What Every Property Investor Must Know About The Land Use Charge Law 2018 – Bolaji S.Ramos

The Land Use Charge Law 2018 was signed into law on 8^th February, 2018, and it became enforceable from that date. Less than a month from its passage, a lot of Demand Notices had been sent already to property owners and occupiers of properties in Lagos State. By rough estimation, the popular public view was that the Law increased what is payable as Land Use Charge by 400% in most cases and more or less than that in other cases. Following the realization that the Law will occasion serious financial and economic hardship on properties owners, property investors, lessees, tenants and other stakeholders in Lagos, there was a series of serious public outcries and protests—notable among these is the NBA IKeja Branch protest that took place in March. 

In response to the raging outcries and public condemnation of the new rates and categories of chargeable persons introduced by the Law, the Lagos State Government, through the Commissioner for Finance, announced that owing to the interactions it had with some stakeholders, that the Lagos State Executive Council chaired by the Governor of Lagos State, Mr. Akinwunmi Ambode, resolved to give some discounts to different categories of owners and occupiers of properties in Lagos as follows:

• Commercial properties will now pay 50% less the amount they have been charged initially under the new Law; 

• Residential properties occupied by owners and third parties (for example: tenants, licensees and lessees) will now pay 25% less the amount they have been charged initially or going to be charged under the new Law; 

• Industrial premises used for manufacturing purposes will now pay 25% less the amount they have been charged initially or going to be charged under the new Law; 

• Residential properties that are solely occupied by the owners will now pay 15% less the amount they have been charged initially or going to be charged under the new law 

It is important to note that the discounts granted do not reduce the charge rates under the Law. They are just bonuses given in respect of the assessed charges for 2018. In addition to the above listed discounts, a waiver was also granted in relation for late payment of the Land Use Charge. What this means is that owners and occupiers of properties who pay or may have paid late will not be penalized for late payment. In spite of these discounts and waiver, some stakeholders, especially the NBA Ikeja Branch, are of the view that what will appear considerate to the present realities and economic situations of Lagos residents is a total return to the old regime of Land Use Charge.

In line with this, the NBA Ikeja Branch gave Lagos State Government another 7-day ultimatum to return the Land Use Charge regime to its old dispensation or face another public protest and litigation, and that the proposed bill to amend the present Land Use Charge Law 2018 that was sent by the Lagos State Executive Council to the Lagos State House of Assembly should be made available to people to comment on, in addition to inviting them for public hearing of the Bill. On 22^nd March, 2018, the Lagos State House of Assembly had a session on the Bill to amend the 2018 Land Use Charge Law and they fixed 27^th March, 2018 for public hearing. 

Categories of Property Investors 

Generally speaking, property investors are those who have invested or created interests/ security in properties. While the popular aim of investing in properties may be for business purposes or to make profits, properties may also be invested in for other reasons ranging from residential to religious purposes.  Categories of property investors which will be affected one way or the other under the Law include:

• Landlords— These will include the heirs, assigns, caretakers and administrators of the estates of a deceased landlords.

• Occupiers— These will include lessors, lessees, licensees (lodgers) and even trespassers who may be occupying the land or property illegally.

• Religious organizations— These include churches, mosques and other religious bodies.

• Non-Governmental Organizations— These include NGOs, non-profit organizations and other similar organizations.

• Governmental Organizations—These include government agencies, offices, departments, commissions and the likes at the Federal, State and Local Government levels.

• Property Companies— These are companies that buy, sell and invest in properties for business purposes.

• Educational Institutions— These include schools (pre-primary, primary, secondary and tertiary) and other institutions that provide educational services.

• Banks and other Financial Institutions— These financial institutions that grant loans for development of properties, invest in properties and create securities in properties. Good examples are the Federal Mortgage Bank of Nigeria (FMBN) and Assets Management Corporation of Nigeria (AMCON).

• Pensioners— These include people who invested or are planning to invest their moneys in properties after retirement. 

What Investors Must Know About the Law 

The Land Use Charge Law 2018 has thirty-Seven sections all together with a schedule. The following summarize what investors of all categories and stakeholders must know about the Law:

Calculation, Property Classification & Rates:

1. In calculating what is payable as the Land Use Charge, three things must be known and present: (i) the market value of the property; (ii) the classification of the property; and (iii) the rate attached to the classification of the property.

