REAL ESTATE MARKET REGULATION AND PROPERTY VALUES IN LAGOS STATE, NIGERIA

European Scientific Journal December edition REAL ESTATE MARKET REGULATION AND PROPERTY VALUES IN LAGOS STATE, NIGERIA Oni Ayotunde Olawande 0 1 2 0 Department of Estate Management, Covenant University , Ota , Ogun State, Nigeria Oluwatayo Adedapo Department of Architecture, Covenant University , Ota, Ogun State , Nigeria DurodolaDaniel O. Department of Estate Management, Covenant University , Ota, Ogun State , Nigeria 1 Ilaje Village , Ajegunle, Badiya, Ijora-OlaleyeVillage, Amukoko, Ilasan, Ikota, Ajah, Addo, Orile-Iganmu, Oke-Odo, Iba, Ijanikin, Ikare, Mile 2, Irede, Imore, Ibeshe, Ibasa, Ijegun-Egba, Onireke Village, Ojo-Alaba, Maza-maza, Ilaashe, Ojo, Okokomaiko, Ajangbadi, Mebamu, Ishasi, Ojo-Igbede, Otto-Ijanikin, Amuwo, Agboju, Oluti, Shasha, Aboru, Bolorunpelu, Baruwa, Abule Egba, Igando, Abaranje, Ijegun Village, Ipaja, Abule-Oki, Surulere Tuntun, Isheri-Olofin, Ayobo, Makoko, Old Alaba, Ejigbo, Iponri, Abesan Low Cost Housing Estate, Sangotedo, Ikota Resettlement Scheme, Owode, Thomas Laniyan Estate, Ajegunle via Owode-Onirin, Badore, Okun-Ajah, Abesan 2 Lagos Island including Olowogbowo , Isale Eko, Epetedo, Sangross, Obalende, Onikan, Araromi Faji Area, Oke-Suna, Anikantamo, Lafiaji, Oke-Popo area, Agarawu area, Oko-Awo, Tinubu, Brazillian Quarters, Obadina, Ita-Eleiye area, Apongbon, Idumota, Ereko, Oto, Ido, Surulere, Ebute Meta West, Apapa, Festac (Medium Density) Increasing demand for commercial and residential properties has caused increase in rental values while the Government has intervened through enactment of the Rent Control and Recovery of Residential Premises (RCRRP) Edict (1997). This paper examined the effects of the law on residential property values in the study area. In doing so, a process of inference to evaluate the law was adopted, in addition to multiple-samples comparison and analysis of variance of the controlled and open market rents. Furthermore, hypothetical design of threebedroom flats was used to illustrate the valuation of residential properties under the RCRRP Edict. The study found that with alpha level set at 0.05, rent control has no statistically significant effect on rental values, P-value=0.0009. It recommended that Government should not regulate the real estate market but provide enabling environment for investors to provide low cost housing units that would in the long run reduce rental values. Intervention; property market; property tax; rent control; real estate; market regulation - any significant difference between the stautory rent and open market rental values in the study area? In resolving these questions, hypothetical three-bedroom flat was used for illustration since this is the unit of accommodation commonly sought after by residents in the study area. Also, the principles and techniques stipulated in the edict for calculating statutory rental value of a three-bedroom flat were expatiated. In doing so, one hypothesis was set in the null form to determine the relationship between statutory and open market rental values in the study area; the hypothesis is: there is no significant difference between the statutory and open market rental values in the study area The Provision of the Rent Control and Recovery of Residential Premises Edict 1997 The Lagos State Rent Edict of 1997 is examined under its application, provisions on standard rent and advance rent payment, standard rent order, zoning of Lagos State, and standard rent table. The edict applies to residential accommodation with annual rental value that, as at 1996, was not more than N250, 000. The edict classified the types and categories of residential accommodation and zoned Lagos State into areas with fixed standard rents and terms of tenancy agreement applicable in such areas. It further provided that the rents prescribed in the edict would be the standard rents that must be payable and would only be reviewed upwards every three years on the order of the Military Administrator (now the civilian Governor) of Lagos State, and that such standard rent would be reviewed at every period at a rate not exceeding 20% of the standard rent prescribed in respect of each type of residential accommodation; while such standard rent supersedes any rent between the landlord and the tenant. Furthermore, the edict states that it would be unlawful for any landlord or his agent, to demand or receive rent in excess of six months from incoming tenant and the incoming tenant to pay in excess of six months advance rent for categories T1 and T2 and twelve months in respect of accommodation in categories T3 to T8 as shown in Table 1. Table 1: Classification of Residential Accommodation under the Rent Edict T1 T2 T3 T4 T5 T6 T7 Source: Rent Control and Recovery of Residential Edict, 1977 Similarly, for the sitting tenants, the edict stated that it would be unlawful for a landlord or his agent to demand or receive standard rent in excess of three months in respect of any form of accommodation and for sitting tenant to offer or pay a rent in excess of three months advance payment for any accommodation. In both cases, any person who receives or pays rent in excess of what is prescribed in the edict would be guilty of an offence and become liable to a fine of N50, 000 or six months imprisonment. The edict expressly provides that all landlords should issue rent payment receipt to the tenant, failure of which such landlord would be guilty of an offence and become liable to a fine of N2, 500 or one month imprisonment. The edict categorizes residential accommodation in relation to materials of construction into Categories A, B, C, Standard Flat, and Standard House as shown in Table 2. Table 2: Categories of Residential Accommodation under the Lagos State Rent Edict Category Description Accommodation Details Buildings constructed of sandcrete blocks, bricks or mud plastered and painted internally and externally Buildings constructed of bricks or mud plastered with cement Buildings constructed of mud, bamboo, planks or corrugated iron sheets Rooms with floor area not less than 11.2m2 (or 12 x 10); plus 14m2 (3.7m x 3.7m or 12 x 12) parlour; kitchen not being shared by not more than 6 rooms; bathroom with pipe-borne water not shared by more than 6 rooms; flush toilet not shared by more than 6 rooms; minimum floor finish is cement screed; water and electricity supply are from the mains. Standard rooms with dimensional area less than 11.2m2 (3.7m x 3.0m or 12 x 10); plus parlour having a dimensional area not less than 14m2 (3.7m x 3.7m or 12 x 12); kitchen, not shared by more than 8 rooms; bathroom with pipe-borne water but not shared by more than 8 rooms; cement screeded floor; water and electricity from the mains. Standard rooms with dimensional area not less than 11.2m2 (3.7m x 3.m or 12 x 10); parlour with dimensional area not less than 14m2 (3.7m x 3.7m or 12 x 12); external kitchen; external pit toilet; external bathroom; screeded floor; at least internal wall surfaces pl (...truncated)