Ghana currently has a housing deficit of 1.7 million which tilts the power to the supply side of the housing sector. With landlords at the supply end, tenants at the demand end and demand exceeding supply, landlords have become incredibly powerful (regardless of their limits in the Ghana Rent Act) and thus dictate the terms of the rental agreement.
The Government has tried to intervene and control the upper hand of landlords by proposing an amendment to the Ghana Rent Act 220 which was passed in 1963. Among many of the reforms in the Act is a proposal of a monthly rent payment as opposed to the 6-month rent advance payment detailed under the current law. We assess the merits and demerits of the proposal and analyse its implications on both parties in the rental agreement.
A monthly payment covers a month’s lease and may involve an automatic renewal unless the tenant or landlord provides a notice of non-renewal. In Ghana, the notice of non-renewal is set at 90 days, however, there is not much information if the reviewed Rent Act still pegs the notice at the same duration. The reviewed Ghana Rent Act seeks to shift power from landlords to the Department of Rent Control who act as the facilitating body. The Department of Rent Control would be mandated by the new law to set a ceiling on standard rent to prevent landlords from exploiting desperate tenants.
The amendment also seeks to empower the Rent Office to send inspectors around to educate both tenants and landlords concerning their rights and responsibilities. The main aim of the law is to limit the powers landlords currently wield and protect tenants while empowering the Department of Rent Control to be an influential mediator between both parties.
To landlords, this proposal might seem unfavourable since the mandate given to the Rent Control Office to set a price ceiling on rent reduces their control on pricing and dictating the terms of payment. However, every cloud certainly has a silver lining. A careful examination of the newly proposed monthly rent payment could be beneficial to landlords as it could provide a steady stream of income.
In the informal rental sector, tales are often told of landlords who, after spending the rent advance payments go to the extent of inflating shared utility bills in times where their finances are tight, to continue making money from tenants even outside of the tenancy agreement. Receiving monthly payment is akin to receiving a monthly salary. Termination of contracts with undesirable tenants would also be easier and quicker since all that would be required is a note of non-renewal with an agreed notice period, instead of waiting for the advance payment to fully expire.
For tenants, this new law, if passed, seems like salvation from unfair practices of some landlords such as wrongful termination of contracts, eviction, and outrageous demands for rent advance. The amended law promises to restore some sanity to the rental system.
For most tenants, coming up with one-year and two-year rent advances requires loans and funds from friends and family. Hence, the proposal of monthly rent payments might come as a relief to salaried workers since it offers affordability and paying according to a budget determined by end-of-month pay.
Tenants looking for flexible property for rent would have it easier, should these laws in the new Ghana Rent Act be passed and enforced. For a tenant looking to relocate or in need of a temporary rental deal, the monthly rent proposal seems ideal and doesn’t involve much commitment.
Notwithstanding, some tenants may be advocates of paying a lump sum of 1-2 years rent advance because it provides them with peace of mind to go about their duties without constantly worrying about rent costs. For salaried workers who usually have a stack of monthly bill deductions such as car loans, mobile phone subscriptions, TV bills and many others, monthly rent costs might further decrease their disposable income. Others also prefer the 1-2 year rent advance payment because it locks in the exact rent amount and does not give room for landlords to increase rent for the duration paid for.
As real estate players await the verdict on the proposed review, it remains indisputable that all players stand to benefit from a well-regulated housing sector that will attract better real estate investment and help to address the current housing deficit. Whichever way the tide pulls, there are bound to be benefits for all in the proposed reform of the Ghana Rent Act.