2. The market value of the property is the summation of the value of the land and the value of the development (building) on the land. These are the two things that make up the market value of the property.

3. Market values of the properties are to be determined by the Commissioner for Finance of Lagos State, but not on an imaginary or unrealistic scale. They must be based on actual assessment of the properties by the Commissioner or professional valuers and consultants appointed by the Commissioner, and they are allowed to enter the properties between 7a.m and 5p.m for the purpose of assessment. Failure to do the assessment before levying the demand notice for payment of Land Use Charge is a breach of the Law.

4. For the purpose of the Law, properties are generally classified into eight (8) categories as follows: (i) residential property exclusively occupied by the owner; (ii) residential property occupied jointly by the owner and third parties; (iii) residential property without owner in occupation (i.e occupied only by third parties); (iv) residential property occupied by a pensioner; (v) commercial property (used by occupier for business purposes); (vi) industrial property of manufacturing concerns; (vii) vacant property and open empty land; and (viii)Lagos State Government properties.

5. The chargeable rates for the respective categories are as follows:

S/N	CATEGORIES OF PROPERTY	APPLICABLE RATE
1.	Residential property exclusively occupied by the owner	0.076% of the market value of the property
2.	Residential property occupied jointly by the owner and third parties;	0.256% of the market value of the property
3.	Residential property without owner in occupation (i.e occupied only by third parties)	0.76% of the market value of the property
4.	Residential property occupied by a pensioner	Exempted
5.	Commercial property (used by occupier for business purposes)	0.76% of the market value of the property
6.	Industrial property of manufacturing concerns	0.256% of the market value of the property
7.	Vacant property and open empty land	0.076% of the market value of the property
8.	Lagos State Government properties.	Exempted

6. The Land Use Charge is calculated by multiplying the market value of the property with the applicable rate and dividing it by 100.
7. From some of the Demand Notices for Land Use Charge issued in March 2018, two major things were discovered: (i) there was no actual assessment of properties carried by the Commissioner or any of his appointed valuers and consultants (if at all they have been appointed). The assessments of the market values of the properties are based on speculations and imaginary scales; and (ii) there are cases of wrong classifications of some properties.

8. All property investors and other people liable to pay to the Land Use Charge are advised to carry out their own assessments and be sure that their properties are properly classified.

9. Where a property investor or other liable persons are not satisfied with the assessment or classification of the properties, a cause of action has arisen and they must appeal at the Land Use Charge Assessment Tribunal established under the Law for a review of the market value and proper classification of the property.

Liability to pay Land Use Charge:

10. The category under which a property investor falls in will determine the liability or otherwise of such investor. Property investors may be liable or not, depending on the kind of arrangement they have in respect of their properties or the use they want to put the properties.

11. Property investors such as landlords, religious organizations, non-governmental organizations, property companies, educational institutions, banks and other financial institutions, among others, who lease out their properties for a period of 10 years or more will not be liable to pay the Land Use Charge. The liability goes to the lessees or tenants as the case may be.

12. Property investors such as landlords, religious organizations, non-governmental organizations, property companies, educational institutions, banks and other financial institutions, among others who rent or lease out their properties for a period of less than 10 years will be liable to pay the Land Use Charge, either exclusively or jointly with their lessees or tenants depending on the arrangement they are able to reach.

13. Under the old Land Use Charge Law 2001, the person liable to pay Land Use Charge was the owner of the property. This means that occupiers of the property such as lessors, sub-lessors, lessees, tenants, licensees and trespassers were not liable to pay. This position has changed under the Land Use Charge 2018 where liability to pay may exclusively or jointly fall on the owner on the one hand and occupiers such as lessees, tenants or trespassers on the other hand, depending on a given situation.

14. For occupiers or lessees whose lease is up to 10 years or more, the liability to pay the Land Use Charge is exclusively on them, and not on the owners. The owners, in this regard, have no legal duty to pay at all.

15. For occupiers or lessees whose lease or tenancy is less than 10 years, the new Law places the responsibility to pay on either the owner or the occupier. What this means is that in situations where the lease or tenancy is less than 10 years, both parties may agree who is to be paying exclusively or whether both of them should share the burden of paying the Land Use Charge. This has to be contained in the lease or tenancy agreement.

