Doing Business Simplified: Building Trust in the Real Estate Sector in Lagos – Regulation of Agents
In today’s times, companies are having to re-strategize and think of ways to reach consumers remotely by leveraging on technology and innovation. One sector in Nigeria where remote services has been a struggle is the real estate sector. This is largely due to practical challenges such as the need for buyers/tenants to view properties physically, on the one hand; and a lack of trust due to unscrupulous practices by agents, on the other hand.
Startups like PropTech Zone and Zillow have shown that the need to visit properties can be tackled with technology that allow for virtual viewing of properties.
With respect to the issue of trusting agents, the government has tried to bridge the trust gap in Lagos State, by creating the Lagos State Real Estate Transaction Department (the “Department”). The role of the Department in protecting buyers against fraudulent activities is, however, not widely known and therefore yet to be effectively adopted.
In view of the foregoing, we have set out below useful information about the Department to guide dealings with agents in property transactions in Lagos State and build trust.
- What law regulates property agents in Lagos State? – The Lagos State Real Estate Transactions Law, established the Lagos State Real Estate Transaction Department, which is tasked with securing the protection of property buyers/seekers from fraudulent real estate agents in Lagos state.
- How are agents regulated? The Department conducts due diligence on agents and maintains a register of suitable agents. Intending buyers of properties and prospective tenants are advised to only transact with agents who are registered with the Department.
- How can buyers or tenants confirm that an agent is registered with the Department? The list of registered agents can be accessed via the Department’s website. Buyers or tenants are advised to carry out a search on the Department’s website to confirm that an agent who offers a property for sale or rent is duly registered.
- What happens if a registered agent acts fraudulently? Where a registered agent transacts fraudulently, the affected party can report the matter to the Department who is empowered to investigate the matter and step in to recover lost funds.
- How does this affect a PropTech company? PropTech businesses that offer properties for sale or lease on a platform (similar to an agent), are advised to register with the Department. This should give buyers and tenants comfort that the platform can be trusted.
- What fee are Agents and Lawyers entitled to under the law? The Law clearly states the fee range payable to Agents and Lawyers on property transactions. Agency fees under the law are fixed at 10% of the total rent collected for a property. Where the transaction is a sale or lease, the fixed agency fee is 15% of the total proceeds of the transaction. Legal fees are not fixed, however, the fees should not exceed 12.5% of the value of the transaction. The Law goes a step further by prohibiting estate agents from preparing legal documents and vests such preparation exclusively in the hands of legal practitioners.
- Is there penalty for not registering as an agent with the Department? An agent who fails to apply to the Department for registration would be liable to conviction and monetary fines.
Conclusion
The establishment of the Department is a step in the right direction to resolve the issue of trust in the Real Estate sector. Proptech companies and agents should take advantage of this law to give potential buyers comfort and attract investors.
