‘How REDAN’s RERC bill’ll discourage investment in Nigeria’ –

‘How REDAN’s RERC bill’ll discourage investment in Nigeria’ – The Sun Nigeria

By Omodele Adigun

A casual observer would agree that, with the spate of building collapse in the country, there is an urgent need for stiff regulation in the Real Estate industry. And to this end, the Real Estate Developers Association of Nigeria (REDAN) promoted a bill for the establishment of a Real Estate Regulatory Commission(RERC), which was last year passed by the Senate and sent to the House of Representatives for concurrence.

However, one of its members, Rainbow-Push Coalition Nigeria, has pooh-poohed the bill and petitioned the Speaker, House of Representatives to discard the legislation as it  doesn’t promote investment and ease of doing business in the country.

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These are contained in the petition to the lower legislative houseby by their lawyers, West – Idahosa & Co, who posed:

“With all the identified stringent procedure and compliance, would this bill not stifle investments in the real estate and, eventually, economy of the country? Would this bill promote the agenda of ease of doing business as being pursued by the Federal Government?”

After listing more than 35 obnoxious clauses in the bill, they concluded that “Real Estate Industry is a business ventures where any interested persons may opt to delve into through investment” and noted that the bill is inimical to the efforts of the government to promote ‘Ease of doing Business’ and   does not represent the best interests of the key stakeholders in the country. “This Bill is not to the best interest of real estate development in Nigeria and as such should not see the light of the day.” In a statement made available to Daily Sun, Rainbow-Push Coalition  went down memory lane to expose what gave birth to the bill:

“The Real Estate Developers Association of Nigeria – REDAN is a body registered under the laws of the federation as an incorporated trustee. The stated aim and objective are to ‘promote the business of real estate in Nigeria’, however the history of the Association shows it was set up as a platform to enable its members access the Federal Mortgage Bank of Nigeria – FBMN’s Estate Development Loan – EDL scheme. The Association has promoted a bill for the establishment of a Real Estate Regulatory Commission which has been passed by the Senate and sent to the House of Representatives for concurrence. Before the passage of the bill, as a group of interested stakeholders, we approached the leadership of REDAN to allow us see the draft bill and make inputs as we had not been carried along even as full members of the association. We were given the draft but denied the necessary time to make input.

In reaction, we organized other likeminded stakeholders to critically look at the bill and make corrections where we deem necessary. While we are not in anyway opposed to any regulation that would help make our industry better, we believe that the bill in its current form does not represent the best interests of the key stakeholders i.e., developers.

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Why we are against the proposed bill: There was complete lack of stakeholder engagement –

REDAN claims to be the umbrella body of all real estate developers but it does not carry the membership along in decision making. The Association is never present or heard in fighting for the interests of its members especially in the face of rising costs of building materials, bureaucratic bottlenecks and other challenges facing members. The focus and composition of the leadership is skewed disproportionately towards Mass Housing Developers who do not understand and are unwilling to work with other players in the real estate sector. The industry of course is bigger than Mass Housing and it includes Commercial Developments, Luxury Housing, Student Housing etc. All these different sub sectors cannot be painted with one brush and given a one size fit all solution based on the experience of largely unsuccessful Mass Housing developers based in Abuja.

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Legal Issues – Our team of lawyers have scrutinized the bill and have come with robust responses and alternatives. There are many areas where the proposed bill clashes with existing laws of the federation not least the land use act. Please refer to the attached paper.

Over Regulation & Ease of doing business – REDAN claims that the bill is intended to ‘sanitise the real estate business’ they claim that the industry is not regulated. This is very far from the truth as nobody can build a single house without approvals from regulatory bodies.

From the above examples, it is obviously not true that the business of real estate is not regulated. Adding another agency to duplicate the work that these existing agencies are already performing very well is inimical to the efforts of the government to promote ‘Ease of doing Business’. It is also adding to the size of government against the advice of the Oronsoye Report on the need to streamline agencies of government. It would ultimately add to the cost of doing business and translate to more expensive real estate in a nation yearning for lower costs of housing.

The Ombudsman – One of the cornerstones of the proposed bill is that the public are being scammed by developers. While this maybe so, and it is not something unique to Real Estate, there are government agencies set up to deal with financial crimes (EFCC). There are also agencies that have been set up to protect consumers in Nigeria i.e., Federal Consumer and Competition Protection Agency. Why should REDAN seek to usurp their powers instead of working to ensure that they perform their duties where they are found wanting?  

It is very curious to observe the strange obsession of the REDAN leadership with the passage of a defective bill in the light of the above facts. So many questions come to mind;

•Why are they so desperate to become a statutory body?

•Why would the government create a body and handover to REDAN?

•Can a participant in an industry as be the regulator (or the regulator be answerable to the participants), Judge and Jury in its own case?

•What has REDAN really done for the industry? Have they helped in advocacy in the issues that most affect the sector? Have they lobbied government for Dangote to bring down cost of cement?

•As a body set up to work with the Federal Mortgage Bank of Nigeria – FMBN to access the Estate Development Loan scheme of the FMBN, have they looked at the cases of Estate Development Loans that have been squandered by their members over the years?

•What have they been doing with membership dues paid?

