Tenancy and the Tussle of Agency Fees: A Legal Examination of Lagos State’s 10% Cap Regulation

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12 June 2025

By Victoria Ochanya Ankeli, Esq.

Associate, TEE Legal General Services

29th May, 2025

Introduction: Tenancy in the Crosshairs of Regulation

In the vast labyrinth of Nigeria’s tenancy law, the tenant is often the sacrificial lamb—bargaining from a place of desperation, vulnerability, and legal ignorance. In Lagos, Africa’s most populous city, the imbalance has grown starker: agents impose arbitrary “professional fees,” landlords demand multiple years in advance, and tenants bear the brunt.

In a rare but welcome assertive policy stance, the Lagos State Government, through the Lagos State Real Estate Regulatory Authority (LASRERA), announced the enforcement of a long-standing yet largely ignored regulatory limit: a statutory ceiling of 10% on agency fees. This article analytically interrogates the legality, implementation hurdles, and the jurisprudential implications of this regulation within Nigeria’s broader tenancy law framework.

I. The Legal Status of the 10% Cap: Myth or Mandate?

The 10% agency fee cap is not new—it is embedded within the LASRERA Law and the Tenancy Law of Lagos State 2011, which collectively recognize and regulate the conduct of real estate agents and developers in Lagos State¹.

Section 2(1) of the LASRERA Law empowers the authority to:

“register, regulate, and monitor the activities of real estate practitioners and ensure the enforcement of rights and obligations in the real estate market”².

Though the 10% limit is customarily recognized, its express statutory articulation is found in regulatory directives issued under LASRERA’s enabling powers³. The absence of punitive enforcement mechanisms for non-compliance had long rendered the cap theoretical.

However, a major turning point came with the official directive issued by the Lagos State Commissioner for Housing in 2024, which reaffirmed the 10% agency fee ceiling and explicitly warned of impending penalties for defaulters. The Commissioner’s pronouncement is not an isolated policy statement; it is an executive reinforcement of LASRERA’s mandate, signaling a renewed commitment to enforcement and compliance.

This directive, being issued by the supervising authority under the LASRERA Law, qualifies as executive guidance with binding regulatory effect. When read in tandem with Section 27 of the Interpretation Law (Cap I3, Laws of Lagos State), which permits subsidiary legislation to impose sanctions for violations, this directive by the Commissioner for Housing now puts the rule into sharper legal focus⁴.

II. Agents as Fiduciaries: Legal Duties Under Nigerian Law

Agency law in Nigeria is governed by both statute and common law. Under Sections 182–196 of the Contracts Act (Cap C20, LFN 2004), and by extension, the general principles of fiduciary duty, agents are duty-bound to act in the best interests of their principal and avoid conflicts of interest⁵.

Yet, in practice, most real estate agents in Lagos simultaneously represent landlords, tenants, and even developers, charging each party under the guise of “professional fees.” This dual representation, where not transparently disclosed or agreed, amounts to a breach of fiduciary obligations and renders such agents susceptible to civil liability under Nigerian contract and agency law.

The Court of Appeal in Afolabi v. Polymera Industries Ltd (2021) reasserted:

“An agent who charges undisclosed or excessive commissions without a transparent agreement breaches their fiduciary obligations and may be made to disgorge such benefit”⁶.

III. The High Cost of Renting in Lagos: When Basic Shelter Becomes a Luxury

For the everyday Lagosian looking to rent, this is more than law—it’s survival. A young worker in Yaba earning ₦150,000 monthly may need to cough out exorbitant sums upfront to satisfy landlords demanding multiple years’ rent and agents insisting on fees beyond what the law permits.

As the saying goes — “No be every kite wey fly dey reach sky,” meaning not everything that looks promising is what it seems; sometimes, hidden traps lie beneath. These informal charges—though disguised as routine—are often illegal and exploitative. This regulation isn’t just about statutes; it’s about making the law finally serve the people.

IV. Illegality of Additional Charges: The Case Against Caution and Inspection Fees

The Lagos State Government has now declared caution fees, inspection fees, and documentation fees as illegal charges. The legal reasoning is rooted in the doctrine of unjust enrichment—a principle upheld in Alfred v. Governor of Lagos State (2019), where the Court held that:

“Any fee collected by a party that confers no reciprocal benefit, and is not grounded in contract or statute, is unjust and unenforceable”⁷.

In essence, unless these charges are explicitly contained in a signed tenancy agreement and provide clear reciprocal value, they are legally voidable and may amount to actionable misconduct under the Lagos State Criminal Law (2015), particularly Sections 323–325, which prohibit obtaining financial advantage by false pretense⁸.

V. The 10% Cap in Light of Freedom of Contract: A Counter-Argument

Critics argue that the 10% fee cap infringes on the doctrine of freedom of contract, a bedrock of private law. But this freedom is not absolute. The Supreme Court has consistently held that regulatory interventions are justified where public interest or economic justice is at stake.

In C.B.N. v. Okojie (2004), the Court stated:

“Contractual freedom may be regulated where such regulation serves to restore market fairness or protect vulnerable participants”⁹.

Thus, a statutory cap aimed at preventing economic exploitation and market distortion is constitutionally valid under Sections 16 and 43 of the 1999 Constitution (as amended)¹⁰.

VI. Enforcement Challenges: Toothless Tiger or Legal Trigger?

Enforcement remains LASRERA’s Achilles heel. With thousands of informal agents operating without registration, the real challenge is compliance monitoring. However, two key legal steps could reposition LASRERA from passive regulator to active enforcer:

Criminalization of Excess Commission: Through subsidiary legislation, Lagos can invoke Section 27 of the Interpretation Law (Cap I3, Laws of Lagos State) to issue binding regulations with fines and penalties for defaulters¹¹.
Consumer Protection Litigation: Tenants can institute representative actions under the Federal Competition and Consumer Protection Act (FCCPA) to claim restitution where overcharged. The FCCPC has concurrent jurisdiction to enforce fair pricing¹².

Conclusion: Toward a Fair and Sustainable Real Estate Ecosystem

The Lagos State Government’s reassertion of the 10% agency fee cap transcends mere administrative formality; it marks a pivotal moment in the quest for meaningful structural reform within Nigeria’s notoriously fragmented and exploitative real estate market. This policy intervention confronts deeply entrenched practices of unchecked agency fees and arbitrary landlord demands that have long disenfranchised tenants, especially the economically vulnerable majority.

However, the regulation’s true transformative potential hinges on the development of robust enforcement mechanisms, comprehensive public legal education, and a shift towards transparency and accountability across the sector. Without these critical components, the 10% cap risks becoming an ineffectual mandate—“a tiger without claws”—unable to curb predatory behaviors or instill confidence in tenants.

Legal practitioners, policymakers, consumer rights advocates, and regulatory bodies must collectively champion this cause. Our responsibility extends beyond drafting laws or issuing directives; it involves actively facilitating judicial enforceability, empowering tenants through awareness campaigns, and advocating for stronger sanctions against non-compliance. Only through this multi-pronged approach can the fragile balance of power in tenancy relationships be restored and the dignity of Lagos’s residents be upheld.

Ultimately, the success of this reform will not be measured solely by legislative enactments but by its tangible impact on everyday Nigerians seeking affordable, fair, and transparent housing solutions. The vision is a real estate ecosystem where lawful regulation harmonizes with market realities, fostering equity, sustainability, and social justice.