HOW IS THE LAND USE CHARGE CALCULATED?

1.      Similar to the 2001 Law, the LUC Law calculates Land Use Charge by multiplying the market value of the property (i.e. the sum of land value and building development value) by the Annual Charge Rate. Unlike the 2001 Law, market value under the LUC Law is to be determined by professional Valuers appointed by the Commissioner of Finance.

      The LUC Law also includes a new ‘Relief Rate’ which is applied to the market value and charge rate.  A General Relief Rate of 40% is applied in calculation of Land Use Charge. Specific Relief Rates are also available at various rates ranging from 5% (for long occupiers of property) to 100% (for pensioners). Specific and Relief may be applied for by disabled persons, aged persons, owners/occupiers of old properties (25 years above), Federal and State owned property, non-profit making entities and for timely payment of Land Use Charge (within 15 days).

      Applications for Specific Relief are made to the Commissioner of Finance with any relevant supporting documentation.

                                                       WHO PAYS WHAT?

• For a landlord occupying his house with his family (no tenant). Your annual fee is 60 per cent of the value of the house × 0.076. For instance, if your house is valued at N20 million. Your fee is 0.076 per cent of (60 per cent of N20 million) is 0.076 per cent x N12 million which is N9, 120.00 per annum.
• If you rented out the house to tenants only and you don’t live there and the house is worth N20 million. You will pay 0.76 per cent of (60 per cent of N20 million) is 0.76 per cent of N12 million is N91, 200.00
• If you are a landlord living with your tenant in the same building of the above value. You will pay 0.256 per cent of (60 per cent of N20 million) is 0.256 per cent × N12 million is N30, 720.00.

                                                                           ASSESSMENT

It is possible for same type of properties in the same area and occupying the same size of land to be 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 i.e. Commercial, Industrial and Residential usages. Commercial properties generally attract a rate of 0.394 percent of the assessed value. Industrial properties are assessed at a rate of 0.132 percent 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 percent, while a similar property occupied by the property owner and tenant(s) or third parties will be charged at a rate of 0.132 percent. The third scenario/category is an investment property fully occupied by tenants or third party/parties for revenue generation, charged at a rate of 0.394 percent.

The Land Use Charge does not provide for installment payments particularly since 15 percent discount is granted for early payment. However, any amounts left unpaid are carried over to the next year with its full interest compliment.

The Lagos State Government clarified the figures circulating in the media on the rate for the newly reviewed Land Use Charge Law of 2018, saying many of the numbers were based on several years of arrears on the levy not paid by affected property owners.

Speaking at a news briefing held at the Bagauda Kaltho Press Centre in Alausa, Ikeja, the State’s Commissioner for Information and Strategy, Mr Kehinde Bamigbetan said there were so many misconceptions and misinformation about the new law, adding that the law was a progressive enactment duly made by the House of Assembly and handed over to the Executive for implementation in the overall interest of the people.

He specifically dismissed the humongous figures being bandied about on the social media, saying many of the calculations were based on arrears of many years of non-payment.

                                                                             LIABILITY

The charge is imposed on the owner of a property. However, where the owner is not in possession of the property, the LUC law authorizes the collecting authority to appoint the occupier, who is usually the tenant, to be assessed with and pay for the tax; the tenant is in turn authorised by the law to offset such a payment from monies that may be due from the tenant to the owner of the property.

The ‘owner’ of the property has the duty to inform the Commissioner of the loss of exempt status or risk a penalty of up to 3 times the exemption in issue.

Under the new law, persons liable to pay LUC have been extended to include occupiers holding long leases of 10 years and above. This, on the other hand, excludes tenants with short leases.

The term ‘Occupier’ has also been defined in the new legislation to include persons unlawfully occupying a property.

There is thus an indemnity in favour of the tenant/occupier against the owner. Where a property owner did not receive the First Demand Notice, the Lagos state government advises that complaints be registered through any of their customer service channels. You can visit www.landusecharge.com for clarification or you go over to their office at Ministry of Finance at Alausa, Ikeja, Lagos.

However note that all claims of non receipt of First Demand Notice will be checked against their proof of delivery of all bills. The cost of assessment is free to property owners; they are not expected to pay for assessment of property. The amount charged is not negotiable. However, if payment is made within 15 days of the delivery of the demand notice, a discount of 15 percent is applicable.

In cases where property owners receive Land Use Charge Bill for the first time, yet they are being asked to pay arrear, demand notices issued with arrears are reviewed against proof of delivery of the Land Use Charge demand notices on such properties for the previous year(s) for necessary correction. Such cases should be registered through the complaints interface of the website; www.landusecharge.com, or through their help lines or e-mail, all available on their website.

In a situation whereby the property owner received the Tenement rate demand notice and has made payment before receiving the Land Use charge demand notice for the first time, the amount paid should be deducted from the Land Use Charge (if the Land Use Charge is higher than the Tenement rate,) then pay the outstanding balance. All evidence of payment including payment of Tenement rate should be forwarded to their office.

However, where Land Use Charge demand notice is received before any of the consolidated charges i.e. tenement rate, ground rent and neighborhood improvement charges, Land use charge should be paid as it covers all these rates and charges.