Here’re 4 major takeaways from Lagos reformed Land Use Charge 2020

Following the agitation and public outcry that trailed the new Lagos Land Use Charge (LUC) Law 2018, the Babajide Sanwo-Olu administration decided to undertake a thorough review of the law and recently came out with what is now known as Lagos Reformed Land Use Charge 2020.

The state government had, under former Governor Akinwunmi Ambode in 2018, repealed its 2001 Land Use Charge Law and replaced it with a new Land Use Charge Law 2018, which did not only increase the charge by almost 400 percent, but also consolidated all property and land-based rates and charges into the land use.

Accordingly, all tenement rates law, ground rates law, the neighbourhood improvement charge and all other similar property rates or charges, other laws or amendments to any such property laws ceased to apply to any property in the state from 2018.

But the reformed LUC Law has set aside all that and reverted to pre-2018 charge, bringing relief and lightening the burden placed on the shoulders of property owners by the LUC Law 2018.

“In the reformed Land Use Charge, we have enlarged the definition of who is a pensioner. The scope of that definition has been enlarged to include retirees from private sector organisations who can now enjoy full exemption from the charge in respect of properties they own and reside in,” Rabiu Onaolapo Olowo, the state’s commissioner for finance, explains.

Olowo, who spoke at a media programme in Lagos, states that the reformed LUC comes with 48 percent charge reduction, meaning that a property owner in Ikeja, for instance, who paid N27,000 by 2018 rate, will now be paying about N14,000 or thereabout.

Another take-way from the reformed LUC is that there is a reintroduction of 25 percent discount for early payment of the charge. “All property owners who are able to pay their charge before the due date will enjoy this concession,” the commissioner emphasises.

He states further that the new LUC also comes with some waivers, which he explains, were introduced by the state government as a form of palliative to cushion the hash economic and social impact of Covid-19 pandemic on the people.

“Because of that, all penalties for payment defaults for 2017, 2018 and 2019 have been waived. But government is not waiving the amount payable. What we are waiving are the interests and penalties for failure to pay. This means that the 2018 law subsists for those charges payable then,” he explains.

For purposes of clarity, the commissioner says LUC was calculated based on land area, the building area, the kind of building on the area and the value of the land on which the building stands.

This means that a storey building will attract more charge than a bungalow. Again, it means that a building in Ikoyi attracts higher rate charge than another in Ikeja, because the land values in the two areas are different.

Olufemi Dipe, a property owner in Ikeja, describes the reformed LUC Law as a very good development from the government, thanking the government especially for the inclusion of pensioners who retired from the private sector in the list of those exempted from paying the charge.
Another property owner residing in Akute, who identified himself simply as Hyacinth, lauds the government on the reformed LUC, noting, “This is the best thing to happen in the state since the time of Lateef Jakande.”

This contrasts sharply with the views and comments that trailed Ambode’s LUC Law 2018. “The real estate sector has been in negative growth for, at least, 8 quarters; what it needs now are incentives for growth. This new law is punitive in nature and will only serve to put more pressure on the residential market, and on property owners who have been paying the tax over the years,” noted Erejuwa Gbadebo, an architect and private estate manager, then.

Femi Akintunde, group managing director, Alpha Mead Group, affirmed, stressing, “definitely, it will affect house rents because landlords will aim to transfer part of the liabilities to the tenants.”

He stated that the law would put further pressure on the ability of both the landlord and the tenants to be able to meet their service charge obligations, leading to further deterioration in property condition.

Many considered the LUC 2018 Law as both insensitive and punitive. Besides the outrageous increase in the charge, penalties for failure to pay were incredible.

According to the law, failure to pay a LUC within the period specified in the Demand Notice attracted several penalties.

There were 25 percent penalties on the LUC Demand Notice Rate not paid between 45 and 75 calendar days; 50 percent penalty on the LUC Demand Notice Rate not paid between 75 and 105 calendar days, and 100 percent penalty on the LUC Demand Notice Rate not paid between 105 and 135 calendar days.

Where the LUC Demand Notice was not settled after 135 days of the tax payer’s receipt of the Demand Notice, the Lagos State government was authorised by the LUC Law to appoint a Temporary Receiver/Manager to administer the property until all the outstanding taxes, penalties and administrative charges were paid.