Can Landlords Legally Sell Debts Owed by Tenants to Third-Party Debt Collectors?
When tenants leave without paying rent or ignore repeated reminders, landlords often look for faster ways to recover the money owed. One option that's gaining attention in Nigeria's real estate industry is the idea of selling rent debts to third-party debt collectors or recovery firms.
But is this practice legal in Nigeria? And if so, what are the conditions, risks, and benefits?
Let's break it down.
What Does It Mean to Sell a Tenant's Debt?
Selling a tenant's debt means that the landlord transfers the right to recover the unpaid rent to a third party—usually a debt collection company—in exchange for immediate payment, typically at a discounted rate.
For example: If a tenant owes ₦6,000,000 in unpaid rent, a collection agency might offer the landlord ₦3,000,000 upfront and take over the effort to recover the full amount from the tenant.
This process is known as "debt assignment" or "debt sale."
Is This Legal in Nigeria?
Yes, selling or assigning a debt is legal in Nigeria—provided it follows lawful procedures. Always seek legal advice from a competent lawyer prior to making a decision.
The Law of Contract in Nigeria allows a creditor (in this case, the landlord) to assign a debt to another party (the collector), as long as:
- The debt is valid and not time-barred under limitation laws (usually within 6 years).
- The assignment is in writing, clearly stating the amount owed and the rights being transferred.
- The debtor (tenant) is notified in writing that the debt has been transferred to a new party.
Benefits of Selling Tenant Debt
Immediate Cash Flow
The landlord gets some money upfront without having to chase the tenant or spend on legal fees.
Reduced Stress
Landlords can avoid the emotional and administrative burden of following up on debts.
Professional Recovery
Third-party collectors often have the tools, networks, and legal backing to track down defaulters—even those who have moved to other states.
Risks and Considerations
Discounted Recovery
You won't get the full amount owed—only a percentage. Think of it as "cutting your losses."
Reputation Risk
Unethical collectors may harass tenants or use illegal tactics. This can reflect badly on the landlord if not managed carefully.
Loss of Control
Once assigned, you no longer control how the debt is collected or negotiated.
Best Practices for Landlords
- Use a written agreement when assigning the debt
- Verify the legitimacy and professionalism of the debt collection agency
- Ensure the tenant is notified of the transfer to avoid confusion or legal disputes
- Keep all records of communication, agreements, and payment history
Conclusion
Yes, Nigerian landlords can legally sell tenant debts to third-party collectors—if done properly. It can be a smart move for landlords who want quick recovery and are willing to accept less than the full amount owed. But like any financial decision, it should be approached with caution and proper documentation.
DocuProp empowers landlords and property managers to effortlessly prepare and manage documents, with the added advantage of our proprietary Quit Notice Support (QNS). This innovative solution enables you to securely keep detailed records for your peace of mind.
