Oral Tenancy Agreements are Legal in Nigeria but not Advisable
Typically, an individual will enter into several agreements daily. Terms are agreed to every time an application is downloaded onto a mobile phone or other tech-enabled device; an online account is created on any e-mail or social media platform; a purchase is made, whether online or offline. Considering the amount of agreements every individual will inevitably enter into, without much thought, it is not uncommon for individuals develop a relaxed attitude towards agreements.
Nevertheless, certain agreements require special attention. The more an individual stands to gain, or lose, from an agreement, the more attention such agreement deserves. For example, a simple purchase transaction online may not be given equal measure of attention as a mortgage, employment or tenancy agreement. This is because the latter agreements usually impose more privileges or liabilities on the individual than the former. Due to the importance of the latter agreements, it is imperative that any individual being bound by them must understand the terms stated therein.
The purpose of this article is to illuminate on some key aspects of tenancy agreements in general and the position of parties to an oral tenancy agreement in particular. The article will consider some of the laws governing tenancy agreements and discuss some disadvantages of an oral tenancy agreement.
Basic principles regulating contracts
Generally, a contract may be oral or written. However, some Nigerian laws require certain contracts to be in writing in order to be enforceable (contracts to transfer interest in land, moneylenders’ agreements and hire purchase agreements, among others).Contracting parties are at liberty to decide the mode of forming a simple contract. All contracts, whether in writing or otherwise, must have four essential ingredients: offer, acceptance, consideration and an intention to create a legal relationship. Where all the ingredients are present, the agreement is binding on all parties to the contract and can be enforced against anyone who fails to meet their contractual obligation.
It is relatively easy to enforce an obligation under a written contract, as the contractual document serves as evidence of the obligations therein. While oral contracts are enforceable, there is the burden of proving the terms of the contract. A litigant will have to put forward credible evidence (the statement of a witness, email correspondence or text messages between the parties) to substantiate the claim. So, even if an oral contract was in fact entered into, if the litigant cannot prove this, or if the defendant is able to successfully challenge the litigant’s evidence, a claim for enforcement or breach is likely to fail. Written contracts are therefore the preferred method of entering contractual agreements.
Tenancy Agreements
A tenancy agreement simply refers to an understanding between the owner of a building (Landlord) any person who seeks to occupy the building for a period of time (Tenant), to the exclusion of the owner, usually for a fee called rent.
Tenancy agreements in Nigeria are governed by specific laws of each state of the Federation. In Rivers State, the applicable laws are the Landlord and Tenant Law of Rivers State and the Recovery of Premises Law of Rivers State. The Landlord and Tenant Law of Rivers State provides that a tenancy agreement may be oral, in writing or by deed. Tenancy agreements for a duration of more than 3 years must be made by deed. For a duration of three years or less, the agreement may be written or oral.
The tenure of a tenancy can either be fixed or periodic, and the difference between the two matters significantly. For a fixed tenancy, the parties mutually agree on a fixed day on which the agreement automatically terminates. In this case, the position of the law is that when the tenancy is determined by effluxion of time on the agreed date, the landlord is entitled to possession of the property and need not file a notice to quit. Where possession is not immediately given up, the law requires the landlord to serve the tenant at sufferance with a 7 days’ notice of the owner’s intention to recover possession. If the tenant at sufferance continues to remain in possession, the owner may then approach the court to enforce his right of re-possession.
In the case of a periodic tenancy, the tenure will be for a known period, i.e. a week, a month, three months, six months, or a year. The tenancy is automatically renewed on the expiration of the agreed period until either the landlord or tenant expresses their desire to end the tenancy. Therefore, both parties to a periodic tenancy do not know when the tenancy will end at the formation of the agreement. Since both parties do not know when the tenancy will end, the law requires that a notice to quit must be issued by the party seeking to end the agreement on the other party. For a weekly tenancy, a weeks’ notice is required; for a monthly tenancy- a months’ notice; a quarterly tenancy (three months) – three months’ notice; a 6 months tenancy or an annual tenancy- 6 months’ notice. All notices must expire on the eve of the anniversary of the tenancy.
