompleted building or structure may constitute any of the foregoing, the MDA(s) shall serve notice on the owner or occupier of such building or structure, requesting the completion of the construction within a period of three (3) months or such period as the Authority may deem fit.
Upon the failure to comply with the initial notice, the MDA shall serve a final notice on the owner personally or by posting on the building or structure, granting an additional period of three (3) months to comply with the notice. The owner may also make a representation to the Authority on the steps or measures taken to facilitate compliance with the notice.
Where after the expiration of the period stated in the final notice, the owner of an abandoned or uncompleted building or structure remains non-compliant or is unable to convince the Authority of the ability to complete the building or structure, the Authority shall issue recommendations to the appropriate authority to revoke the right of occupancy of such owner or occupier. If, however, it appears to the Authority that it will be inequitable to make such a recommendation, it shall jointly evolve a suitable arrangement with the owner or occupier putting into consideration the type of the structure and financial implications. The Law leaves to the discretion of the Authority the type of arrangement that may be made between the Authority and the owner.
CONCLUSION
One of the challenges in the real estate sector over the years has been fraudulent activities and sharp practices perpetrated by unlicensed real estate agents seeking to exploit prospective homeowners and tenants. A major cause of this problem has been the lack of a proper framework regulating the conduct of real estate transactions. The Law is aimed at resolving this problem as it stipulates wider and improved standards to be maintained by all stakeholders involved in real estate transactions. This is a step in a positive direction and it is hoped that it will be properly implemented to achieve its aim.
Footnotes
1. Section 1 of the Lagos State Real Estate Regulatory Law 2021.
2. Section 27 of the Lagos State Real Estate Regulatory Law 2021.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
