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A Commentary on the Lagos State Land Use Charge Law, 2018


By
Ehiwe O. Sam Esq.

The Lagos State House of Assembly on January 28, 2018 passed the Lagos State Land Use Charge Bill into law. This law which was recently assented to by the state Governor repeals and replaces the Land Use Charge Law, 2001. The new law introduces a number of changes to swathe the loopholes that were in the former law.

The major and most pronounced change in the law is that the Land Use Charge Formula (LUC) now ensures that assessments are based on the market and commercial value of the property and not the rental value. Also, unlike what obtained under the old law where cemeteries, whether public or private were exempted, under the new law; only public cemeteries are exempted. The implication is that owners of private cemeteries would be required to pay the charge.

Public and private libraries are exempted under the new law, however for the private libraries, the owners must show that the libraries are not for profit-making, and this must be certified by the commissioner of finance. In addition to that, under the old law, properties owned by religious bodies were generally exempted but under the new law, for the property to be exempted, it must be used for worship. The tax implication of this is that where the church, mosque, or shrine is let out for events for a fee the exemption may not apply. The question which begs for answer is that in a situation where a property is owned by a church and that property is let out to another non-Christian religious body which uses same for worship, will the exemption still apply? It is submitted that in such instance the property should still enjoy exemption from the charge because ultimately it is being used for worship and owned by a religious body which is what the law requires, the rental value being collected notwithstanding.

The law also provides the any exempted property which is leased out for generating revenue will lose its exemption status. Thus, where a church or mosque rents its hall to be used as wedding reception and a fee is collected, such may not be covered by the exemption provision. However, as we have argued above, where the use of the property is still for worship, the religion notwithstanding, and whether a rental fee is collected, it is submitted that the property should still be viewed as a property owned by a religious body and used for a religious purpose which qualifies for an exemption under the law.  

The new law also provides that occupiers of properties, who though not being the true owners, occupying the property under a lease of 10 years and above are liable to pay the charge. Unfortunately, the law keeps mute on the issue of whether such charge paid can be recovered from the Landlord. It is submitted that it should be recoverable. Another issue that arises here is with regards to leases that though not up to 10 years but has a clause for automatic renewal of the term granted, except terminated, the cumulative term of which exceeds 10 years. In such instance, it is submitted that the occupier is not to pay the charge because the law does not seem to imply the opposite.

This law also, in tandem with International Tax laws provides that illegal occupants of properties will still be liable to pay tax as illegality does not preclude a taxpayer from his tax obligations.

Non-compliance to the statute attracts a higher fine as penalty under the new law. From 100,000 naira which obtained in the former law, it has been increased to 250,000 naira.

The law has also reduced the number of assessment tribunals from 15 to 9 and the tribunals are also empowered to adopt Alternative Dispute Resolution mechanism in resolving any issue that may arise from the law. However, if the dispute is not resolved within 45 days, parties can explore other legitimate means of resolving the dispute.

In conclusion, it can be said that although this law has come to level up the loopholes that were in the former law, there are however some areas which were not sufficiently covered. And if the law must serve its true purpose, there may be need for an amendment to make it robust and compliant with best practices. 

Image credit: lawyard.ng

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