While we are ready for constructive engagements on how to make our industry better, we will not submit to cheap blackmail by REDAN in their blind pursuit of power and spoils of office. We have a right both as members of REDAN and as Nigerians to have our say in any legislation that materially affects our business. Our stakeholders have created more homes, infrastructure, jobs and contributed to the economy in less than 10 years than REDAN and its leadership have in their entire existence.”

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In its petition to the Speaker, House of Representatives, dated 22 December 2021, entitled, “Extra-ordinary Request on Grounds of Clauses Contrary to Public Policy and Natural Justice to Amend Certain Clauses of the Original Copy of the Bill to be Received by the House of Representatives from the Senate in line with Order Twelve Rule 10(6)(B) of the Standing Orders of the House of Representatives, their lawyer, West – Idahosa & Co,  stated: “Our clients are shocked that SB.540 as passed by the Senate contain very worrisome powers and role purportedly created by proposed legislation for a private stakeholder whose members also are competitors in the Estate Development industry.

“ Clause 4(f) also gives the Council the power to register and license all real estate developers in Nigeria through the institutional guidelines of REDAN; Clause 4 (j) gives the Council the power to monitor, investigate and Sanction registered and licensed Real Estate Developers that violate the Bill through REDAN; Clause 4(v) provides that the Council shall prescribe fees, fines and charges to be paid as recommended by REDAN.”

Accordingly, the coalition strongly holds the view that the real estate industry is already well policed by the anti-money laundering agencies, whose laws do not need to be repackaged in another bill to be effective.  It adds: “REDAN keeps using this as an excuse as if the laws are not passed and in force already.

“One of the cornerstones of the proposed bill is that the public is being scammed by developers. While this may be so, and it is not something unique to Real Estate, there are government agencies set up to deal with financial crimes (EFCC)”.

It insists that the National Executive Council (NEC) of REDAN, which champions the cause of enacting the law, is unlawfully constituted:

“REDAN has no governing body and the NEC is not approved by the general meeting of members of REDAN,” adding that that association is not empowered by its constitution to execute any of the acts named in the bill.

Added to the above, the coalition , in its legal opinion, states:

“By the virtue of Section 1 of Land Use Act 1978, all land comprised in the territory of each state in the federation is vested in the governor of that state, and such land shall be held in trust and administered for the use and common benefit of all Nigerians by such governors. Therefore, the Federal Government or any of its agencies cannot superintend, regulate or control the use and development of land already vested in the State Governors. In extension, the National Assembly cannot legislate over same.

Equally, in the Second Schedule Part 1 of the 1999 Constitution of the Federal Republic of Nigeria, there was no mention of land or development of Land and  Property or Business of Real Estate as an item under the Exclusive Legislative List. Therefore, the National Assembly cannot make laws regulating land or land development and Real Estate Development.

It is pertinent to note further that council is generally created by law to regulate professionals or persons seeking to join such professions. Real Estate Industry is not a profession, neither is it an industry restricted to a specific set of persons. It is a business ventures where any interested persons may opt to delve into through investment. This is also evident in the preamble to the bill. Consequently, it is wrongful to create a council to regulate activities of Real Estate. It is worthy of note, that Real Estate business is a convergence of experts from different professions such as Engineering, Architecture, Building, Quantity Survey etc. These professions are already regulated by their councils and professional bodies. Thus, there is no need whatsoever for creating council for Real Estate Business.

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Looking at the entirety of the Bill particularly the functions of the Council, it is evident that the bill has nothing new which is not currently covered by already existing laws. Consequently, this bill if passed will amount to multiplication of laws and eventually lead to overlapping and conflict of duties and functions.

Assuming without conceding that the bill as a whole is not in contravention to the above, a comprehensive study of the bill reveals so many irregularities, unfairness, unconstitutionalities and so on. The following are the identified provisions that cannot stand test of legal sift and economic realities due to both constitutional and economic implications:

Clause 4 makes the functions of the Council almost impossible without REDAN – See Sub Sections A, B, G, H, K, V where the Council only act with consultation, recommendation, ratification and working through and by REDAN,only. Thus making the council the puppet of REDAN. Worthy of note is also the fact that Executive and Members of REDAN are supposed to be under the control of the Council and not otherwise.

Check Clause 4(C) with the duties of other agencies connected to housing in Nigeria. As it stands currently in Nigeria, Federal Ministry of Lands and Housing, Federal Mortgage Bank, Federal Housing Authority, State Government various House Schemes etc are already saddled with development of suitable housing programmes, this singular will amount to duplication and clash of roles/duties.

Clause 5(i) The appointment of the Chairman of the Board is by the recommendation of the Real Estate Developers Association of Nigeria (REDAN) when there are other similar associations such as Real Estate Professionals Association of Nigeria. Same applies to the appointment of the Executive Secretary of the Council. – See Clause 5(vi)(i)

•Clause 35 gives room for tyranny on the part of the Council as the Council cannot be sued before the expiration of one month. This is a bad law as pre-action notice should only be applicable to Principal Officers of the Council and not the Council itself.

•With all the identified stringent procedure and compliance, would this bill not stifle investments in the real estate and eventually, economy of the country?

•Would this bill promote the agenda of ease of doing business as being pursued by the federal government?

•Does this bill in any way cover any area that is not currently being covered by existing laws both at the federal and state levels?

In view of the above legal opinion, this Bill is not to the best interest of real estate development in Nigeria and as such should not see the light of the day.

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