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You bought the house for ₦500 million. Congratulations! Now meet your new landlord: the estate management company.
And service charge is only one part of the conversation.
Take electricity.
The Band A electricity tariff has been ₦209.50 per kWh. Yet in some estates in Lekki and its environs, residents reportedly pay upwards of ₦350 per kWh for electricity supplied through the estate's power arrangement.
You spend hundreds of millions of naira to buy a house. But you may discover that you cannot simply deal directly with the electricity distribution company like an ordinary homeowner. Electricity is supplied through the estate's infrastructure and management arrangement, and you buy your power from or through the estate management company at a significantly higher effective tariff.
So you own the house, but you don't necessarily have complete freedom over something as basic as how you power it.
Electricity is just one example.
There may be compulsory charges for water, sewage treatment, security, waste disposal, cleaning, landscaping, maintenance of common areas, recreational facilities and general facility management. Some of these services are obviously necessary. My problem is not with paying for services. My problem is being locked into expensive services, with little control over the provider, the price or how the money collected is spent.
Interestingly, some estate residents are beginning to challenge these arrangements.
I was in court recently in a matter involving an estate where the residents' association had terminated the services of the existing estate management company following complaints, including alleged failure to properly account for service charges collected over the years. The residents proceeded to constitute their own management structure.
Before buying the house, investigate who will control the estate after the developer has sold the houses.
This is because the business model in some developments does not necessarily end with selling you the property.
A developer acquires land, develops an estate and sells the individual houses. You receive your deed or other title documentation transferring the relevant interest in the property to you. But alongside the property documentation may be an estate management agreement, deed of covenant or similar arrangement regulating how the estate will be managed.
And sometimes the management company is affiliated with the developer.
The developer has made money from selling the houses, but an affiliated company may continue earning revenue from the same homeowners through service charges, electricity, water and other estate services for years afterwards.
There is nothing inherently wrong with that. The problem arises where the arrangement effectively converts homeowners into what I call "upgraded tenants."
You have bought the property, but somebody else may still determine who supplies your electricity, how much you pay for it, how your water is supplied, what services you must subscribe to, what annual service charge you pay and, depending on the contractual structure, how easily residents can replace the management company.
This is why anyone buying property in a managed estate should:
Read the estate management agreement.
Read the deed of covenant.
Ask who owns the management company.
Ask how long its appointment lasts.
Ask how it can be removed.
Ask who determines the service charge.
Ask whether residents approve the annual budget.
Ask whether the accounts are independently audited.
Ask whether electricity and water are compulsory.
Ask whether you can install solar or a borehole.
Ask what happens if you refuse a particular service.
Because paying ₦300 million, ₦500 million or ₦1 billion for a house is one thing. Discovering afterwards that you have bought yourself into an expensive management arrangement that will make you end up as an upgraded tenant is another.
- Chukwuemeka Michael Ugah #EstatePropertyInNigeria
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Come to Light! Come to Jesus, please
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