House of Reps agrees with Senate on Bill to establish Real Estate Regulatory Council…..gives REDAN overwhelming powers.

The House of Representatives has agreed with the Senate on the passing of a bill for ‘An Act to establish the Real Estate Regulatory Council of Nigeria (RECON) to provide efficient, effective and transparent administration of the business of real estate development and prescribe minimum standards for the conduct of the business of real estate development in Nigeria and related matters’. The Nigerian Senate on Wednesday, November 17, 2021, the Nigerian Senate had passed the bill which is to have general application in every state in Nigeria including the Federal Capital Territory, Abuja (“FCT”).

Read Bill passed by Senate here  NASS Real Estate Bill 2021

The objectives of the Bill which primarily are to “standardize the business of real estate development in Nigeria by regulating the conduct of transactions in the real estate sector,provide enabling environment and transparency in the business of real estate development in Nigeria etc are quite laudable but stakeholders in the real estate industry are concerned about the overwhelming power given to the Real Estate Developers Association of Nigeria (REDAN) in its provisions.

The duties of the Council for instance have several references to REDAN:

• regulate the business of real estate development in Nigeria in consultation with REDAN;
• promote sustainable development of the business of real estate as championed by REDAN;
• register and license all real estate developers in Nigeria through the institutional guidelines of REDAN;
• renew the license of real estate developers annually, upon payment of the prescribed fees and fulfillment of all requirements prescribed under this Bill as recommended by REDAN;
• register, maintain and update register of all real estate development projects ratified by REDAN to have met set standards of industry practices;
• work through REDAN to monitor, investigate and sanction registered and licensed real estate developers that violate the provisions of this Bill;
• work through REDAN to investigate and penalize unlicensed real estate developers that violate the provisions of this Bill;
• prescribe fees, fines, and charges to be paid under this Bill as recommended by REDAN;

In addition, in constituting the Council, REDAN is to have several members as the Bill states that “ a Chairman who shall be appointed by the Minister on the recommendation of the Real Estate Developers Association of Nigeria (REDAN)” as well as “two (2) persons from each of the six (6) geopolitical zones in Nigeria to represent REDAN” In addition,  “the Secretary of the Council; who shall be appointed by the Council on the recommendation of the Real Estate Developers Association of Nigeria (REDAN)” Reading through other clauses of the Bill, it is also clear that the Chairman cannot be removed except by approval of REDAN.

Other vital clauses that give enormous powers to REDAN is that being a member of the Association is mandatory requirement of the Licencing process and three out of the five member panel to investigate developers are to be members of REDAN.

The concern of stakeholders is how developers can be fair and equitable in regulating their own industry and members. There is also the worry that by denying rivals membership of REDAN, such new developers are essentially shut out of being registered by the Council. Any factional infighting by REDAN members will stop the Council from functioning.

A law firm, Bloomfield Law, which reviewed the Bill also raised the issue of constitutional infringement.

It said “The requirement that a prospective Developer to be licensed with the Council must be registered with REDAN is unconstitutional if read together with Section 40 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) (the “Constitution”).  Section 40 of the Constitution provides that every person shall be entitled to assemble freely and associate with other persons. See also Article 10 of the African Charter on Human and People’s Rights (Ratification and Enforcement) Act, Cap A9, Laws of the Federation of Nigeria, 2004. It has been established in a plethora of authorities that the idea of automatic (and forced) membership of an association is an infringement of the fundamental right of freedom of association. See AGBAI v. OKOGBUE. No developer can therefore be compelled to register as a member of REDAN or any other association as subtly imposed by the Bill.”

It went further to state that : “Again, the Bill has dangerously given enormous powers to an association by incorporating the guidelines of REDAN by reference. Under the Bill, a prospective Developer is required to abide by the guidelines of REDAN to get licensed by the Council. This is a glaring preferential and exclusive treatment of an association registered as an Incorporated Trustee under the Companies and Allied Matters Act, 2020 (“CAMA”) in an enactment. If the Bill becomes an Act, it will
continue a precarious precedent and inadvertently preclude the formation of reputable future associations of real estate developers in Nigeria. This is an anomaly and hopefully, this will be considered and deliberated upon before the Bill
becomes an Act, having the future in mind and other stakeholders who do not wish to join REDAN but intend to be licensed and regulated by the government.”

The Bill has to go through a Third Reading and it is expected that Real estate practitioners and developers will contribute to future debates before the Bill is passed into law.