Lagos State Tenancy & Recovery Bill 2025: Implication On Real Estate Development | Gidi

Overview of the 2025 Tenancy & Recovery Bill

The Lagos State House of Assembly introduced the Tenancy and Recovery of Premises Bill 2025 in July, aiming to repeal and replace the Tenancy Law of 2011, in response to a growing housing crisis and public outcry over exorbitant rents.

This bill is designed to address key issues in the rental market: it tightens rules on rent advances, streamlines eviction processes, regulates agent commissions, and even introduces digital dispute resolution mechanisms. The initiative comes at a time when over 70% of Lagos residents are tenants, many spending 40–60% of their income on rent, far above the UN-recommended 30% benchmark. The housing deficit in Lagos has continued to widen, growing from an estimated 2.95 million units in 2016 to about 3.4 million in 2025, making housing affordability and tenant protection pressing social issues.

Why the reform?
In recent years, tenants have faced steep and arbitrary rent increases, with reports of landlords doubling rents or issuing triple-digit percentage hikes without notice. The 2011 Tenancy Law, Lagos State’s first major attempt to regulate landlord-tenant relationships, had its protections eroded by weak enforcement and economic pressures like high inflation. Public discourse (spurred by viral social media conversations in 2024 to early 2025) underscored the need for stronger regulation of rent practices. The 2025 Bill, therefore, is the government’s answer to restore balance in the rental market.

From 2011 Law to 2025 Bill: Key Changes

The Tenancy & Recovery Bill 2025 introduces significant changes compared to the Lagos Tenancy Law of 2011. Below is a summary of the key distinctions and updates:

• Coverage of the Law: The 2011 Tenancy Law notably excluded certain upscale areas (Apapa, Ikeja GRA, Ikoyi, and Victoria Island) from its application. The 2025 Bill, by contrast, applies to all premises across Lagos State.

• Advance Rent Limits: Under the 2011 law, a landlord could not demand more than 6 months’ rent in advance from a sitting monthly tenant or 1 year from a yearly tenant (and tenants likewise were forbidden from offering more). For new tenants, the old cap was 1 year max upfront. The new bill lowers the advance rent cap to 3 months for sitting tenants on monthly agreements and retains 1 year for yearly tenancies, while maintaining 1 year max for any new tenant.

• Regulation of Agents and Fees: The 2025 Bill introduces strong regulation of real estate agents to professionalize the industry. It mandates that any agent must be registered with the Lagos State Real Estate Regulatory Authority (LASRERA). It also caps agent commissions at 5% of one year’s rent. By comparison, the 011 law permitted much higher fees. Agents could charge up to 10% of annual rent (with lawyers preparing tenancy agreements charging another 10%), effectively allowing up to 20% of rent as fees under the old framework.

• Tenant Rights and Landlord Obligations: The new bill explicitly spells out tenants’ rights to “quiet and peaceable enjoyment” of their homes, including rights to privacy, freedom from unreasonable disturbance, and exclusive possession. While the spirit of this existed in common law and the 2011 statute, the 2025 Bill entitles tenants to compensation for any improvements they made with landlord’s consent if the tenancy ends.

• Eviction Notices and Procedures: Under the 2011 law, even if a tenant fell behind on rent, landlords still had to issue a quit notice according to the tenancy type, which could delay repossession. The 2025 Bill streamlines recovery of premises when rent is in serious arrears: if a tenant owes at least 2 months’ rent (for a monthly tenancy) or 3 months (for quarterly or half-yearly tenancy), the tenancy is deemed to have lapsed and the landlord can proceed with just 7 days’ notice of intention to recover possession.

• Faster Court Processes: To address the notorious delays in Lagos’ courts, the Tenancy & Recovery Bill 2025 introduces a more efficient eviction proceeding. Strict timelines are set: once a case is filed, tenants (defendants) have 14 days to file their counter-affidavit defense, and landlords have 7 days to reply. A hearing must be scheduled within 14 days after pleadings close, and the court is encouraged to hear the case day-to-day until judgment.

• Rent Increase Dispute Mechanism: Importantly, the 2025 Bill gives tenants a new legal avenue to challenge exorbitant rent hikes. If a landlord imposes a rent increase that the tenant finds unreasonable, the tenant can apply to a court to have the increase declared unreasonable. While that challenge is in progress, the landlord cannot evict the tenant for refusing the new rent until the court decides the matter. If the court agrees the hike was unreasonable, it may set a more appropriate rent.

