Nigeria’s Rent-to-Own housing schemes, designed to bridge the gap between renting and homeownership, are facing significant challenges due to inadequate foreclosure laws, JOSEPHINE OGUNDEJI writes
In a country where owning a home remains one of the most elusive milestones for the average citizen, rent-to-own housing schemes emerged as a glimmer of hope, offering Nigerians the opportunity to transition from tenants to homeowners without the burden of lump-sum payments or inaccessible bank mortgages. But that hope is dimming fast.
Even with Nigeria’s recently approved minimum wage of N70,000, the math rarely works. Rent-to-own schemes in urban centres like Lagos, Abuja, and Port Harcourt often require monthly payments ranging from N150,000 to N300,000. For a worker earning the new minimum wage, these figures represent not just financial strain but outright exclusion.
In reality, only a small segment of the working population can meet such obligations without compromising essentials like food, transport, and healthcare.
However, the real problem runs deeper than affordability. When tenants default on payments, developers and financiers find themselves trapped in legal quicksand, unable to reclaim properties early enough through the judiciary system.
Nigeria’s foreclosure laws, where they exist, are largely outdated, burdened by procedural bottlenecks, and poorly aligned with the needs of an evolving housing finance landscape.
Unlike more advanced legal systems where property recovery is clearly defined and time-bound, foreclosure in Nigeria remains a multi-year ordeal.
Developers must initiate court actions, navigate overlapping land laws, and endure countless adjournments, often while defaulting tenants continue to occupy homes without consequence. The absence of housing courts or specialised tribunals only makes matters worse, leaving real estate investments exposed and developers disillusioned.
This legal inertia has become one of the greatest threats to rent-to-own housing. Without the ability to repossess homes when there is a breach of agreement, developers absorb the full weight of default.
Many are responding by pulling back entirely or increasing prices to offset legal risk, ironically shutting out the same low- to middle-income Nigerians these schemes were created to serve.
Foreclosure in limbo
Foreclosure is the legal process by which a lender reclaims a property when a borrower defaults. In many countries, it serves as the backbone of housing finance. But in Nigeria, foreclosure is entirely judicial, requiring full court proceedings that often drag on for years. This legal bottleneck has made lenders and developers cautious, if not altogether unwilling, to commit to long-term financing options like rent-to-own.
According to the Centre for Affordable Housing Finance in Africa, the foreclosure timeline in Nigeria averages 1,050 days, nearly three years from default to repossession.
“The risk to developers is just too high. If a tenant stops paying midway through the rent-to-own plan and refuses to leave, it can take years to get that house back. No investor will put money into that kind of model,” said a developer, Pelumi Awodiya.
Comparisons with South Africa and Ghana
In contrast, South Africa operates a dual system that allows for both judicial and non-judicial foreclosure. Under the National Credit Act, a lender may repossess a property via “sale in execution” with far fewer procedural obstacles. The average foreclosure process in South Africa takes three to six months, according to CAHF.
This efficiency has helped build investor confidence in South Africa’s housing market. As of 2022, over 30 per cent of households had access to formal housing finance products, and South Africa boasts one of the most developed mortgage markets on the continent.
Similarly, Ghana has made legislative strides. In 2008, it introduced the Borrowers and Lenders Act, allowing for non-judicial foreclosure where the mortgage agreement permits it. This reform reduced foreclosure timelines to fewer than 180 days in most cases, according to a report by Ghana’s Ministry of Works and Housing. The introduction of a collateral registry further simplified asset recovery, boosting lender confidence.
Despite its smaller economy, Ghana’s housing finance penetration is steadily growing, with over 2.4 per cent of the adult population having access to formal mortgages, surpassing Nigeria’s estimated 0.5 per cent, based on data from the Nigerian Mortgage Refinance Company.
These foreclosure efficiencies in Ghana and South Africa have made rent-to-own schemes viable and scalable. In Ghana, the State Housing Company runs RTO schemes with over 1,500 homes delivered between 2020 and 2023, according to the Ghana Real Estate Developers Association. In South Africa, private developers like International Housing Solutions have deployed RTO models as part of broader affordable housing portfolios.
