Understanding Service Charges in Nigerian Tenancies

Walk into any Nigerian tenancy agreement and you'll see a line called service charge. Ask five landlords what it covers and you'll get five different answers. Ask five tenants whether they feel they're getting value, and four will say no.

This is the most commonly disputed part of Nigerian tenancies. Let's clear it up.

What service charge legitimately covers

Service charge is money collected from tenants to fund the maintenance and operation of common areas and shared services. In a typical Nigerian apartment building or estate, that includes:

• Security (guards, CCTV, perimeter maintenance)
• Cleaning of common areas (lobbies, stairwells, compound)
• Waste disposal
• Estate gate access control
• Common-area electricity (corridor lighting, water pump, gate)
• Generator maintenance and fuel for common areas
• Water supply infrastructure (boreholes, tanks, pumps)
• Lift maintenance (for storey buildings)
• Gardening and landscaping
• Pest and termite control
• Minor common-area repairs (painting, fixing gates, etc.)

What service charge should NOT cover

• Personal electricity within the tenant's unit (they pay PHCN/Ikeja Electric/Eko Electric directly)
• Personal water usage inside their unit
• Repairs to items inside the tenant's unit
• Major structural repairs (roof, foundation, external walls) — these are the landlord's capex obligations, not operating expenses
• Property rates and ground rent (these are the landlord's duty)
• Agency and legal fees from tenant turnover

How to calculate a fair service charge

Add up the annual cost of running the shared services listed above, divide by the number of units, and that's the per-unit service charge. If the estate has 10 units and annual common-area costs are ₦4M, each tenant pays ₦400,000 in service charge.

Many landlords pick an arbitrary figure without this calculation — then wonder why tenants complain. If you can't show a cost breakdown, you don't have a defensible service charge.

Handling unused service charge balance

Best practice is to treat service charge as a trust fund: collect it, use it for its purpose, and carry forward unused balance to the next cycle. Some estates publish an annual reconciliation statement to tenants. This builds trust and heads off disputes.

The legal status of service charge

Service charge is not statutory in Nigeria — it exists by agreement between landlord and tenant. That means the terms must be in the tenancy agreement: the amount, what it covers, how it can be adjusted. Without this, a tenant can challenge it as a hidden rent increase.

How professional property managers handle it

• Separate bank account for service charge
• Annual budget shared with tenants
• Quarterly or annual actual-vs-budget reports
• Tenant input on major upgrades (new generator, new CCTV) before billing
• Clear breakdown on every rent invoice