Protests, Concerns Trail New Lagos Land Use Charge

Image source: Nigeria Real Estate Hub/MAIJAGRAPHITTI MONTAGE

●112 surveyors picked to value property ●Valuers weigh effects on residential market

More protests have greeted the newly introduced Lagos Land Use Charge (LUC), which raised the previous rates to over 200%.

The Guardian Nigeria report continues:

Though over 112 estate surveyors and valuers have been selected to value property under the scheme, led by Knight Frank, Ismail and Partners, the state’s branch of the Nigerian Institution of Estate Surveyors and Valuers believes that the LUC is a misnomer, as it will increase rents, bring about negative returns on investment and lower property development in the state.

The body is preparing to present a formal position on the issue within the week, while some members are lobbying that the Association of Professional Bodies of Nigeria (APBN) take up the matter, others plan to provide expert witness to clients or groups who may seek legal redress. Already, the Organized Private Sector (OPS) has rejected the law, vowing to fight the law with every legal means at its disposal. While describing the law, which repealed the Land Use Charge Law 2001 as insensitive to business and land- owners.

The OPS speaking through the Nigeria Employers’ Consultative Association, NECA, argued that the new law would expect property owners in Lagos State to pay an increase of over 200%in Land Use Charge even when the income of the property owner had not experienced significant increase to justify the charge. The Director-General of NECA, Mr. Olusegun Oshinowo, who commending Governor Akinwunmi Ambode for his good works and making Lagos a model for good governance, he, however, contended that “sensitivity and humanness, which is part of good governance, is missing in the recent amendment of the Land Use Charge law in the state.

His words: “The new charge is, thus, highly insensitive and inhumane to say the least. It is, therefore, unacceptable to organized businesses. The law is not acceptable and the Organized Private Sector (OPS) will not stand hands tied up to celebrate impunity and cheer disdain. It will fight this law by social resistance and any other legitimate means at its disposal.”

But State officials say the law has a human face. “The new LUC Law provides a robust legal and regulatory framework to support ongoing LUC administration reforms aimed growing the economy. “The LUC law was repealed and re-enacted to address some identified challenges which include: lack of clarity on the LUC formula to support self- assessment; obsolete rates, which had not been reviewed in over a decade and need to improve LUC administration efficiency.”

According to the senior official, before now, the formula/basis for LUC determination were not clearly defined thereby creating room for subjectivity in the computation of LUC amount payable; payers were only able to make payments of LUC based on demand notices served by the State Government.

“However, due to administrative challenges, including inadequate enumeration, LUC demand notices were not served timely/regularly in most cases. This meant that, if you did not receive a demand notice, you were not likely to pay LUC thereby resulting in lost revenue to the State Government,” he said.

He said: “For the purpose of land use charge, property are assessed individually. For any two similar property, the physical appearance, aesthetic features and age will determine the property class rate (high, medium, and low) to be adopted in the valuation of the property. Another reason for charging different rates on any similar property is the usage and status of occupation. It is noteworthy that property assessment is classified under three broad categories – commercial, industrial/educational and residential usages.”

In reaction, an estate surveyor, President, Africa region, International Real Estate Federation (FIABCI), Chudi Ubosi, told The Guardian “we are already beginning to receive the new bills with the horrendous increases in the rates and sums payable”.

According to him, 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 to 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% increase. A particular client of ours had her bill increased from ₦200,000 to ₦1.09 million. This basically represents about 25% of the rent payable on the property.

“The long -term effects are many. Less investment in real estate in Lagos, fewer houses available for lease despite the huge demand, higher rents, more defaults in rent payments, more vacant properties etc.

“As regards our practice, anything that negatively impacts real estate investment and usage will also impact us negatively. Right now, a lot of stakeholders, he said, are still in disbelief at the quantum leap. And that’s the truth.“ It still a wait and see approach. I can’t say that we are already planning for any changes”, he added.

Also NIESV’s Chairman, Faculty of Estate Agency and Auctioneering, Mr. Sam Eboigbe, queried the timing of the increment , saying that a lot of tenants are finding it difficult to pay their rents and are paying even in batches .“ Increasing at this time in the excess of 200-400% is an invitation of anarchy in the society.”

He also stressed that investors are still not encouraged to invest in real estate because of high cost of building materials, increasing the land use charge at this time, he said, amounts to asking too much.

“They are still trying to get their rent especially when rents in places like Victoria Island are going down without proper attraction to investors.”Eboigbe, who said they are organizing a forum in the faculty, where people will be allow to vent their grievances in the law, urged government to show human face in the area of implementations because of its harsh measures and penalties.

The new land charge, which was kick-started weeks ago by Governor, Akinwunmi Ambode, changed the formula of calculating the charges, which is now based on ‘market’ or commercial value of land and improvements. It also specified categories property exempted to include, property owned and occupied by a religious body and used exclusively as a place of worship or religious education; public cemeteries and burial grounds.

Others are property used as a registered educational institution certified by the commissioner to be non-profit making; property used as public library or as a private library certified by the commissioner to be non-profit making. Likewise, any property specifically exempted by the Executive Governor by notice published in the State Official Gazette; and all palaces of recognized Obas and Chiefs in the State provided that if any of the exempted property is leased out to private entities for revenue generation, it will forfeit its exemption status as contemplated under the provisions of this law.

Under the new law, the minimum LUC payable on any given property will not be less than ₦5,000 irrespective of any LUC relief granted on the property. The reliefs include: General relief of 40% (applicable to all property liable to pay LUC).

Specific reliefs is applicable to property owners and leases of 10 years and above for: pensioners (60 years and above) – 100%owner-occupied property; persons with disability – 10% of owner- occupied property.

There was also a change in persons liable to pay the charge. Now, occupiers holding long leases of 10 years and above are liable to pay the charge. Occupiers in unlawful occupation of property are also liable to pay the Charge.

The number of tribunals has been reduced from 15 to nine with the Tribunal having the power to allow for mediation of the assessment. There are conditions under which this is to be done.

The mediation must resolve the dispute within 45 working days or earlier if the mediator declares an impasse. In such cases, the dispute will go back to the Tribunal. Apart from that, there is an increased penalty for non-compliance. Penalty for non-compliance with provisions of the law has been increased to a maximum fine of ₦250,000 from ₦100,000, while the state can now either institute a civil action against the owner or seize the property.