Tenancy

Essential Components of Tenancy Agreements in Nigeria

Campfires Law Firm | 24th October, 2023

 

Real estate stands as one of the oldest and most lucrative industries, where property ownership and rental are integral aspects of investment. Despite its long-term nature, this form of investment often becomes a source of disputes, varying opinions, and legal conflicts, primarily arising from the absence or improper execution of a tenancy agreement. On other occasions, the agreement itself may be inadequate and fraught with legal complexities.

To provide context, a tenancy agreement is a contractual document that governs the relationship between a property owner and their tenant. Typically utilised for real properties leased for less than three years, this agreement may be professionally drafted by a lawyer either as a standalone legal service or as part of property management under a Power of Attorney on behalf of the property owner.

The Clauses

Given the crucial role of a tenancy agreement in resolving conflicts, it should encompass various pertinent clauses. In addition to the widely recognised and commonly used clauses such as property usage and tenancy fees, we have compiled some essential considerations and clauses that ought to constitute the terms of a comprehensive and satisfactory Tenancy Agreement.

1. Duration

The tenancy agreement should clearly state the precise commencement and termination dates of the tenancy. It is important to note that a period of twelve months may not necessarily equal 365 days in legal terms, so the agreement should be specific about the tenancy duration.

2. Extension or Renewal

The tenancy agreement must include specific clauses addressing the extension or renewal of the tenancy. “Extension” often refers to the possibility of continuing the tenancy under the same terms by paying the rental value before the current term expires. On the other hand, “Renewal” would often be interpreted as entailing certain changes to the tenancy terms after the current term concludes.

3. Termination and Notice

The Termination and Notice clause(s) of the tenancy agreement should outline the actions that constitute a breach of the agreement and the consequences of such breaches. For example, if the tenant uses the property for commercial purposes instead of the agreed-upon residential use, the tenancy may be terminated, and the tenant may indemnify the property owner to the extent and consequence of such breach. This is in addition to any understanding that the property owner will refund the unused rent or retain same. Additionally, if the tenant continues to occupy the property after the agreement’s expiration, they may be required to pay rent for that period or refund any legal fees incurred by the property owner to regain possession.

The agreement should also specify the required notice period for terminating the tenancy, often referred to as a “notice to quit.” While the tenancy laws across Nigerian states may mandate a minimum of 6 months’ notice for yearly tenants, any shorter period mutually agreed upon in the tenancy agreement is legally binding on both parties.1

4. Dispute Resolution and Self-help

The tenancy agreement should include a clause outlining the steps the tenant or property owner will take in case of a breach. It is crucial to emphasise that resorting to self-help measures [e.g., forcibly evicting the tenant upon tenancy expiration] is illegal, and any clause suggesting such actions is invalid and unenforceable. Only a court order can authorise a tenant’s eviction, regardless of the tenant’s behavior.

Further Recommendation

A tenancy agreement is a formal contract and should be given to the potential tenant before any tenancy fees or associated charges are paid, not after. This ensures that the tenant has the opportunity to review and negotiate the terms if necessary, and either accept, amend, or reject them. Providing the agreement upfront prevents the tenant from feeling pressured into accepting terms they may not agree with. It also helps avoid conflicts that may arise if the tenant, after paying the fees, demands a refund due to dissatisfaction with the terms, but the property owner or agents refuse or are unable to comply.

We strongly recommend that both the tenant and the property owner [either in person or through an attorney] participate in the execution of the agreement. Unexecuted agreements are not legally binding on either party, and agreements executed by one party alone typically do not bind the other party.

 

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END NOTE

Amakeze v. Onwudiwe (2013) LPELP-20350 (CA); African Petroleum Ltd. v. J. KOwodunni (1991) LPELR-213 (SC)

 

| Contributor: ISAAC NWOKOLO

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