In Nigeria, however, rent-to-own is still struggling. The Federal Mortgage Bank of Nigeria’s RTO initiative, launched in 2017, has produced fewer than 10,000 housing units, despite growing demand from over five million informal sector workers and low-income earners.
Legal and administrative bottlenecks
The Chief Executive Officer of UPDC Plc, Odunayo Ojo, noted that while rent-to-own was a promising initiative, its viability is undermined by Nigeria’s weak foreclosure laws, which make it difficult to repossess properties from defaulting occupants, sometimes dragging cases on for over a decade.
He said, “Rent-to-own is something that we have tried before, and right now we are not considering it, and one of the reasons we are not considering it is because of the foreclosure laws. Our foreclosure laws make it difficult to get quicker possession from somebody who is in occupation. So, when somebody is renting-to-own, sometimes when they default, you have to go to court to get the occupants out, and those cases can go on for many years.
“We have cases going for 10 years or more, so why do we see it as a very good initiative, but there is more to be done in terms of the enforcement of our foreclosure laws to make rent-to-own bankable?”
Similarly, a legal practitioner, Olawale Dada, stated that the need to review Nigeria’s foreclosure laws has become urgent in light of the growing demand for innovative housing finance models such as rent-to-own schemes.
He explained, “Under current legal frameworks, particularly those governing mortgages and property ownership, the process of foreclosure is notoriously slow, expensive, and bogged down by procedural technicalities. In many states, mortgage enforcement still relies heavily on judicial intervention, requiring court orders for possession even when a borrower has defaulted. This cumbersome process discourages financial institutions and investors from participating actively in the housing sector, particularly in long-term lending arrangements.
“For rent-to-own schemes, where occupants transition from tenants to owners over a period of time, the lack of clarity and enforceability in case of default presents a significant challenge. These schemes typically operate on hybrid contracts that combine tenancy and conditional purchase agreements. However, when an occupant defaults, legal ambiguities often arise: is the person to be treated as a tenant, a purchaser, or both? In the absence of clear and efficient enforcement mechanisms, developers and financiers are left vulnerable, sometimes spending years in litigation to recover property or enforce contractual rights. This legal uncertainty makes rent-to-own structures unattractive, especially in a country facing a massive housing deficit and a rising urban population.”
Aside from the judicial nature of foreclosure, Nigeria faces additional obstacles. Land titling is still riddled with delays and inconsistencies. Many developers are unable to perfect titles, leaving them without enforceable collateral. There’s also the problem of Governor’s Consent, mandated under the Land Use Act of 1978, which must be obtained before any property transaction is considered legally valid. The process can take six months to two years, depending on the state.
Even in Lagos, where housing reform is more advanced, the implementation of the Mortgage and Property Law of 2010 has had limited impact due to judicial delays and weak enforcement. The state’s land registry has digitised records, but real estate professionals say it hasn’t translated to faster resolutions in court.
The difference is stark: while Nigeria’s rent-to-own model is burdened by risk and delayed recoveries, South Africa and Ghana have introduced structural legal reforms that incentivise private investment and protect the integrity of housing finance.
Calls for reforms heightens
A real estate consultant, Spark Ovadje, said Nigeria’s real estate sector stands at a crossroads.
He noted, “As we grapple with a housing deficit of over 28 million units, innovative solutions like the rent-to-own scheme have emerged as lifelines, especially for young professionals, low-to-middle-income earners, and informal sector workers dreaming of homeownership. But as promising as this model appears, it faces a silent yet serious threat: Nigeria’s outdated and inefficient foreclosure laws.
He continued, “I have had the privilege of championing homeownership across states and socioeconomic classes. Among all the models we’ve explored, the rent-to-own system stands out for its inclusivity. It enables aspiring homeowners to move into a property as tenants, with the option of ownership through structured payments over time, without needing a massive down payment or mortgage.”
