AREDOLS knocks Lagos’ new law on Land Use Charge

THERE appears to be discordant tunes among the professionals in the real estate sector over desirability or otherwise of the controversial Land Use Charge recently introduced by the Lagos State government.

While some section of Estate Surveyors approved the move, another group under the aegis of Association of Real Estate Developers in Lagos (AREDOLS) has opposed the new law, asking for its immediate abrogation.

The group, in a statement signed by its chairman, Nureni Akinsanya described the law as unconstitutional and anti-business.

He hinged this on the fact that the LUC as signed into law by the state government was at variance with section 16 (1) and 16 (2) d of the constitution, even as it was not business friendly.

Said he, “Can it be said that these land use charges were promulgated in keeping with the spirit and intendment of these provisions of the constitution?

“The LUC, 2018 saw the rise of payment of land use charge skyrocket to as high as 400 per cent of the initial charges with criminal sanctions attached to default in payment and a right of the government to sue for the sum.

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“The contention of the association is the effect of these new charges on economic investments in the real estate market. The rippling effect of the new charge will increase the price of locally-made goods and finished commodities in the state thus killing local companies and businesses in the country,” said AEREDOLS,  arguing further that those companies who do not close shop will be forced to the lay off workers in order to restructure their finances to accommodate the new charge.

It also noted that a rather obvious effect is the sharp increase in the cost of goods and other services in Lagos State, as owners, developers of properties, as well as tenants living in the buildings; would be forced to cushion the effect of the taxes on their income.

Akinsanya stressed that secondary goods and services will also be affected by the ‘blowback’ of this tax regime as the LUC will be factored into the overall cost of sales of goods and services and the differentials will be placed squarely on the heads of consumers.

According to him, the provision of the LUC law recognises the difference between short term and long term leases but makes no legal or taxable distinction and provides no relief for owners or occupiers of lease of “less than 10 years” from those of “more than 10 years.”

He contended that the LUC should have contemplated that the owner-occupier may share different interests in the property and should be entitled to pay different rates on the property. This he said is very important when one considers that land use charge ought to be an owner’s charge and not the charge of a person in possession of a property for a duration of term.

It may be argued that if the LUC is made strictly an owner’s charge, the payment of such charge will merely be passed down to the tenant when paying rent. This may be true but a legally recognised owner’s charge will put a Tenant/Lessee who is usually a weaker party in these negotiations with a significantly better bargaining power when negotiating for more favourable terms of the tenancy or lease upon payment of such owner’s rates and levies. It should also be stated that for the purpose of taxation, the grantee or deemed grantee of a right of occupancy is most positioned to direct what use a building will used and enjoy whatever amenities or neighbourhood improvements provided by the government around the vicinity.

“It is important to stress that the owner or a developer who wants to build the structure to be assessed and taxed would have had to pay personal and company income taxes on himself and/or his company; rates, levies and permit to the state government for the approval of the construction by the state government; value added taxes on the materials purchased in the course of the construction; capital gains taxes on the constructed property amongst others.