A REVIEW OF THE LAGOS STATE REAL ESTATE REGULATORY AUTHORITY LAW 2021

A REVIEW OF THE LAGOS STATE REAL ESTATE REGULATORY AUTHORITY LAW 2021

Introduction

On Monday, 7 February 2022, the executive governor of Lagos State, Babajide Sanwo-Olu signed a bill to regulate the conduct of real estate transactions in Lagos state and provide for operational standards in the real estate sector known as the Lagos State Real Estate Regulatory Authority Law 2021 (the “Law”). The law repeals the Lagos State Estate Agency Regulation Authority Law 2015, and establishes the Lagos State Real Estate Regulatory Authority (the “Authority”) and the Lagos State Real Estate Regulatory Authority Governing Board (the “Board”) to provide for proper administration of real estate transactions. The law sets conditions for registration and issuance of permits to persons with interest to operate in the real estate sector whether as a foreigner, corporate body or citizen.

Notable Provisions of the Law

Establishment of the Lagos State Real Estate Regulatory Authority

The law establishes[1] an Authority with the responsibility to execute the provisions of the law and ensure that Lagos state citizens are protected from illegal real estate transactions. The Authority has the mandate to sensitize the public by organizing seminars, workshops for persons, organizations, or stakeholders dealing in real estate. It seeks to formulate policies for proper dealings in real estate transactions and to recommend policies to the state government to enhance real estate transactions;[2] as well as to maintain a comprehensive and updated register of permits issued to real estate professionals in the state.[3] It is mandated to register tenancy transactions and agreements above five (5) years;[4] receive and investigate petitions and complaints from members of the public; collaborate and liaise with law enforcement agencies in the prosecution of persons and organizations dealing in real estate suspected of violating applicable laws in the State.

Some of the powers of the Authority will be discussed below.

Power to Resolve Disputes

Disputing parties on issues that relate to real estate transactions within the state may voluntarily submit their disputes to the Authority, which is empowered to mediate the disputes timeously in respect of agent and prospective tenant, agent and property owner, developer and landowner, developer and prospective tenants and any other matter(s) in relation to a real estate transaction.[5] Where a petition is submitted to the Authority, an investigation may be initiated and mediation process commenced.[6] Letters of invitation may be sent to all the concerned parties and where the petition relates to fraud or obtaining by false pretense, such petition shall be forwarded to the Police or relevant authority. In coming to resolution between disputing parties in the mediation process, the Authority may prepare a memorandum of understanding which shall represent the full and final settlement of the dispute and enforceable by a court of law.[7] However, where an aggrieved party is not satisfied with the mediation process, there is a right of action in a competent court of law.[8]

Registration of Stakeholders

An individual or organization that operates as a property developer, facility manager or property management company is expected register with the Authority and specify any project it is undertaking at the time of registration.[9] The Law restrains foreigners or foreign companies from investing in real estate without seeking and obtaining the permission of the Governor through the Authority. Where such permission is obtained, investment in land by a foreigner(s) shall not exceed twenty-five (25) years including any option to renew subject to the provisions of Acquisition of Lands by Aliens Law.[10] Where there is a failure to undergo registration as provided in the law, the individual is liable to conviction to a fine of not less than Two Hundred and Fifty Thousand Naira (₦250,000.00) and not less than One Million Naira (₦1,000,000.00) in the case of an organization.[11] This provision seeks to bring all stakeholders in the real estate industry under checks and control.

Registration of Transactions

One of the functions of the Authority is to maintain a register of real estate transactions containing such details of persons or organizations dealing in real estate sector. The register is to contain an updated list of realtors and transactions forwarded to it by a person or organizations dealing in the real estate sector, and made available to members of the public for inspection.[12]

Eligibility and Conditions for Registration[13]

There are certain conditions to be fulfilled before the Authority can register a person or organization with intention to deal in real estate. In the case of an individual, the person must be a Nigerian, if a non-Nigerian, possesses a valid work permit; possesses Lagos State Residents Registration Agency (LASRRA) number; possesses a minimum of West African School Certificate, General Council Examination or National Examination Council; have proper records of transactions and operate client account; have three (3) years tax clearance certificate preceding the date of registration; and register at least a business name with the Corporate Affairs Commission. In the case of an organization, a corporate applicant must be registered with the Corporate Affairs Commission; have proper records of transactions and operate a separate client account; one of the directors must meet the conditions of an individual category; ensure that all non-Nigerian directors have valid work permit and comply with all laws in respect of foreigners; and have three (3) years tax clearance certificate preceding date of registration.

