Concern mounts as Lagos’ new land use charge takes effect
With the signing into effect of the amended Lagos Land Use Charge Law, 2018, the state government has given legal fillip to the implementation of the law alongside its local government areas.
The new legislation replaces Land Use Charge Law, No. 11 of 2001. The government has justified the amended law, saying it was aimed at eliminating multiplicity of property taxes and levies, as they relate to both the state and local governments.
However, property investors and developers have expressed concern about basing the charge on capital values of property rather than on rental income. They argued that this aspect of the law was a disincentive for investment in property, in a state with over 3 million housing deficits.
“At a time when governments in other jurisdictions are putting measures in place to encourage investment in the housing sector, the Lagos State government is still piling charges on developers with their new Land Use Charge, which is now on capital values and not rental income,” Hakeem Oguniran, MD, UACN Property Development Company (UPDC), who spoke at a real estate summit in Lagos Tuesday, said.
Oguniran, who noted that the structure of the Nigerian economy was not in favour of real estate and the investors, said basing the land use charge on capital gains was inappropriate at a time when many houses were empty because they could not find buyers or tenants.
Lagos has a large chunk of vacant buildings across the various segments of the market including residential, commercial office space, retail malls and industrial warehouses. Until the last two quarters of 2017, when the economy improved, residential vacancy rate in the state was as high as 37 percent, while both office space and retail malls averaged 30 percent and 42 percent, respectively.
The recent sale of high yield Treasury Bill by the Federal Government was also seen as a major discouragement to investment in real estate. Bolaji Edu, CEO, Broll Nigeria, described it in an interview with BusinessDay as government’s systematic way of “crowding out private investors.”
The law applies to real and landed property in Lagos, and seeks to consolidate all property and land-based rates/charges into a single property charge. Under the new law, which was signed by Governor Akinwumi Ambode on Thursday, each local government area in the state would be the collecting authority for land use charge within their jurisdictions.
The charge is payable on all property except those exempted under Section 12 of the law. The exemptions include property owned and occupied by a religious body and used exclusively as a place of worship or religious education.
Other exemptions include public cemeteries and burial grounds as well as property used as a registered educational institution certified by the commissioner of finance to be non-profit making, palaces of recognised traditional rulers in the state, and any property specifically exempted by the governor by notice published in the state official gazette.
The new law further provides that exempted property becomes subject to land use charge if the use of such property changes to one that does not qualify for exemption.
Under the law, land use charge payable on any property is arrived at by multiplying the market value of the property by the applicable relief rate and annual charge rate using the prescribed formulae.
Adeniji Kazeem, state commissioner for justice and attorney general, explained the rationale behind the law.
According to Kazeem, the amended law reflects the state government’s efforts to tackle the issue of multiplicity of property taxes and levies between the state and local governments, especially as the imposition of land use charge on a landed property implies that all other state laws that impose tax on properties would cease to apply to such landed property.
BY JOSHUA BASSEY