The rationale for the notice is that it enables the other party to prepare for the end of the tenancy. If the landlord seeks to end the tenancy, the notice period allows the tenant time to seek new accommodation. If the tenant seeks to end the tenancy, the notice period allows the landlord time to seek new tenants. Thus, the agreement will not be validly terminated until the required notice to quit is served. Where the notice requirement is adhered to, upon the expiration of the tenancy period, the owner is entitled to possession and must issue a 7 days’ notice of owner’s intention to recover possession where the tenant at sufferance remains in possession.
Case against oral tenancy agreement
The foregoing simply explains that one of the main differences between the fixed tenancy and the periodic tenancy is the requirement to issues a notice to quit before periodic tenancy will be terminated. What then is the position of a party to a fixed term, but oral, tenancy agreement where the tenancy expires on the agreed date but the other party, unable to find new tenants or accommodation, wishes to continue with the agreement? The other party could simply claim that the tenancy is a periodic tenancy and that the notice to quit which is required by law to validly determine the tenancy has not been served.
The legal position, as provided in section 6(2) of the Recovery of Premises Law of Rivers State states that the nature of a tenancy shall, in the absence of any evidence to the contrary (e.g. a written agreement), be determined by reference to the time when the rent is paid or demanded. Without written proof corroborating the claim that the tenancy is for a fixed term, if the rent is paid periodically, whether annually or every six months or quarterly or even weekly, the court will presume that the tenancy agreement is periodic in accordance with the payment of rent. The landlord or tenant, as the case may be, will find that they are forced law to continue with the tenancy until a valid notice to quit is served, which may be contrary to their original agreement. This is one possible scenario which may occur as a consequence of an oral tenancy agreement. Without concrete proof, the legislated laws will apply which may provide for rules and procedures contrary to the parties’ intentions when entering into the agreement.
In Koya v Babayale (1980) 2 O.Y.S.H.C. (pt. 1) 342, the parties entered into an oral tenancy agreement. The tenant failed to pay rent and the landlord sought forfeiture. The court held that the payment of rent was a covenant and not a condition of a lease and in order to take advantage of the right of re-entry, the landlord must show that the lease contained a proviso for re-entry. The landlord failed to prove this as the agreement was oral.
Another reason why an oral tenancy agreement is not advisable is that it does not give the parties the opportunity to consider fully the terms they wish to guide their relationship or keep record/track of it. A carefully considered written agreement will, among other things, answer the following questions: when is the tenant required to pay rent? What is the consequence of a failure to pay rent on the required day? Which of the parties is required to pay Local Government tenement rates? What are the full obligations of the landlord? What are the full obligations of the tenant? Is there a standard of behaviour expected of the tenant? Who covers the insurance of the property? As oral contracts are usually entered into by parties who do not wish to involve a lawyer in the process, the parties are unlikely to consider any of these situations thereby creating room for misunderstanding since there are no clearly spelt out expectations or obligations. Where there are no careful thought out covenants between the parties, the occurrence of any of the aforementioned situations will undoubtedly put the parties in a state of disarray and occasion a strain in what may have otherwise been a cordial landlord-tenant relationship.
Conclusion
No doubt oral tenancy agreements, although legal, puts the parties in a precarious position. Firstly, without proper proof, the parties will be hard pressed to enforce any of the privileged they are entitled to under the agreement. In some cases, they might find themselves in a position contrary to what was expressly agreed, for the simple reason that the agreement was not in writing. Also, the mere fact that the contract is oral presupposes that it is not well thought through, hence the possibility of unnecessary disagreement between the landlord and tenant is likely. Therefore, considering the substantial importance of a tenancy agreement on the parties involved, such agreements should only be entered into in writing. It is advisable that a legal practitioner be involved in the process of forming the tenancy agreement. This way, both parties will receive sufficient advice on their entitlements, duties/obligations, and possess the necessary evidence to successfully enforce their rights under the agreement.
Note
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Orinari Jeremy Horsfall Esq. is an Associate at Accord Legal Practice, a Corporate Law Firm based in Port Harcourt. He can be reached at orinarih@accordlegalng.com