Issuance of Permits

The Authority is required to issue permits to a person or organization dealing in real estate transactions in the state who qualify for registration. The implication of this provision of the law is that only a person or organization that is registered in accordance with the provisions of the law is to be issued a permit. The permit is valid for only one (1) year,[14] except it is revoked, the holder voluntarily surrenders it, the permit lapses, or it is declared invalid or revoked by the court.  A permit lapses when the holder dies or becomes incapable of performing the acts contained in the permit, is declared bankrupt or goes into liquidation in the case of a company.[15] A permit may be renewed on satisfactory performance of the conditions for the renewal. However, for a proper renewal to take place, the holder of a permit shall no later than two (2) weeks before the expiration of the existing permit apply for a new permit.[16]

Principal Officers of the Authority

The law establishes the office of the General Manager who is the Chief Executive and Accounting Officer of the Authority. The holder of this office shall be a person of proven ability and integrity with cognate experience in real estate whose responsibility is for the execution of policies and administration of the affairs of the Authority. The General Manager holds office for a term of five (5) years and may be re-appointed for another term of five (5) years only.[17] There is also the office of the Secretary of the Authority. Only a person with at least fifteen (15) years cognate experience can be appointed as the secretary of the Authority.[18] There shall be a legal adviser for the Authority who shall be the head of the legal department and is recommended by the Attorney-General and Commissioner for Justice of the State.[19]

Offences

Where an individual who is duly registered in accordance with the provisions of the law contravenes or fails to comply with the provisions of the law may be liable to revocation of the permit or a fine of Hundred Thousand Naira (₦100,000.00) and Ten Thousand Naira (₦10,000.00) for each day of non-compliance. Where it involves an unregistered individual, a fine of One Hundred Thousand Naira (₦100,000.00) and a fine of Twenty-Five Thousand Naira (₦25,000.00) for each day of non-compliance. In the case of an organization that is registered, a revocation of the issued permit or a fine of Five Hundred Thousand Naira (₦500,000.00) and a fine of Thirty Thousand Naira for each day of non-compliance. Where it is an unregistered organization, a fine of Five Hundred Thousand Naira (₦500,000.00) and a fine of Fifty Thousand Naira (₦50,000.00) for each day of non-compliance.[20]

The Lagos State Real Estate Regulatory Authority Governing Board[21]

A governing Board is established for the Authority to carry out its functions effectively. The Board is headed by a chairman who is a person of integrity and ability and has at least ten (10) years cognate experience and passion for real estate development in Lagos state. Other members of the Board such as a legal practitioner, a registered architect, a registered engineer, a registered town planner, a registered estate surveyor, a registered builder, a recognized member of the real estate sector in Lagos state and the General manager of the Authority shall all be persons of integrity and sound judgment in the field of real estate with at least ten (10) cognate experience and passion for real estate development in Lagos state.

The Chairman and members of the Board except the ex-officio members shall be appointed by the Governor on the recommendation of the Special Adviser subject to the confirmation of the House of Assembly of Lagos State. The board is expected to meet at least four (4) times every calendar year.[22]

Operational Standards of Holders of Permit

The law sets out certain operational standards[23] every holder of a validly issued permit is expected to maintain in real estate transactions. A permit holder is to declare any person interest; ensure the client performs legal obligations with respect to the transaction; desist from collecting money from more than one prospective client in respect to the same premises or building; ensure that the building or structure is fit for habitation; desist from representing two (2) principals on the same transaction. Furthermore, the permit holder is to register any broker in the transaction, avoid preparing any legal document pertaining to any transaction in real estate; obtain consent of principal before collecting money from a prospective client; ensure that a prospective client takes physical possession of the property paid within seven (7) working days after payment; refund rent or money paid where there is failure to deliver up possession of premises within seven (7) days.

