The Land Use Charge

The Land Use Charge (LUC) is a consolidation of all property and land based rates previously payable in Lagos State, such as ground rent, tenement rate and neighborhood improvement  levy.[1]It is payable on all real property situate in the State,[2]such as buildings, any improvement on land, a parcel of land (whether or not reclaimed, waterlogged or otherwise), a parcel of land and any building or improvement – a wharf or pier, and any leasehold of up to ten (10) years.[3] In respect of a taxable property, LUC is payable by the owner of a property or occupier holding a lease of not less than ten (10) years.[4]

 

However, LUC is not payable on property owned and occupied by a religious body and used exclusively as a place of worship, or religious education; public cemeteries and burial grounds; property used as a registered educational institution certified by the Commissioner of Finance to be non-profit making; any property specifically exempted by the Governor of Lagos State in the State Official Gazette; and all palaces of recognized Obas and Chiefs in Lagos State to the extent that such property is not leased out to private entities for revenue generation.[5]

 

Furthermore, the Commissioner of Finance may also grant partial relief for a property that is occupied by a non-profit making organization; used solely for community games, sports, athletics or recreation for the benefit of the general public; and used for a charitable or benevolent purpose for the benefit of the general public and owned by non-profit making organization.[6]

 

A property exempted in whole or in part from the payment of LUC will become liable for LUC if the use of such property changes to one that does not qualify for the exemption; or where the property of a religious body is registered in the name of an individual or corporate body other than in the corporate name of the religious body.[7]Upon the forfeiture of an exemption granted by the law, the owner or person liable to pay LUC on the property is required to promptly notify the Commissioner of Finance of the forfeiture of the exemption previously enjoyed. Failure to inform the Commissioner of such forfeiture is punishable by a fine of up to three (3) times the value of the exemption in issue.[8]

 

Identification and Assessment of Property for the Purpose of Land Use Charge

Assessment of property for the purpose of LUC will be carried out by property Identification Officers, Professional Valuers and any other person appointed by the Commissioner of Finance for this purpose.[9]Property assessments and levying of the LUC will also be carried out by consultants appointed by the Commissioner of Finance for this purpose.[10]

 

In carrying out their duties of identification and assessment of a property, a person so appointed by the Commissioner of Finance has the power to enter, inspect, survey and assess a property between 7:00 am and 5:00 pm; request for documents or other information to be produced; take photographs; and make copies of necessary documents.[11]

 

It is an offence for any person to refuse or neglect to comply with the provisions of the LUCL when required to do so by a Property Identification Officer or an Assessor. The LUCL also makes it an offence for a person to prevent, hinder, or obstruct a Property Identification Officer or an Assessor from performing his duty. Furthermore, the destruction of a Property Identification Plaque on a property or building b any person is also an offence punishable under the law.[12]

 

The amount payable annually as LUC can be calculated by multiplying the Market Value of the Property by the applicable Relief Rate and Annual Charge Rate using the formula: (Land Value + Building Developments Value) X Relief Rate X Charge Rate.[13]The Market Value of the Property is to be reviewed at least once in every five (5) years using information available to professional valuers and consultants which may vary from area to area. Prior to such review, Market Value of the Property may be set to rise in line with the rate of inflation as the Commissioner of Finance may determine.[14]

 

Payment of Land Use Charge

An LUC Demand Notice is issued each year with respect to every chargeable property in the State.  Such Notice may be delivered to the Owner or Occupier of the property.  In the event that the owner or occupier is not available to take delivery, the Demand Notice will be posted on the property and such posting shall be deemed to be sufficient delivery of the Notice. The owner, occupier or authorized agent of the property can also request for an LUC Notice at any of the LUC offices in Lagos State or through an electronic platform.[15]

 

The person liable to pay LUC on the property is to make payment within thirty (30) days after the date of delivery of the LUC Demand Notice. Payment is to be made at any of the designated banks specified in the Demand Notice. Payment of the LUC payable within fifteen (15) days of receiving a Demand Notice shall entitle the owner, occupier or authorized agent to a discount upon the submission of a written application to the Commissioner of Finance.[16]

 

The Collecting Authority has the power to appoint any person including an occupier of a taxable property to be an agent of the owner. Such a person so appointed may be required to pay the LUC payable by the owner from any money which may be held by that person for the owner.[17]Such a person will then be authorized to recoup the money used in paying the LUC by retaining out of any money coming into an account on behalf of the Owner, or by retaining out of any money due to the owner as may be sufficient to pay the LUC.[18]

Reliefs

In calculating the amount payable as LUC, the law provides for certain reliefs to be granted to tax payers. These includes a general relief of 40%,  a relief of 100% granted to pensioners for owner – occupied properties, a 10% relief granted to persons living with disabilities for owner-occupied properties,  a 15% discount for persons who make payment within 15 days of receipt of Demand Notice etc.