Economic Consequences and Market Implications

While the Tenancy & Recovery Bill 2025 is well-intentioned and socially driven, it is not without economic consequences. Real estate markets are sensitive to regulation, and stakeholders have raised concerns about how certain provisions might affect market autonomy, profitability, and future investment. Here we examine a few potential implications:

• Impact on Estate Agents and Market Dynamics: Capping agency commissions at 5% of annual rent is essentially a price ceiling on agent fees. In the short term, this reduces rental transaction costs for tenants, but it also directly cuts the income of real estate agents (who previously might earn around 10% or more). Market competitiveness could be affected. Agencies may need to handle more volume of deals to make the same revenue, possibly favoring larger or more efficient firms and squeezing out smaller “mom-and-pop” agents.

There is a risk that some agents will respond by operating informally to dodge the cap or by introducing new hidden fees (disguised as “agreement fee”, “consultation fee”, etc.) outside the regulated commission. If a significant portion of the agent community bypasses LASRERA registration, it could create a two-tier market: one regulated with lower fees, and one underground where old practices persist.

• Landlord Investment and Market Supply: From the landlord and developer perspective, the new regulations may introduce uncertainties or reduced flexibility that affect the economics of property rental. One concern is that limiting advance rent collection to one year or less removes a tool landlords used to secure their income. Many Lagos landlords have historically relied on multi-year advance rent as a substitute for unavailable credit, essentially using upfront rent to finance property maintenance or even construction. With only 3 months to 1 year advance allowed, landlords face higher risk of frequent tenant turnover or default.

• Rent Prices and Market Autonomy: The bill stops short of imposing direct rent control, but by empowering courts to judge rent hikes as unreasonable, it introduces a form of soft rent control. If widely utilized, this could temper how fast rents rise, contributing to affordability. However, landlords might preemptively raise rents higher initially or price in the regulatory risk, knowing that future increases could be challenged. Some landlords might attempt to only offer short-term tenancies or use other strategies to get around this.

• Enforcement and Unintended Effects: A law is only as good as its enforcement. The 2011 Tenancy Law had progressive provisions on paper but enforcement was weak. If the 2025 Bill suffers the same fate, we might see a continuation of “business as usual” in many quarters, which can breed cynicism and selective compliance. On the other hand, if the government does crack down on violations, there could be a short-term economic shake-up, some landlords might withdraw their properties from the rental market.

Compliance also raises costs: landlords will have to handle more frequent payment collection, and agents must go through licensing and record-keeping. Additionally, bringing rental income into the tax net is economically sensible for the state but will feel to landlords like an extra cost, some call it double taxation, on top of existing land charges. This might drive more transactions off-record if landlords and tenants collude to avoid the tax.

• Market Competitiveness and Future Development: Real estate, especially in a commercial hub like Lagos, thrives on investor confidence. If investors perceive the new law as overly tilted against returns they might explore other markets or sectors. However, it’s equally plausible that a well-regulated environment attracts institutional investors who previously shunned the Lagos rental market due to its Wild West reputation.

As a result, the economic implications of the Tenancy Bill are a double-edged sword. On one side, it promises a more orderly market with reduced malpractices, which is good for long-term growth and for genuine businesses. On the other side, it introduces controls that interfere with the free market mechanism, such as commission caps and stricter rent protocols. The success of these measures will depend on careful implementation and possibly further dialogue with stakeholders to fine-tune regulations.

The government will need to monitor the housing sector’s response: Are rents stabilizing? Are new rentals coming onto the market? Are there signs of black-market behavior? This feedback can guide whether to enforce stricter or relax certain rules in the future to maintain an optimal balance between social protection and economic viability.

Indeed, a balanced critique of this reform must consider the perspective of economic stakeholders and the practical realities of enforcement. Regulations that are too stringent or inflexible can produce unintended consequences that hurt the very objectives they seek to achieve. If investors feel their potential returns are capped or uncertain, they might be hesitant to build the new apartments and houses that Lagos desperately needs to reduce its housing deficit.

Likewise, small estate agents who play by the rules might struggle financially under the new margins, even though the industry as a whole becomes more transparent. These are trade-offs that the Lagos State government and stakeholders will need to manage. Notably, similar provisions in the 2011 law faltered largely due to poor enforcement and pushback from market players. The authorities must therefore be prepared to support and enforce the new law rigorously while also being ready to make adjustments if certain provisions prove counterproductive.

From the standpoint of real estate developers, landlords, and agencies, the reform should be seen not as a punitive measure but as a call to elevate standards and innovate within a regulated framework. It encourages a move towards institutionalizing Nigerian real estate.