Lagos State land use charge law

The Lagos state land use charge law was instituted on 22nd June, 2001 to  replace the old tenement rate. The land use charge is designed to help the government generate additional revenue needed to develope the state in the light of increasing demand for provision of urban and rural infrastructures and other expenditure while a population that grows at an alarming rate doesn’t help matters.

This single property charge which replaces all other state and local government taxes on real property has twenty-four sections. The land use charge law which is now being enforced in Lagos establishes that a land-based
charge is payable on real properties situated in Lagos State with each local government area empowered to levy and collect the charge for its area of  jurisdiction as collecting authority. Each collecting authority may delegate to the State, by written agreement, Its functions with respect to collection of rates and the assessment of privately-owned houses or tenement for purpose of levying the rate.

The payment of the Land Use Charge which is to be based on annual capital sum is to be paid by the owner. According to Section 5 (1) of the law, the formula for determining the annual amount payable is:

                                                                                                 LUC = M × {(LA × LV) + (BA × BV × PCR)} (1)  Where,

LUC = annual amount of land use charge in naira

M = the annual charge rate expressed as a percentage of the assessed value of the property. The assessed value in this case may vary between owner-occupied residential and commercial properties at the discretion of the state government. Commercial property refers to those that are revenue-generating.

LA = the area of the land parcel in square metres

LV = the average value of a land parcel in the neighborhood, per square metre in naira

BA = the total developed floor area of building on the plot of land in square metres, or the total floor area of apartment unit in a building where apartment has a separate ownership title

BV = the average value of medium quality buildings in the neighborhood, per square metre in naira

PCR = the property code rate for the building and which accounts for the building being of higher or lower value than the average buildings in the neighborhood and which also accounts for the degree of completion of
construction of the building.

(LA x LV) + (BA x BV x PCR) = the assessed value of the property (2)

The law also provides that the annual charge rate for each financial year will be set by the commissioner for finance and published in official gazette and widely read newspapers in the state, and the value of property code rate set and be revised by the commissioner with the approval of the House of Assembly. However, the law exempts some properties from payment of Land Use Charge, such properties are those owned and occupied by religious bodies and used exclusively for public worship or religious education, cemeteries and burial grounds, recognized and registered institution or educational institute certified by the commissioner for finance to be non-profit making, those used as public library,  those specifically exempted by the Executive Governor by notice published in the state government official gazette, palaces of recognized Obas and Chiefs in the State.

In addition, partial relief may be granted to a property that is occupied by a non-profit making organization and used solely for community games, sports, athletics or recreation for the benefit of the general public and those that are used for charitable or benevolent purpose for the benefit of the general public and owned by the state, local and federal governments or non-profit making organization. However, exempted or partly exempted property will become liable for Land Use Charge if the use of the property changes to one that does not qualify for exemption or where the occupier changes to one that does not qualify for an exemption. It is provided that if land use charge status of a property changes, a land use charge imposed in respect of that property will be prorated such that the charge is payable only for the part of the year in which the property or part of it is not exempted.

Apart from these, Sections 10 and 11 state that the collecting authority, that is, the local government area, may declare any person including occupier of chargeable property to be the agent of the property owner and such person will become liable for payment of the charge on behalf of the owner from monies due by him or becomes due by him for payment to the owner. The payment of the charge will become recoverable from the agent where the owner defaults in payment. Section 11 states that the agent will be indemnified against the owner for such payment made by him.

The law envisages that disputes may arise from its implementation and so provisions were made for Assessment Appeal Tribunal which consists of at least fifteen members with three members constituting panel of the Tribunal to hear appeal in respect of amount that the appellant is liable to pay, impose fines and penalty including attachment of persons’ goods. The law stated further that the charge payable would be increased by 25% if the charge is not paid within 75 calendar days after demand notice has been served, it will increase by 50% if not paid within 105 days, and by 100% within 135 days, and if it remains unpaid after 135 days, the property would be liable to receivership by the Lagos State Government or appointed agent until all outstanding taxes, penalties and administrative charges are paid.

Essentially, the law states that with effect from date that land use charge is levied on a property, all other laws that impose tax on properties (the assessment , land rate, neighbourhood improvement charge and tenement rate laws) would cease to apply to such property. A supplement to the law, known as supplement to the ‘Lagos State of Nigeria Official Gazette Extra-ordinary No. 41, Vol. 34 of 13th December, 2001 Part B’ was enacted. The supplement stated the annual land use charge rates payable on assessed value of a property as follows – Owner-occupied residential property – 0.5%; owner-occupied pensioner’s property – exempted from land use charge; industrial premises of manufacturing concerns -0.5%; residential property/commercial – 0.65%; commercial property used by occupier for business purposes 1.75%; and family compounds – exempted from land use charge. In case of non-compliance, obstruction of the law enforcement officials, and damage
of property identification plaques, defaulters will be liable to penalties of up to One hundred thousand naira (N100,000) or three months imprisonment; while properties exempted from land use charge will be liable to other rates or charges under other existing laws. annual value capitalized at the relevant rate of interest, it will produce an equivalent base for taxation as net annual value

However, the land use charge intervention has failed to conform to best practice both in policy and administration. As a result, the reform has not ceased to generate controversies, has enjoyed limited acceptability. As for its success rate; I’ll leave the Lagos state government to determine that.

Next week we will be taking a closer look at the issue of property tax and its effects on the citizenry in Lagos state.

A bulk of this piece was culled from the research material of Oni Ayotunde Olawande