Home Features Lagos Land Use Charge: A law and its unending controversies

Lagos Land Use Charge: A law and its unending controversies


Nigeria media houses has been agog with the Land Use Charge (LUC) law that was recently passed by the Lagos State House of Assembly, and signed into law by Lagos Governor, Akinwumi Ambode. It should be noted that the controversial Bill was passed by the lawmakers on January 29, 2018 and the governor swiftly signed it into law on February 5.

Taking a trip down memory lane, it will be recalled that LUC Act first came into being in 2001 in Lagos under the Administration of Bola Tinubu. The Bill was signed into law on June 22, 2001 as Land Use Charge Law of No 11 of 2001. The Lagos State Government, then, decided to reform all land charges by integrating all forms of rates/charges associated with landed properties that were previously being collected under Land Rates, Tenement Rates and Neighbourhood Improvement Charge into a uniform rate. Also, the government wanted to simplify the mode of payment of land property as part of their aim to augment their Internally Generated Revenue, a mission which they are still pursuing vigorously.

However, it is noteworthy that the LUC later became a blunder as regards its manner of implementation and public acceptance. Many residents of the state were not aware of the existence of the law. More so, many of those who had the knowledge of existence of the law failed to comply. And the state government did not put in place any serious mechanism that would ensure full compliance.

It is against this background that the Lagos State Government decided to review the 2001 law and come up with a new law that would be easier, clearer and would be designed in a way that would be public-friendly with efficient mechanism that gingers compliance.

Prior to the passing of the law, the Lagos State House of Assembly, on January 16 had held an interactive session with relevant stakeholders which included religious organisations, Non Governmental Organisations (NGO’s), business organisations, the media, real estate professionals and some other key stakeholders.

A cursory look at the Land Use Charge 2018 vividly shows that there are some differences between it and that of 2001. In the new law, it is stipulated that owners or occupiers of at least a house are required to pay Land Use Charge. This is contrary to the 2001 law in which the owner of the property was only liable for payment of the charge. Also, unlike the 2001 law that did not include family compounds in the list of taxable property, the new law now stipulates that family compounds must be charged. Furthermore, the content of the 2001 law stipulated that palaces of recognised Traditional Rulers and Chiefs should be charged if such property is leased to private entities for commercial purpose or revenue generation. However, the present land use law says that all palaces of recognised Traditional Rulers and Chiefs should be exempted no matter what they are using the building for. In the 2001 law, both public and private cemeteries were included in the charge while the present one gives them exemption.

The new law requires that the percentage of the land use charge should be 0.076 per cent of the market value of the property (this includes the sum of land value and the building development value), that is, you multiply the market value by the annual charge rate. For instance, if the value market of ownership occupied property is estimated to worth N20, 000,000, using the 0.076 per cent rate, the amount payable will be N15, 200 per year, which amounts to N1, 270 per month.

However, the issue is not the same when it comes to a property that is rented out or used for any form of business or commercial activity. According to the law, if for example such property is also valued at N20, 000,000, the amount payable for such property will be N152, 000 per annum, which means that the amount payable in a month for such property amounts to 12,670. You get the commercial based result by multiplying it with the ownership based figure by 10. The law is designed in such a way that the rate of commercial property is higher than residential property.

However, the law made some significant provisions for relief in the mode in which the rate will be paid. The law stipulates that 40 per cent general relief is applied to both ownership-occupied property and commercial based property. This implies that the owner occupier property will now pay 60 per cent of the result that is derived after the 0.076 per cent calculation. So, using the N20,000,000 figure above, due to the substantial relief, an owner-occupied property will ultimately pay N9,120 per annum (N760 monthly) while a property meant for business or commercial purpose will be N91,200 (N7600 monthly).

Apart from the 40 per cent general relief put in place, the law makes some provisions that will make the rate less burdensome and easier in some particular cases. There is also further 10 per cent relief for owners and occupiers that are 70 years and above. Others are: 10 per cent relief for properties that are above 25 years; 10 per cent relief for persons with any form of disability; 5 per cent relief for properties that are occupied by their owners for over 12 years, 20 per cent relief for non-revenue generating Federal and State Government properties and 20 per cent partial relief for non profit organisations.

According to the content of the law, some properties are exempted from the charge. Apart from properties owned by recognised traditional rulers and cemeteries which have been stated, other properties that are exempted from the Lagos LUC Law are: properties owned by religious institutions which is exclusively used as a place of worship or religious education; properties owned by registered educational institutions and private or public owned libraries (once certified that they are non-profit making)

Unlike the 2001 law that had poor enforcement modalities, the present land use law makes ample provisions for effective implementation and compliance. For instance, any individual that runs afoul of this law will be slammed with three months imprisonment or a penalty of N250,000. It further makes it clearer that where LUC is not paid after 135 days, Lagos State Government deserves the legal right to enforce full compliance and initiate a legal action against any offender, be it owner, occupier or agent.

