A legal opinion on the remuneration of a real estate agent: focus on the

Lagos State real estate regulatory authority (LASRERA) LAW,2022 AND

MIKANO INT'L LTD V EHUMADU

Introduction

The remuneration of real estate agents has long been a controversial topic in the
industry, with clients and agents holding varying positions on the matter. In Lagos
State, Nigeria, the Lagos State Real Estate Regulatory Authority (LASRERA) Law 2022
was enacted to regulate the conduct of real estate agents and their remuneration. This
paper seeks to provide a legal opinion on the remuneration of a real estate agent, with a
specific focus on the LASRERA Law 2022 and the case of Mikano Int'l Ltd v Ehumadu.
Through an analysis of these legal provisions and relevant case law, this paper aims to
shed light on the appropriate and legally sound methods of remunerating real estate
agents in Lagos State.

Overview of LASRERA Law, 2022, On Remuneration of a Real Estate Agent

The Lagos State Real Estate Regulatory Authority Law, 2022 (LASRERA Law) was
enacted to regulate the real estate industry in Lagos State, Nigeria. The LASRERA Law
aims to streamline the operations of real estate agents, developers, and other
stakeholders in the industry while promoting transparency, accountability, and
consumer protection.

One of the key provisions of the LASRERA Law is the compulsory registration of all
real estate practitioners, including agents, developers, and property managers, with the
Lagos State Real Estate Regulatory Authority (LASRERA). The registration process
involves compliance with certain requirements, such as obtaining a minimum level of
education, undergoing training, and passing an examination. Another provision of the
LASRERA Law is the establishment of a dispute resolution mechanism for disputes
arising from real estate transactions. The mechanism involves the creation of a
specialized tribunal to hear and resolve disputes in a timely and efficient manner.
According to law, agency fees are not illegal, it is but a reward for the service rendered
to the clients, either a person looking to buy a piece of land or a prospective tenant
looking to rent a house. Generally, the Agency fee for a tenancy agreement is 10% of the
tenancy fee paid. If for instance, the property is going for N200,000 per annum, the
agency fee will be 10% of the tenancy fees paid, which will be N 20,000. Agency fees on
property sales on the other hand are usually 5% of the total consideration advanced for
the property.

An estate agent must be paid his professional agency fees by his principal only; the
practice of collecting agency fees from both a prospective tenant and Landlord or a
prospective purchaser and seller is now unlawful. An estate agent must remit all
income collected by him or her to his or her principal within fourteen (14) days of such
a collection unless otherwise formally instructed not to do so by his or her principal.
This Law, therefore, requires that all estate agents in Lagos State must not charge
agency or commission fees above 10% of the total rent collected on any tenancy or lease
transaction.
In the case of the sale or purchase of land and buildings, the maximum agency or
commission fee permitted is 15% of the total proceeds of the sale.
 
The total authorised fees or commission, as stated above, must not be exceeded by any
estate agent irrespective of whether more than one agent is acting for the party
concerned. Estate agents are barred from preparing legal documents relating to any real
estate transaction undertaken by them on behalf of their clients. All real property
agreements must be prepared by a Legal Practitioner whose fees must not exceed 12.5%
of the total consideration of the transaction.
Similar to the Old Law, the LASRERA Law also limits the fees that clients can be
charged by real estate practitioners. Section 32(2) of the Law sets out the applicable fees
a person or organisation dealing in real estate may demand from prospective clients;
(a) in a Letting/Lease transaction, not more than ten per cent (10%) of the total rent
collected on any transaction; and 
(b) in the sale or purchase of interests in buildings; where two or more holders of
permits are retained by the owner/vendor for the sale/ lease, fees shall not be more
than fifteen per cent (15%) of the total proceeds of the sale or tenancy." 
 A real estate agent is not to represent two (2) principals on the same transaction in the
case of an agency not to collect money from more than one prospective client in respect
of the same premises or building and shall remit money collected to the landlord in the
case of a tenancy, within seven (7) working days, unless otherwise directed in writing
by the landlord and such money collected shall be receipted. In effect to section 32(2)(a)
above, a person or organisation dealing in real estate shall not demand a fee exceeding
ten (10%) per cent of the total rent or purchase price received from a client in respect of
a lease or sale. For instance, if in a tenancy transaction, the rent of the property is Eight
Hundred Thousand Naira (N800,000) per annum, by implication the permit holder
cannot demand an amount exceeding eighty thousand naira (N80,000) from the tenant.
Furthermore, if there are two or more permit holders retained by a principal in the same
sale or lease, the permit holders shall jointly demand an amount not exceeding fifteen
(15%) per cent of the total proceeds in a sale or lease of interests in property. This will
help to protect members of the public against extortion.
Undoubtedly, the LASRERA Law provides for the protection of consumers of real
estate services by requiring every real estate transaction to be properly documented and
by prohibiting the collection of any form of advance payment or commission from
consumers. Overall, the LASRERA Law seeks to professionalize the real estate industry
in Lagos State, promote ethical conduct, and engender trust and confidence among
consumers of real estate services.
Analysis of Mikano Int'l Ltd v Ehumadu case

In the Mikano Int'l Ltd v Ehumadu case, the court considered the question of whether
a real estate agent was entitled to receive a commission on a property transaction
despite not having procured the buyer. The plaintiff, Mikano, had engaged the
defendant, Ehumadu, to market its properties for sale. Ehumadu subsequently
introduced a buyer to Mikano, but the buyer ultimately purchased a different property
through another agent. Ehumadu argued that he was entitled to commission on the sale
because he had introduced the buyer to Mikano, while Mikano contended that the
commission was only payable if Ehumadu had procured the buyer.

The court ultimately sided with Mikano, holding that commission was only payable if
the agent had procured the buyer. The court noted that while Ehumadu had introduced
the buyer, he had not played a significant role in securing the sale and had not been the
effective cause of the transaction. As such, he was not entitled to receive a commission
on the sale.

This case highlights the importance of clarity in real estate agency agreements and the
need for agents to specify the circumstances under which commission will be payable.
Additionally, it underscores the importance of a clear understanding of the concept of
procuring cause in real estate transactions, as the effective cause of a sale may not
necessarily be the agent who initially introduced the buyer.

In light of the Mikano Int'l Ltd v Ehumadu case, real estate agents should ensure that
their agreements with clients are unambiguous regarding commission payments.
Additionally, agents should strive to play an active role in securing the sale to position
themselves as the effective cause of the transaction.

Conclusion and recommendations

In conclusion, the Lagos State real estate regulatory authority LASRERA LAW, 2022
has provided clarity on the issue of remuneration for real estate agents in Lagos State.
The ruling in the case of Mikano Int’l Ltd v Ehumadu has affirmed the legality of the
contractual arrangement between real estate agents and their clients, and the limits of
their compensation.

Based on the legal opinion provided, we recommend that all real estate agents
operating in Lagos State ensure that their activities comply with the provisions of the
LASRERA Law, 2022. This includes ensuring that all contractual agreements with
clients are clear, comprehensive and legally binding. In addition, real estate agents
should actively seek to avoid any actions that may be perceived as unethical or in
violation of the law.

It is also recommended that clients engaging the services of real estate agents in Lagos
State should be aware of their legal rights and obligations, particularly concerning the
payment of commission and other forms of remuneration. They should seek to
understand the terms of any contractual agreement and ensure that they are satisfied
with the services provided before issuing payment.

Finally, we recommend that the Lagos State government and other relevant
stakeholders continue to monitor the activities of real estate agents in the state and take
appropriate measures to ensure compliance with the provisions of the LASRERA Law,
2022.