News

UNDERSTANDING LAND USE CHARGE OF LAGOS STATE, NIGERIA

LAND USE CHARGE OF LAGOS STATE

Who is responsible for payment of Land Use Charge?
Who is exempted from the payment of Land Use Charge?

What if I fail to pay on time or I didn’t pay at all?

Why are two very similar property charged different rate?

How is Land Use Charge calculated?

When the issue of Land Use Charges arises in Lagos State, lots of residents and even property owners don’t understand the intricacies surrounding the law.

According to the Lagos State Government, the Land Use Charge (LUC) is a consolidation of all land base rates and charges payable under the Land Rate Law, Neighbourhood Improvement Charge Law, and the Tenement Rate Law.
The Land Use Charge being a property tax in Lagos State serves as a source of revenue generation for the government, which enhances the provision of infrastructure and social amenities.

WHO IS RESPONSIBLE FOR PAYMENT OF LAND USE CHARGE?

The Lagos State Land Use Charge Law which was enacted back in 2001 clearly says that any occupier of a property is responsible for the payment of the charge, which can and should be refunded by the property owner. The amount payable is dependent on factors such as the type of property and its use.
Section 10 and 11 of the law states that the collecting authority (That is the Local Government Council 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 the money 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. Hence, it’s the property owner that is responsible for the payment of the charge and where the tenant pays, such money should be refunded.

WHAT IF I DIDN’T PAY IN TIME OR DON’T PAY AT ALL?

Penalties for delayed settlement of the Land Use Charge in section 20 (of the law), with the amount payable as penalty depending on the length of period the payment is delayed.
Delay of between 45 to 75 days attracts 25% of the original charge payable.
Delay of between 76 and 105 days attracts 50% of the original charge payable.
Delay of between 106 and 135 days attracts 100% of the original charge payable.
After 135 days, the property becomes liable to receivership until outstanding taxes, penalties and administrative charges are fully paid.

Penalties put aside, a 15% discount is given to all charges if the bill is paid on time and before certain date which is usually stated on the bill.

WHO ARE EXEMPTED?

Some properties are exempted from the payment of the Land Use Charge. Properties exempted include government properties, properties used for religious activities, charitable activities and other public properties.
It must be noted however, that this exemption will only be granted after application for exemption has been made to the Commissioner of Finance of Lagos State. He advices that legal counseling should be sought to specific situation when they arises.

WHY ARE THE SAME TYPE OF PROPERTIES IN THE SAME AREA AND OCCUPYING THE SAME SIZE OF LAND BEING CHARGED DIFFERENT RATES?

For the purpose of land use charge, properties are assessed individually. For any two similar properties, the physical appearance, aesthetic features and age will determine the property class rate (i.e. high, medium, and low) to be adopted in the valuation of the property. Another reason for charging different rates on any similar properties is the usage and status of occupation. it is noteworthy that property assessment is classified under 3 broad categories ie commercial, industrial and residential usages. Commercial properties generally attract a rate of 0.394% of the assessed value. Industrial properties are assessed at a rate of 0.132%of the assessed value; however, this will only be applicable where the property owner is the occupier of the property. Assessments of residential properties are categorized under three scenarios which attract different rates. A property solely occupied by the owner for residential purpose will be charged at a rate of 0.0394%, while a similar property occupied by the property owner and tenant(s) or third parties will be charged at a rate of 0.132%. The third scenario/category is an investment property fully occupied by tenants or third party (ies) for revenue generation, charged at a rate of 0.394%.

HOW IS LUC CALCULATED?

Where a property is located has nothing to how Land Use Charge (LUC) is calculated. Nevertheless, the location of the property influences the charge since the location determines the market value of the property. The payable charge is always calculated in percentage of the value of the property.
According to the Land Use Charge website, a 5% increase in mile rate for Lagos State Land Use Charge became effective as of January 1^st 2012. The table below shows the categories of properties, the old rate and the new rate.

For instance, a residential property occupied by the owner with open market value of N90, 000,000
Current open market value @ 50% of open market value adopted by LRC = 50% of 90,000,000 = N45,000,000

LUC will be 0.0394% of 45,000,000 = N17, 730