According to Ovadje, the rent-to-own model is a game changer. However, its scalability and long-term viability are increasingly undercut by the lack of a dependable legal framework for foreclosure and asset recovery.
He shared his thoughts: “In a rent-to-own agreement, the developer or financier takes on substantial risk by allowing occupancy and deferred payment. But what happens when the tenant defaults? Ideally, foreclosure laws should offer a quick, clear legal pathway to repossess and reinvest the property. However, in Nigeria, this process lacks efficiency.
“Our current foreclosure framework is fragmented, largely judicial, and painfully slow. Cases linger in court for years. In some states, there are no well-defined foreclosure provisions at all. This legal uncertainty discourages developers, stifles investor confidence, and endangers the entire rent-to-own ecosystem.
“In my role, I frequently engage with real estate developers, financial institutions, and prospective homeowners. A consistent concern is the risk exposure developers face due to legal bottlenecks. Without guaranteed recourse, developers are forced to either avoid rent-to-own schemes altogether or load the financial risk onto the tenant in the form of higher rents, more stringent terms, or shortened contracts.”
According to him, this defeats the very essence of rent-to-own, which is affordability, accessibility, and empowerment.
He urged, “If Nigeria is to make serious progress in tackling its housing crisis, foreclosure reform is non-negotiable. Here’s what we need: A uniform foreclosure law applicable across states would streamline enforcement and boost investor confidence in non-judicial foreclosure options. Creating alternative dispute resolution mechanisms for property repossession will save time and reduce legal costs, tenant and developer protection, and a balanced legal protection will ensure both parties engage in rent-to-own deals with clarity and mutual trust. Institutional backing from the Central Bank of Nigeria, the Real Estate Developers Association, and the Federal Mortgage Bank must support reforms that protect developers and end-users.
“The rent-to-own model is not just a real estate strategy; it is a social reform tool, a chance to democratise access to housing and restore dignity to millions. But if we continue to ignore the legal threats strangling it, we risk replacing dreams of ownership with tales of frustration.
“As Nigeria’s National Real Estate Ambassador and Coach, I urge the Ministry of Housing, legal reform commissions, and state governments to prioritise foreclosure reform. Our people are ready to own homes. Let the law support them, not sabotage them.”
Establish foreclosure tribunal
Meanwhile, Olawale recommended that to address these challenges, there is a strong case for the establishment of a specialised foreclosure tribunal.
“This would follow the example of other sector-specific courts, such as the National Industrial Court for labour disputes and the Investments and Securities Tribunal for capital market cases. A foreclosure or real estate tribunal would consist of legal and property experts who can deliver speedy adjudication on disputes arising from mortgage defaults, rent-to-own agreements, and other property financing arrangements. The tribunal could be designed to resolve disputes within a maximum of 90 days, offering an alternative to the slow and overburdened civil courts.
“Legal reform must also support non-judicial foreclosure processes. In many jurisdictions around the world, mortgage agreements can include “power of sale” clauses that allow lenders to sell the property upon default without going to court, provided certain legal safeguards are met. Incorporating similar mechanisms into Nigerian law would help de-risk real estate investments and encourage lenders to offer more flexible housing finance products. Such measures would also ensure greater legal certainty and contract enforceability, both of which are essential to attracting foreign and institutional investors into the housing sector.
“The 1999 Constitution of the Federal Republic of Nigeria, particularly Section 6(5), provides room for the establishment of specialised courts or tribunals by legislation. Therefore, creating a foreclosure tribunal is not only legally permissible but necessary for modernising the country’s property and housing finance system. A review of foreclosure laws, along with the establishment of this tribunal, would signal a strong commitment to creating an investor-friendly environment, boosting access to affordable housing, and reducing legal bottlenecks in property transactions. In conclusion, for Nigeria to make meaningful progress in housing delivery and financial inclusion, particularly through rent-to-own schemes, the legal infrastructure governing foreclosure must be overhauled. This reform would bring the country in line with international best practices, attract much-needed investment, and help close the housing deficit that affects millions of Nigerians.”