 

The person seeking the relief is expected to provide relevant documents in proof of his qualification for such relief. Such a person is also expected to make an application to the Commissioner of Finance for the grant of the relief.

 

Land Use Charge Rates and Recent Developments

The rates payable as LUC is dependent on the value of the property in question. The LUCL prescribes these rates as follows:

  • the rates payable on an owner-occupier property is 0.076% of the Assessed Property Value per annum;
  • for Industrial Premises of manufacturing concerns, the rate payable is 0.256% of the Assessed Value of the Property per annum;
  • residential properties jointly occupied by the owner and a third party are charged an annual rate of 0.256% of the Assessed Property Value;
  • for residential properties without the owner in residence, the LUC rate is 0.76% of the Assessed Value;
  • commercial properties used by the occupier for business purpose is charged at the rate of 0.76% of the Assessed Value; while
  • vacant properties and open empty lands are charged an annual rate of 0.076% of the assessed valued.

However, owing to the public outcry that greeted the signing into law of the LUCL of Lagos State, 2018 mainly due to the about 400% increase in the rates payable from the rates obtainable under the 2001 law, the Lagos State Government has on the 15thof March 2018, announced a reduction in the rates payable, and steps are now being taken to ensure that the new rates dispensation is passed by the Lagos State House of Assembly.[19]

To this end, the following reductions have been announced by the Lagos State Government:

  • the reduction of commercial charges by fifty percent (50%);
  • a reduction of charges for owner-occupier with third party – including industries and manufacturing concerns by twenty-five percent (25%);
  • a waiver of penalty for late payment on all categories of properties;
  • the issuance of tax credits for LUCs already paid; and
  • the introduction of installment payment system.[20]

 

Conclusion

The LUC as a Lagos State Property Tax is not a new form of tax but one that has been in existence for a while. As a means of raising revenue for the Lagos State Government, the LUC is a consolidation of three different property taxes and the revenue raised by the State Government is shared between the Lagos State Government and all the Local Government/Local Council Areas in the state. Payment of LUC is a civic obligation imposed by law on owners of property and lessees of property (where the lease is more than 10 years), and as such there is the need for all persons liable to pay LUC to strive to meet their obligations so as not to run afoul of the law.

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The above information is for educational purposes only and does not constitute legal advice by Blackwood & Stone LP. Readers are advised to consult a professional with regards to their Land Use Charge obligations. For comments and enquiries, please contact Blackwood & Stone LP on:

Email:  info@wtsblackwoodstone.com;          Phone: +2349033501613

[1]Section 1 of the Land Use Charge Law (LUCL) of Lagos State, 2018.

[2]Section 2 (1) of the LUCL of Lagos State, 2018.

[3]Section 1 of the LUCL of Lagos State, 2018.

[4]Section 9 of the LUCL of Lagos State, 2018.

[5]Section 12 (1) of the LUCL of Lagos State, 2018.

[6]Section 12 (2) of the LUCL of Lagos State, 2018.

[7]Section 13 (1) of the LUCL of Lagos State, 2018.

[8]Section 13 (3) & (4) of the LUCL of Lagos State, 2018.

[9]Section 5 (2) of the LUCL of Lagos State, 2018.

[10]Section 6 (1) of the LUCL of Lagos State, 2018.

[11]Section 8 of the LUCL of Lagos State, 2018.

[12]Section 29 of the LUCL of Lagos State, 2018.

[13]Section 10 (1) of the LUCL of Lagos State, 2018.

[14]Section 10 (2) of the LUCL of Lagos State, 2018.

[15]Section 14 of the LUCL of Lagos State, 2018.

[16]Section 14 (4) & (5) of the LUCL of Lagos State, 2018.

[17]Section 15 of the LUCL of Lagos State, 2018.

[18]Section 16 of the LUCL Law of Lagos State, 2018.

[19]The Punch, ‘Lagos Govt Reduces Land Use Charge’ http://punchng.com/breaking-ambode-reduces-land-use-charge/accessed March 22, 2018.

[20]Ibid.