Following the introduction of a new Land Use Charge Law by the Lagos State Government and its subsequent review by the governor following the severe criticism that it generated, TUNDE AJAJA writes about the fresh round of concerns that seem to be trailing the reduction
Out of the torrent of issues that have generated so much reaction, criticism and condemnation in Lagos State in the recent past, there was hardly anyone that could match the response that greeted the recent increment of the land use charge by the state government.
The state government had repealed the Land Use Charge Law 2001 and replaced it with the Land Use Charge Law 2018. But given the rate of increase and the serious backlash that trailed the action, the state government on Thursday announced the reduction of the charge.
The government also said there would be no more penalty for late payment and that payment could now be made by instalments.
But fresh reactions that have trailed the announcement point to the question as to whether the governor has the power to reduce a rate that had been set by the Act of the House of Assembly and signed into law by the governor.
The Chairman, Victoria Garden City Property Owners and Residents Association, Mr. Olusegun Ladega, said the governor had only exercised his discretion and that for the reduction to be permanent, the law needed to go back to the House of Assembly for amendment.
He said the governor had simply granted a discount for the current year and that it wasn’t backed by the law.
Ladega, who is also the Vice Chairman, Lekki Estates Residents and Stakeholders Association, which is a coalition of all residents associations along the Lekki-Epe Axis of the state, from the 1004 Estate to Epe, said, “The governor has announced the reduction, but it is a reduction that he has simply just applied his discretion. It’s not backed by the law. He’s overriding the law that the state House of Assembly has made, which he has signed.
“Unless he’s going to apply such reduction again next year, it means that regardless of whatever we pay this year, that law still remains. So, this act of discretion or concession for now appears to be a one-off response.
“For there to be a permanent reduction and for it to be seen as something that would be continuous, it has to go back to the state House of Assembly and then the law would now accommodate those discounts or concession.
When asked about the position of his members to the reduction, he said LERSA executive members would meet to take a position on the matter. There would be a meeting of the executive of the main association (LERSA) tomorrow. It’s after the meeting that I would be able to communicate our official position.
Also, a lawyer with expertise in tax matters, Mr. Tunde Esan, said the state executive lacked the power to reduce the rate, since it was a law enacted by the House of Assembly.
He said, “The law prescribed the rate, so it is the House of Assembly that can amend the law before the governor can assent to it, and not the governor saying he had reduced it. Is this not a democracy? The whole thing is just a joke.
“If you want to impose tax on the people, the first thing you look at is the capacity to pay. You can’t just sit in your office and assume that people would pay. People are losing their jobs, and by the way who did the valuation? Rather, you sit in your office and assume what a property is worth. It’s not right.
“Whosoever is running the levies and tax regime of Lagos State doesn’t understand how it’s run and the person has no clue. That person needs to go back to the street and listen to the cries of the people. What Lagos State government is engaging in under taxation is called tax terrorism.”
He said since the governor said that people in Epe or Badagry might not be able to pay, the law should not have been passed because “the enforcement of any law has to be uniform, unless there are exceptions in the law.”
He also said the legality of the Land Use Charge law has to be tested, saying only the local government is authorised by the Nigerian constitution to collect property tax.
Esan, who is a member of the Chartered Institute of Taxation, said, “I had the privilege of being one of the lawyers that challenged the law when it came into force in 2002. Section 7(5) of the Nigerian Constitution gives the right to collect tenement rate to the local government. What the Land Use Charge Law has done is to consolidate property-based taxes and charges. But the question is that can the local government delegate its constitutional function to the state government? That was part of the questions we raised.
“So, there was a lot of things wrong with the law from inception, but we could not have the court determine it then because of political interest, and the local government didn’t have the gut to see it through to the end. The constitutionality of that law has never been tested to the very end and it has to, maybe when we have an opposition party controlling the local government.”
Also speaking, Lagos-based lawyer and human rights activist, Mr. Liborous Oshoma, said the executive could not singlehandedly give such concessions without amending the constitution.
He said, “Is it statutorily within your powers to give those concessions without necessarily amending the law? The answer is no. You cannot, by regulation, amend the rate provided for in the law. So, if the law says these are the rates and how it should apply, the law will prevail.
