Securing a property in Lagos State, whether for rent or purchase, can be expensive and stressful. Beyond the cost of the property itself, many tenants and buyers are often surprised by additional charges that appear during the transaction process.
For years, it has been common practice for property seekers to pay Agency Fees, Legal or Agreement Fees, and Caution Deposits. In many cases, these charges significantly increase the overall cost of securing a property.
This led to a widespread belief that agents and landlords could charge whatever they considered appropriate. However, Lagos State has established laws and regulatory frameworks aimed at promoting transparency, limiting excessive charges, and protecting property seekers from exploitation.
This is what makes Find Nigeria Properties different: every property listed and approved on FNP is regulatory-compliant, ensuring buyers and renters do not pay or do anything beyond what the law has provided.
The Role of LASRERA and Statutory Fee Limits
The Lagos State Real Estate Regulatory Authority (LASRERA) was established to regulate real estate activities within the state and promote professionalism across the sector.
Under the existing framework, specific limits apply to certain real estate transactions:
Rental and Lease Transactions
The framework sets a baseline cap for agency commissions at 10% of the total rent collected.
Property Sales and Acquisitions
For the outright sale or purchase of land and buildings, agency fee is between 5%-10%. The statutory maximum agency fee is 15% of the total sale value. This cap applies regardless of whether one agent or multiple intermediaries are involved in the transaction.
Despite these limits, compliance remained a challenge for many years. Unregistered operators and informal agents often ignored the regulations, particularly in a market where housing demand continues to exceed supply.
The 5% Agency Fee Reform
To address rising concerns around housing affordability and excessive transaction costs, the Lagos State House of Assembly introduced reforms through a New Tenancy Bill. One of the most notable provisions is the reduction of agency fees on tenancy transactions.
Statewide Coverage
Unlike previous frameworks, including aspects of the Tenancy Law of 2011 that excluded certain high-value areas, the updated provisions are intended to apply across Lagos State.
This means locations such as Ikoyi, Victoria Island, Apapa, and Ikeja GRA are no longer treated differently from other parts of the state.
Penalties for Non-Compliance
The legislation introduces penalties for individuals who demand or receive fees above the statutory limit.
These penalties include:
- Fines ranging from ₦1 million to ₦2 million
- Imprisonment for up to two years
- Refund of excess charges to affected tenants
Understanding Legal and Agreement Fees
Legal or Agreement Fees are among the most misunderstood charges in property transactions. Many tenants and buyers are asked to pay these fees without understanding what they cover, who is legally responsible for paying them, or whether the amount being charged is appropriate.
In practice, these fees are meant to cover the preparation and review of legal documents relating to a tenancy or property transaction. However, questions often arise around who should bear the cost, how much can legally be charged, and whether real estate agents are permitted to collect these fees. Lagos State provides guidance on these issues through its tenancy laws and regulatory framework.
The 10% Ceiling
The maximum amount chargeable for preparing tenancy documentation is 10% of the annual rent. For example, if a property rents for ₦1,500,000 per year, the legal or agreement fee cannot exceed ₦150,000.
Who Pays the Lawyer?
Section 11 of the Lagos State Tenancy Law provides important clarification on this issue. The party who engages a professional service is generally responsible for paying for that service.
If a landlord hires a lawyer to prepare tenancy documents, the landlord bears that cost. A tenant can only be required to pay legal fees where they specifically engage a lawyer to act on their behalf.
Agents Cannot Charge Legal Fees for Drafting Agreements
A common practice in the market involves agents providing standard tenancy templates while charging legal fees.
However, only qualified Legal Practitioners are legally authorized to prepare property contracts and tenancy agreements for a fee. Real estate agents are not permitted to draft legal agreements and charge legal fees for those services.
How LASRERA Regulates Market Participants
LASRERA serves as the primary regulatory body responsible for monitoring and enforcing compliance within the real estate sector.
To improve accountability, real estate practitioners, developers, and firms are expected to register with the authority. This helps create a system through which members of the public can verify operators before entering into transactions.
LASRERA’s responsibilities include:
- Investigating complaints relating to excessive or arbitrary fees
- Handling disputes and facilitating refunds where appropriate
- Monitoring compliance with established regulations
- Referring serious cases of fraud and misconduct to relevant law enforcement agencies
The authority has also recovered substantial sums on behalf of individuals who were affected by fraudulent real estate practices.
Red Flags Property Seekers Should Watch Out For
When searching for a property in Lagos, it is important to remain alert to practices that may indicate non-compliance.
Double Agency Charges
An agent should not collect commission from both parties for the same transaction while presenting the charge as a single agency service.
Lack of Cost Transparency
Always request a detailed breakdown of charges. Rent, agency fees, legal fees, and any other costs should be clearly separated and explained.
Unverified Operators
If an agent cannot provide verifiable registration details or demonstrate regulatory compliance, it is advisable to exercise caution before proceeding with any payment.
What To Do If You Are Asked To Pay Illegal Fees
If you believe an agent or property owner is demanding fees that exceed statutory limits, it is important to document the transaction carefully.
Request a formal offer letter or itemized invoice showing all charges.
Avoid making untraceable cash payments. Where possible, use documented payment channels and obtain receipts for every transaction.
You may also submit a complaint through the LASRERA complaint channels for investigation and possible enforcement action.
Final Thoughts
Understanding the rules around agency fees and legal charges can help buyers and tenants make more informed decisions when navigating the Lagos property market.
While regulations exist to promote fairness and transparency, property seekers should still carry out due diligence, verify the professionals they engage, and request clear documentation for every charge presented during a transaction. A well-informed property seeker is far less likely to become a victim of excessive fees or unfair practices.
If you want to start your search on properties, visit Find Nigeria Properties to get started.