The operational standards stipulate the applicable fees for a person or organization dealing in real estate should demand from clients. However, a property developer shall collect consideration based on fair market value and rate as nay be determined by an estate surveyor and valuer. In letting or lease transactions, the fees should not be more than ten (10) percent of the total rent collected on any transaction. In sale or purchase of interests in building; where two or more holders of permits are retained by the owner/vendor for the sale/lease, fees shall not be more than fifteen (15) percent of the total proceeds of sale or tenancy.[24]

In the case of an off-plan arrangement, a person or organization dealing in real estate in the state shall draw up a contract with the prospective client, inserting a clause to indemnify the prospective client in the event of non-completion of a project or any breach of contract by the person or organization.[25]

Power to Acquire Abandoned or Uncompleted Buildings and Structures

One of the main functions of the Authority is to compile all identified buildings or structures within the State and forward them to the relevant ministries, department and agencies (MDAs) for necessary actions. The MDA is to revert to the Authority within the period specified in the notice served.[26] If a building constitutes a nuisance, is a safety risk, contributes to environmental degradation or the building is used as a ground for perpetration of criminal activities, and has not been developed due to lack of funds, such a building or structure may be considered abandoned,[27] and the MDA can serve a notice on the owner or occupier of such structure. It is important to note that where the owner or occupier of an abandoned or uncompleted building or structure fails to complete the construction or do certain remedial works recommended by the relevant MDAs within the period specified in the notices, the Authority shall give a final reminder to the relevant MDAs to render such identified abandoned building or structures to the Authority within the period of three (3) months of service of the relevant statutory notices.[28]

The owner or occupier of an abandoned or uncompleted building structure may make representations before the Authority on steps to facilitate compliance with notices served under the law and the Authority has the mandate to evolve an arrangement that will serve the objective of the law.[29]

Establishment of a Committee of Inquiry

The law established for the Authority a committee for inquiry with five (5) members to be appointed by the Board. The committee shall be presided by a member of the Board and at least two (2) other members who shall be legal practitioners. The committee has the duty of hearing and determining reports of misconduct, complaints or petitions from the public against persons or organizations dealing in real estate in the state. The Committee after considering the report has the power to invite in writing, the concerned person, organization to make oral or written representation within two (2) weeks of receipt of the notice of the complaint and may invite any other person to make representation pertaining to the matter before it.[30] Where the person reported is found wanting, the Committee shall have the option to either recommend the suspension or revocation of the permit issued by the Board. The Authority shall not later than one (1) month after the conclusion of the hearing, serve the affected parties with the decision of the Board in which the reasons for the decisions shall be clearly stated. A party who is aggrieved by the decision of the Committee has a right of appeal against such decision to a court.

Service of Pre-action Notice to the Authority

The law requires that any court action to be commenced against the Authority either as a party or against the General Manager/Chief Executive Officer in that capacity unless one (1) month written notice of intention to commence same has been first served on the Authority by the intending plaintiff or claimant.[31] The notice must contain the cause of action, particulars of the claim, name and place of abode of the intending claimant and the claims or reliefs sought by the intending claimant.

Conclusion

The law will protect investments in real estate, reduce corrupt practices and increase revenue for the government, among others. However, the power of the Board to acquire uncompleted or abandoned property leaves so much to be desired, and it does not provide a timeline for the payment of adequate compensation to a person whose right of occupancy has been revoked. In addition, it appears that demolitions can only be legal on the basis that the authority is satisfied that the structure or building in question constitutes a danger to the health and safety of the public.[32] Therefore, if a building or structure has not been developed due to lack of funds, it does not create a legal right for demolition by the government.

 

[1] Section 2 of the Law.

[2] Section 6 (a) & (b) of the Law.

[3] Section 6(c) of the Law.

[4] Section 6(i) of the Law.

[5] Section 7 of the Law.

[6] Section 35 of the Law.

[7] Section 36 of the Law.

[8] Section 34 of the Law.

[9] Section 27 of the Law.

[10] Section 28 (1) & (2) of the Law.

[11] Section 48(a) of the Law.

[12] Section 25 (a) & (b) of the Law.

[13] Section 26 of the Law.

[14] Section 39 of the Law.

[15] Section 30 of the Law.

[16] Section 31 of the Law.

[17] Section 19 of the Law.

[18] Section 20 of the Law.

[19] Section 21 of the Law.

[20] Section 48(b).

[21] Section 3 of the Law.

[22] Section 11 of the Law.

[23] Section 32(1) (a) – (k) of the Law.

[24] Section 32(2) (a) & (b) of the Law.

[25] Section 32(4) of the Law.

[26] Section 37 of the Law.

[27] Section 38 of the Law.

[28] Section 37(1) of the Law.

[29] Sections 39 & 40 of the Law.

[30] Section 33 of the Law.

[31] Section 44 of the Law.

[32] Section 43 of the Law.