“Legally speaking, you cannot use regulations to amend the provisions of the law.”
He said the government should have made adequate consultations before coming up with the law, saying the welfare of the people should be paramount to any government.
He said, “Without recourse to the reason why your predecessor in office did not review that law all these years, not that they didn’t know they were to review the law but they intentionally didn’t because reviewing the rate further as provided for by the same law would mean further putting untold hardship on the people.
“Now that you want to review, you did not even consider consulting, and the people revolted and you now say you have consulted and you have given concession.”
He said the speed with which the law was passed without consultation had fuelled allegations that the government was looking for money to do elections “because one would expect them to apply the old rate while you use this year to consult widely so that at the end of the day the rate you would come up with would be acceptable to the people.”
“People are sceptical and they are saying what if this reduced rate was what government wanted and it only increased it first to hoodwink the people to see it as a listening government, so that immediately after the election, they would go back to implement the law. We have seen it happen before, and these are the things that breed distrust and suspicion.”
Meanwhile, a popular human rights activist and legal practitioner, Mr. Jiti Ogunye, said he had not read the law but that generally, a law passed by the House of Assembly or the National Assembly could have provisions allowing the review of rates by the administrators of that rate or those that would operate the law – the executive arm of government.
He said, “I have not looked at the law. But general principles of law is that a law that is validly enacted may have provisions authorising the administrator of that law to take administrative, executive or regulatory decisions in respect of charges rate or things that could be done in that regard.
“We need to be sure this law authorised that, but if it didn’t, what the executive has done is inchoate to that extent, until it receives the legislative rubber-stamp of the House of Assembly, it cannot be said to have been consummately done.”
Also, a senior lawyer, Mr. Olisa Agbakoba, SAN, said he hadn’t read the law but that a law could be cast in two ways, whether with the provision for the executive to be able to revise it or without such authority.
He said, “It could be in a way that a framework is made by the legislature authorising the executive to impose those charges and then the executive would draw up an executive order, or otherwise. From what we have seen, it seems the executive has the legislative authority to amend or revise the tariffs, if necessary. And if that is the case, they could do that.
“So, we cannot rule it out unless we see the bill itself, but usually, tax codes are expressed in a way to give flexibilities.”
But responding, the Lagos State Commissioner for Information and Strategy, Mr. Kehinde Bamigbetan, said even though the executive did not have the powers to change the rate as specified in the law, it could give concessions.
He said, “The law is sacrosanct and the job of the executive is to apply the law. The rate approved by the law is still there. The only thing the executive has done was to provide additional reliefs. It has gone to the streets and found out that there is a resistance.
“The executive does not have the power to change the rate, but it can give concessions. So we have not changed the rate, only the House of Assembly can change the rate. Ours (Executive) is to give reliefs and concessions.”
He said going back to the House of Assembly to amend the rat could take time and the government could have “lost the year, so the best we can do is to increase the relief and make it convenient for people to be able to pay it and then use persuasion to convince them to pay.
“Also to let them realise that the money comes back to them in form of infrastructure. So, they have not lost anything. The aim of the law was not to punish anybody.”
Beyond the reduction by the government, there had equally been questions as to how the values of properties were arrived at. All the property owners who spoke to our correspondent pointed out that their properties were not visited for valuation.
Among similar reservations, Ladega had said, “The figures with which they valued our properties are out of tune with market realities and we do not even know when these properties were valued. How do you value a property without the owner knowing? We have resolved to take our case to the tribunal shortly.”
Responding to an enquiry as to whether a property could be valued without physical inspection, an estate surveyor and valuer, Mr. Dipo Fakorede, who is the Principal Partner of Dipo Fakorede & Co., said it is not possible to value a house without visiting the property.
He added that the feelers he got from his clients also showed that their houses were not visited for the valuation exercise.
Fakorede, who is a Fellow of the Nigerian Institution of Estate Surveyors and Valuers, said, “It is not possible to do valuation without physical inspection, because you can’t value in absentia. You must visit the property physically, inspect it, examine the state of the building, take note of the construction details, finishing of the house and other things.
“You have to look at all those details, vis-a-vis the location of the property before you can arrive at a value, because there are a lot of things we consider in valuation. So, if you cannot visit the house, you cannot have a fair value for the property.”