However, despite the seeming human face that the law entails, since the intimation has been made, it has been trailed with barrage of criticisms by many stakeholders, civil society organisations and members of the society. Many have been casting aspersion on the state government, raising fear that such move would further aggravate the suffering and frustration of many Lagosians who are still managing to survive in this present harsh economic condition. There is this fear that millions of tenants will bear the brunt as many house owners will jack up their tenancy fees across the state; thereby ratcheting the already frustrated situation. This fear cannot easily be ignored because many of the tenants still find the present tenancy rate extremely difficult to pay. Also, many are also perturbed that business owners who are doing business in their own building or rented property may be forced to increase the cost of their service or goods of their products.

Lagos State Government on its part on several occasions have been justifying the LUC, citing the alarming rate in which the population of the state is increasing daily, mostly through migration from other states. They said that the asymmetric difference between the ever increasing population and the level of infrastructure on ground has been a source of great worry for the government. Truly, one cannot easily discard the claim of the state government as regards the city’s population explosion and the present level of infrastructure in place, because since the capital of Nigeria was moved from Lagos to Abuja in 1991, the city has received little or no assistance from the Federal Government by virtue of its strategic importance to the country.

According to worldpopulationreview.com, Lagos has a population of estimated at 21 million in 2016 and has also surpassed Cairo in size to emerge as the largest city in Africa. The platform also estimates that about 66 per cent of the populations live in slum. Also, Lagos State Government has for long been echoing that the state needs a whooping sum of $50bn to tackle its huge infrastructure deficit.

Justifying the position of the government on the law, the state Commissioner for Information and Strategy, Kehinde Bamigbetan said that people should not have misconception about the law due to the fact that it exempts pensioners, retirees and to some extent, charitable organisations, noting that the benefits that would be derived from the law considerably outbalances the pains. He added that the present level of infrastructure in the state needs serious attention if compared to the tremendous rate in which the population of the state is ballooning.

Speaking during a press interactive session held at the premise of Vanguard Newspaper, Bamigbetan said: “Our classrooms are filled to the brim with children, we need to build more classrooms, we are expanding the spaces in our schools, building more vocational schools and making the Lagos State University a boarding institution for the first time. We are building 181 roads and we are determined to build more roads to ease transportation. We are also working on rail and waterways. According to the late Obafemi Awolowo, taxation is the best way to go if we must raise resources for development.”

He added: “In our own story of the journey that started in 2015-16, we decided to build the future for our children, we needed to take education seriously and that was why we voted N20 billion last year to rehabilitate the schools. A sizeable chunk of this year’s Budget has been earmarked to service education, so where do we get the money.”

Shedding light on the law, he said that the law which was initially made in 2001 was designed to be reviewed every five years, lamenting that for 15 years, it was not reviewed. Bamigbetan disclosed that comparing the cost of things of the time when the law was enacted to the cost of things at the present time, one would logically come to term with the reality that the review is long overdue.

In his views: “When we looked at our laws, we found out that LUC was meant to be reviewed every five years and in the last 15 years we have never reviewed LUC. We felt that if we look at inflation spiral between now and 15 years ago, look at goods and services 15 years ago, the law is overdue for increase. It’s not just LUC, people have talked about harmonised taxes as a major factor in the ease of doing business.

“It is a tax that takes three taxes together, the grand rent, the tenement rate, Neigbourhood improvement tax, so when you pay the LUC you do not need to pay the three taxes again. The main targets are those making money from property because they make more money they need to pay more, that is the principles of progressive taxation. Those who pay more take care of those who pay less. If you are not using your property for commercial purposes or rent it out, you are not likely to be affected by the law this is our narrative.

“We are not a perfect government and in vision to create a new society and respond to the need of our people we will come up with ideas and we will need your understanding and I can assure the intention will be in the long term interest of the good people of the state.” he said.

Speaking on the matter, the man in the saddle himself, Governor Ambode said that he was aware of the controversy the LUC is generating, adding that he is ready to dialogue with the relevant stakeholders on the matter. He said that despite the fact that the law stipulates that there should be upward review in every period of five years, the state government has not done the review for many years, noting that the review is fashioned in such a way that it is in tandem with the reality of the present economic environment..

Speaking during a recent stakeholders’ forum with the Organised Private Sector, Ambode noted: “The law was made in 2001. It provides that every five years, we should review it and also find a way to increase. 15 years after in 2017, the law has never been reviewed. Now, the question is this; those who are having commercial properties, the rental income they were getting in 2002 as against the rental income they are getting in 2017, is it the same?