Exemptions:

16. Under the Law, six categories of properties are expressly exempted from paying the Land Use Charge. They are: (i) properties belonging to religious organization and used as a place of worship or religious education; (ii) properties used as public cemeteries and burial grounds; (iii) properties used as registered educational institutions; (iv) properties used public or private libraries; (v) properties used as palaces of recognized Obas and Chiefs; and (vi) properties specifically exempted by the Governor of Lagos State.

17. The exemption given to the property investors in these six categories are conditional. Once the conditions are not met, they will lose the exemption and become liable. In addition, exemption can be forfeited if the use of the property changes from one that is exempted to one that does not qualify for exemption.

18. NGOs, Trade Unions, Associations and other Incorporated Trustees who have properties or who are property investors need to know that they are not exempted from paying the Land Use Charge. They are all liable to pay. However, if the properties are solely occupied by such NGOs, Trade Unions, Associations and Incorporated Trustees and they are for not profit making, then they can apply to Lagos State Commissioner for Finance for partial relief. Total exemption is not to be granted.

19. Exemption granted to religious organizations such as churches and mosques are conditional. If the conditions are not met, then there is no exemption. The conditions are three and they are conjunctive: (i) the church or the mosque must be the owner of the property; (ii) the church or mosque must be the one occupying the property; and (iii) the occupation of the property by the church or the mosque must be exclusive. If any of these three conditions are not met, such church or mosque becomes liable to pay the Land Use Charge.

Reliefs

20. The Law has both general and specific reliefs. The general relief is 40% reduction of the assessed market value of the property. This is automatically deducted from what is assessed as being payable by a chargeable person before issuing the Demand Notice to such person.

21. The specific reliefs are given to eight (8) classes of persons/properties as follows:

S/N	CATEGORY	RELIEFS	QUALIFICATION
1.	Pensioner (owner occupied)	100%	60 years and above
2.	Aged persons (owner occupied)	10%	70 years  and above
3.	Age of property	10%	25 years and above
4.	Person with disability (owner occupied)	10%	……
5.	Long possession by owner	5%	12 years and above
6	Federal and other States Government	20%	Non-revenue generating
7.	Partial relief for organizations	20%	Non-profit making
8.	Payment within 15 days of demand	15%	…….

22. Only the general relief of 40% comes automatically and already reflected in the Demand Notice. For specific reliefs, property investors and other liable persons have to apply to the Commissioner for Finance for approval of claim of such reliefs, and the application must be supported with relevant documents.

Recovery of LUC/Attachment of Property:

23. Lagos State has to power to sue property investors or other liable person to recover all unpaid Land Use Charge together with the penalties incurred for late payment. Where the land use charge remains unpaid after judgment, Lagos State can attach the earnings or goods of the property investors or other liable persons to settle the debts.

24. Payment is expected to be made within 30 days of the demand notice. If payment is not made between 45 days and 75 days after the date on the Demand Notice, a penalty of 25% will be incurred. If not made between 75 days and 105 days, a penalty of 50% will be incurred. If still not made between 105 days and 135 days, a penalty of 100% will be incurred.

25. If payment is not made after 135 days, the property will be liable to enforcement. This means that Lagos State will take over the property until the outstanding Land Use Charge owed is paid. This gives Lagos State the power to attach the earnings of the property with recourse to court. The right of enforcement of Lagos State includes right to file an action to obtain a court order for distraint of property for the purpose of recovery. 

Conclusion 

With the Bill to amend the Land Use Charge Law 2018 and the call by the Lagos State House of Assembly for public hearing of the Bill scheduled to hold on 27^th March, 2018, the final shape the Law will take can only be known after the passage of the Bill. It is important to state at this point that the notice for the public hearing issued by the Lagos State House of Assembly is suspiciously too short. The notice was published in the national daily on Friday 23^rd March, 2018 and the hearing is scheduled to hold on Tuesday 27^th March, 2018, and participants are expected to send their memoranda before this date. What this mean is that the Lagos State House of Assembly gave only a one-week-day notice, and expects the public to actively arrange their schedules, prepare memoranda and submit same by Monday 26^th March, 2018? This is coupled with the fact that the amendment Bill is never made available to the public and stakeholders as requested in good faith by NBA Ikeja Branch. This kind of short notice falls short of the standards of a true democracy and government of inclusion, as it does not seem to take the concerns of property investors, the public and other stakeholders seriously. This is one matter that should not be treated with levity.

Presented by Bolaji S. Ramos at the Property Acquisition and Succession Seminar Organized by Tope Babade and Co. On 24th March, 2018

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