Speaking on the reduction, he said, “We heard that they have reduced it but the truth of the matter is that they have not repealed the law. It means the governor can come back after winning election in 2019 and increase it again. This is a political game he is playing with Lagosians.”
Reacting to the issues raised on how the values on which calculations were based were arrived at, Bamigbetan said the government relied on an existing database on the values of properties.
He said, “There was already an existing database to rely on, because every year, people have been paying Land Use Charge. We are relying on existing database, and that is why even now, a fresh round of evaluation is on course so that we can re-evaluate the properties.”
Meanwhile, with the reduction, the Commissioner for Finance, Mr. Akinyemi Ashade, at a press briefing on Thursday, said, “The rates payable on commercial properties have been reduced by 50 per cent. The government has also reduced the charges for owner-occupier with third party by 25 per cent, while tax credit has been given for LUC charges already paid in addition to introduction of instalment payment system.”
While giving a breakdown of the reduction, Ashade said for commercial property owners, a property valued at N20m for instance, which was earlier billed N91,200, would pay N45,600 per annum as a result of the 50 per cent discount, while property occupied by owner, third party and property used for industrial and manufacturing purposes will now pay N23,040 per annum on a property valued at N20m as against the earlier N30,720 based on the 25 per cent discount.
“On owner-occupied property valued at N20m, only N7,752 will now be paid per annum as against N9,120 earlier demanded based on 15 per cent discount.
“Other rates and reliefs, apart from the ones stated above, will remain unchanged. These include 40 per cent general relief, 10 per cent for 70 years and above, 10 per cent for properties owned by persons living with disabilities and 10 per cent for properties that are 25 years old. Owners of properties across all categories will now be allowed to make payments by instalments.”
But before this reduction, the law had been greeted by lamentations by both the rich and the poor in the society.
A property owner who had reached out to our correspondent said the increment was largely insensitive.
Sitting at one end of his cosy but lavishly furnished office at the pent floor of his building, Mr. Johnson Awodile almost didn’t notice his guest had entered, as he kept staring profusely at the white paper on his table, punching his calculator with so much zeal and anger.
Insulated from the razzle-dazzle that often characterises his end of the Oregun area of Ikeja, Lagos that Tuesday morning, one would know that whatever the 48-year-old landlord was trying to unravel in that piece of paper must be worth the seriousness and effort.
As Awodile would later tell our correspondent, he had been left in shock since he received the new land use charge on his apartment. From the N177,000 that he paid the previous year, his property tax has skyrocketed to N401,000.
“If I tell you that about 60 per cent of this whole building is vacant, you wouldn’t believe it, yet, someone stayed at a distance and assumed a figure as the value of my property, because I’m not aware of anytime physical inspection and proper valuation was done. I have not been able to wrap my head round it,” he had retorted.
“We know tax payment is not a bad thing; it’s a civic responsibility and we know its importance, but when reviewing such a law that has direct bearing on people’s survival and well-being, you put human face to it. It only shows that the governor and people in government were aloof. They are insensitive because they enjoy free things and the perks around them have kept them in denial of what people are going through.
“My question is that, did the governor, his government, agencies or the political class notice any kind of prosperity in the economy for them to effect such increment, because I can count how many private companies (since they don’t even tax public institutions) that have sacked workers within the last one year, yet, they are the target of this new law, or is it our fault that that they didn’t review it between 2001 when it was enacted and now?”
Awodile pointed out that landlords would naturally pass the increase to their tenants, but for him, that is another cause for worry because at the moment, more than half of his tenants owed rent. “Tenants owe me months of rent and you can’t even evict them because the eviction process is very cumbersome, especially when it gets to court,” he said.
Awodile’s questions, lamentations and displeasure over the imposed increment were a microcosm of what had trailed the passage and implementation of the reviewed Land Use Charge Law.
Thus, across the length and breadth of the state, individuals, corporate bodies, associations and civil society groups and other stakeholders, have criticised the new law, describing it as insensitive, a misnomer that would impact negatively on investments and well-being of most residents of the state.