“The level of infrastructure that existed in 2002 as against what has happened in the last 15 years, are they the same? Did it not come at a cost? So, why is the market value of the property that you built with one million naira, 15 years after, you are selling at N20million.

“Why do you think somebody who is a buyer will pay N20million for it? Is it not because of the facilities around the property? So, we have to sacrifice; that is how it works everywhere,” Ambode  said.

Giving more explanation, the governor said: “Lagos wants the best of everything. We must understand that there is a paradigm shift of trust in governance in Lagos and that is my message to you today. Do you believe that the dividends of democracy are being delivered to you? Are you seeing what your taxes are being used for?

“Would you entrust me to do more for more dividends of democracies to be delivered to you? Are you seeing what your taxes are being used for?” he asked.

As stated earlier, some stakeholders have picked holes with the law. For instance, the Nigeria Bar Association, NBA Ikeja branch went to an extent of issuing 7-day ultimatum for the state government to rescind its decision, noting that failure to do so would make it organise mass protest against the law which it believes would further compound the economic woes of the residents of the state. It added that if the law is allowed to hold sway; Lagos would become a living hell to stay.

According to its Chairman, Adesina Ogunlana, “To the horrible shock of Lagosians, they woke up a few days ago to learn about the hyper-inflated rate of the so called land use charge which the Governor of Lagos state has escalated upwards 400 per cent. Another notable tax increase is in the car registration fee, another wacky 300 per cent or so. In Judiciary, filing cost of litigation has jumped astronomically, pushing genuine but financially weak grievances away from employing and enjoying access to legal and judicial justice.”

He added: “Even ordinarily in Lagos, accommodation, is only cheap and easily affordable, that is for those who have the parks and under the bridge to sleep or dwell. Clearly the sharp increase in ancillary property tax of the land use charge will have a bandwagon effect on all other services and function in Lagos as owners of properties and services will automatically transfer other financial burdens to others that will have to bear the burden or crumble under the weight.”

According to him, the state government should not because of its vision of smart city and make life miserable to the teeming residents of the state  through what he termed  ‘pharaoric taxes’, advising that that Lagos should not become a so called ‘Paradise at the expense of lives and limbs of Lagosians.’

Voicing out on the matter, Director-General of Nigeria Employers’ Consultative Association, NECA, Olusegun Oshinowo  disclosed that Organised Private Sector (OPS) in which NECA is among, would not fold its arm to allow the law to hold sway, stating that OPS would resist the law by using every legal and legitimate means at its disposal.

In an interview with Vanguard, he said: “The sensitivity and humanness, which is part of good governance, is missing in the recent amendment of the Land Use Charge law in the state. The new law will expect property owners in Lagos to pay an increase of over 200 per cent in Land Use Charge even when the income of the property owner has not experienced significant increase to justify the charge.

“There is, also, a penalty payment ranging between 125-200 percent, if payment is not made between April and August, 2018.The new charge is, thus, highly insensitive and inhumane to say the least. It is, therefore, unacceptable to organised businesses.

“The law is not acceptable and the Organised Private Sector (OPS) will not stand hand tied up to celebrate impunity and cheer disdain. OPS will fight this law by social resistance and any other legitimate means at its disposal,” he vowed.

Expressing his concern, President, Africa region, International Real Estate Federation (FIABCI), Chudi Ubosi in an interview with the Guardian said that this would be an added burden to those who live in Lagos, most especially those who rented landed properties.

“we are already beginning to receive the new bills with the horrendous increases in the rates and sums payable”. The bills are high and though it’s already a law, as a practitioner I think it’s very high and this may be the very wrong time to introduce same.

“We are going through difficult economic and political times in Nigeria and thus will be an added burden to all in Lagos. It’s difficult to see who will not be affected – landlords and tenants. A lot of our clients who have received their bills are simply aghast at the increase. Many are as much as 400/500 per cent increase. A particular client of ours had her bill increased from N200, 000 to N1.09million. This basically represents about 25 per cent of the rent payable on the property,” he added.

However, a major stakeholder in the real estate sector who is also the convener of Coalition of Real Estate Investors and Surveyors in Lagos, Ayokunle Gregory has a different view from some of his colleagues who oppose the law.

In a statement he made after a closed door meeting of the coalition recently in Lagos, he said that some mischief makers, because of their selfishness are feeding people with the wrong information on the law, most especially as regards the figure of the payment of the charge.

“We feel obliged to address the falsehood from a professional perspective before the unsuspecting public is misguided to the bewilderment and violation of the law. In order to clear the air of any misinformation, we implore all owners and occupiers of properties in Lagos to do a self-assessment using the formula provided, and also provide officials with valid documents to ensure smooth run of the exercise for the benefits of all,” the coalition stated.


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