Rent can be paid in advance or arrears. Where the lease agreement is silent, rent is paid in arrears.

Key Facts about the Lagos State Tenancy Law

  • NEW TENANTS WHETHER MONTHLY OR YEARLY MUST NOT PAY MORE THAN ONE YEAR RENT

  • HOWEVER, SITTING MONTHLY TENANTS MUST NOT PAY MORE THAN 6 MONTHS RENT WHILE SITTING YEARLY TENANTS MUST NOT PAY IN EXCESS OF 1 YEAR.

  • The punishment is imprisonment for three months, or fine of N100 thousand.

Areas not covered by the Tenancy Law of Lagos State:1(3)

  • Victoria Island

  • Ikoyi

  • Ikeja GRA (Alausa)

  • Apapa

What is Rent
Rent is the consideration paid by the lessee to the lessor for the use of the demised property. Payment of rent is not compulsory thus the validity of a lease agreement is not hinged on payment of rent by the lessee or tenant . FURTHERMORE, THIS IS BECAUSE RENT IS NOT ONE OF THE ESSENTIALS OF A VALID LEASE. Also rent need not be in monetary consideration. It must not be in cash. There are instances where rent is not paid. They are:

  • When lump sum or capital sum is paid

  • When there is a condition which is enshrined in one of the covenants and the lessee has agreed to perform the covenant, that can serve as consideration

  • When there is acknowledgment of relationship of landlord and tenant (mere acceptance of the lease by the lessee)

Rent are meant to be paid in arrears thus where the landlord/lessor desire it to be paid in advance, it should be stated in the rent clause.

Types of rent

  • Ground Rent

  • Rack Rent

  • Premium (fine) rent

Ground rent: is the rent paid on the bare parcel of land without putting into consideration any development on the land. SECTION 5 LUA This is paid to the Governor in recognition of the right of the state Government as trustee of all land within the territory. It is payable by the landlord but the deed may state otherwise that it is the tenant to pay the
ground rent.

Rack rent: this is also called ‘Economic rent’. It is the economic rent payable for the land and the improvements and developments on the land. Thus it is the rent paid or payable while putting into consideration the development on the land. Rack rent is the best type of rent but landlord should avoid collecting so many years of rent in advance due to its prohibition, taxation and inflation. It is dependent on the area of the property. It is payable to the landlord or the lessor.
In fixing rack rent the following factors are taken into consideration:

  • the location of the property. It is important because it helps you fix your rack rent.

  • quality of the property and extent of the building would be put into consideration

  • Investment on the property

  • The use to which the property will be put

The above are all economic factors.

Premium: this is a lump payment paid in addition to periodic rent in consideration of a reduced rent. In several states, it is prohibited. It is also known as a fine. Landlords attempt to circumvent the prohibition of the premium, by charging rent in advance for many years. Lagos prohibits PAYMENT OF RENT IN ADVANCE. SECTION 4 OF Tenancy Law of Lagos state.

Disadvantages of Premium Rent
• Inflation
• Statutory Prohibitions. It is not universal
• Payment of Tax. Rent collected in advance for more than five years is subject to tax action as income. Section 3(3) PITA. Section 4(2)© of income tax Management Act.

Rent Review Clause:
It allows for the rent of the property to be reviewed periodically. It is important to insert a rent review clause in a lease especially if the term of years granted is a long one.

UNILIFE DEV CO v ADESHIGBIN(2001). It is inserted in a lease to cushion inflation and recoup economic value of investment.”

DRAFT

  • YIELDING(PAYING) during the said term granted the rent of….1 million subject to review annually in accordance with the provisions contained in the schedule attached to this lease.

Contents of a Rent Review Clause

  • Mode OF INITIATING THE REVIEW. Example issuance of notice and the duration of such notice

  • The time to initiate the review

  • The method of calculating the new rent

  • Procedure for dispute resolution concerning the new rent.

Rent can be paid in advance subject to the agreement between the parties and the law regulating leases or tenancy in a particular state.

It is pertinent to note that in the absence of a rent review clause, the lessor cannot unilaterally change the agreed rent. YAHAYA V CHUKWURA