While lamentation held sway
While Awodile was still enumerating his displeasure over the new tax, a fellow landlord in the area paid him a visit, holding his own land use charge demand notice. He had been billed N525,000 as against the N180,000 he was paying before the review.
No doubt, the impact of this new law was felt across the state, from mainland to the island, where most of the rich in the state live.
Until the reduction, the LERSA had vowed not to pay the new charges, which they said were four times higher than what they paid in 2017. They had resolved to take the case to the tribunal.
Two tenants of a twin duplex in Lekki Phase I Estate had also lamented severely about the bills they were given. The tenants told Saturday PUNCH during the week that their landlord lives in the United States and that their tenancy agreement had stipulated that they would be responsible for all the taxes and bills levied on the property. Thus, for the four years that they have occupied the property, they have been paying the Land Use Charge.
One of them, Mr. Felix Adu, said, “Up till last year, we were paying N150,000 on each of the duplexes. But now, by the time they brought the notice, each of us will now pay N750,000. Can you imagine that?
However, with the new reduction, succour might have come their way.
The Manufacturers Association of Nigeria, the Ikeja branch of the Nigerian Bar Association, the the Lagos Chamber of Commerce and Industry, the Organised Private Sector, Nigeria Employers’ Consultative Association and other stakeholders had opposed the increment.
The OPS had vowed to fight the law with every legal means at its disposal, while the LCCI and MAN said the new law would lead to the collapse of businesses that were still bearing the brunt of economic hardship.
But apart from the “outrageous” billing, there are also accusations that the exercise had been shrouded in secrecy.
Meanwhile, in real estate practice, some tenancy agreements vest the responsibility of paying the taxes and charges levied on the property on the tenant (s). In some cases, the landlord takes responsibility for paying the taxes and in most cases transfer the liability to the tenants by way of rent charged on the property. But, in some other cases, the landlord and the tenant share the levies.
But overall, some of the critics of the increment said almost everyone resident in the state would bear the brunt eventually, noting that tenants would be on the receiving end as landlords would transfer the increase to the rent.
Awodile said, “If I’m a landlord and I have tenants, I would easily pass the increase to the tenants. Every reasonable landlord in business would do that. That means indirectly, the government is making life difficult for the people, because their rent will automatically increase. And apart from sharing the increase among the tenants, the landlord would also want to make more money on the increment.
“Nobody wants to live on the street, and don’t forget that most people in Lagos are tenants and not house owners. So, somehow people would have to pay, and it has a spiral effect. Such parents may also not be able to pay their children’s school fees and so it will further impoverish the people.”
Truly, most Lagos residents are tenants, because as of 2013, the then Commissioner for Housing, Mr. Bosun Jeje, said there were 4.75 million houses in the state. But as of that time, the human population was about 20 million.
According to the ‘mathematical explanation’ provided by the government, pensioners, churches, mosques, palaces, schools, NGOs, cemeteries and public places are exempted from payment. But for properties (owner occupied) in which only the owner lives there and there is no tenant, the remaining 60 per cent of the property value is multiplied by 0.076 per cent (charge rate) to arrive at the amount payable per annum.
For houses that are rented out to tenants only and the owner doesn’t live there, the remaining 60 per cent of the property value is multiplied by 0.76 per cent (charge rate) to arrive at the amount payable per annum.
Also, for houses that are owner occupied and commercial, in which case the landlord lives with the tenants in the premises, the charge rate is 0.256 per cent and it is multiplied by the remaining 60 per cent of the property value to arrive at the amount payable.
Meanwhile, the Organised Private Sector said on Friday that it was not satisfied with the reduction. Its spokesperson, Mr. Olusegun Oshinowo, said in a letter addressed to the Lagos State Commissioner for Finance, Mr. Akinyemi Ashade, that the demands of the sector were yet to be met.
In a chat with News Agency of Nigeria, he commended the governor for the reduction but that the body’s fundamental request in the formal submission to the government were reduction in both or either of the base percentage rate of or (and) Assessed Market Value, adding that these had not been met.
He said that the reduction of 50 per cent over the invoiced rates was far off from the mark on the relief that would ameliorate the over 500 per cent increase in the new rate.
He said the business community would not hesitate to challenge the law in court, as it did in 2002, if the government continued to shun its request for dialogue.