The Land Use Charge (LUC) is property taxation and a revenue stream for the Lagos State Govt. You can agree with me that the real estate industry isn’t excluded from the hit of the economic impact of COVID-19.
See Also: How to access the CBN COVID-19 Relief Fund
The Lagos State Government in a bid to relieve the real estate industry, landowners, and residents of the financial pressure Post-COVID-19 made changes to Land Use Charge. The Governor, Mr. Babajide Sanwo-Olu approved the reversal of the Land Use Charge (LUC) to the pre-2018 rate. This directive is based on the government’s reflection of the current realities, to reduce the burden on citizens.
Recall that in 2018, Former Governor Akinwunmi Ambode reduced all levies for its new Land Use Charge (LUC) that had attracted public outcry by 50, 25, and 15 percent respectively. The state government had jacked up the charges payable by 400 percent as enabled by the Land Use Charge Law of 2018.
The Government said it implemented the Act to tackle the issue of multiplicity of property taxes and levies between the state and local governments. All of these were consolidated into the Land Use Charge Act. The Land Use Charge (LUC) is a consolidation of Ground Rent, Tenement Rate, and Neighbourhood Improvement Levy, which was first enacted in 2001.
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Things you need to know about the Land Use Charge:
1.) The law that supports the Land Use Charge was enacted in 2001. Revenue generated from Land Use Charge forms an integral part of the fund utilized by the Lagos State Government to provide the necessary social amenities and infrastructures for its populace.
2.) LUC shall be payable in respect of all real estate property situated in Lagos State (“the State”).
3.) The Lagos State Land Use Charge (LUC) is a consolidation of all property and land-based rates and charges payable under Lands Rates, Neighbourhood Improvement Charge, and Tenement Rates Laws of Lagos State.
4.) The Annual Charge 2018 Rate applied to eligible property in Lagos State is as follows:
- Owner-occupied residential property –0.0761% per annum of the assessed property value’
- Owner-occupied pensioner’s property –exempted from LUC.
- Lagos State Government property –exempted from LUC.
- Industrial premises of manufacturing concerns–0.255% per annum of the assessed property value.
- Residential property (owner and third party) –0.255% per annum of the assessed property value
- Residential property (without the owner in residence) –0.761% per annum of the assessed property value
- Commercial property (used by the occupier for business purposes)–0.761% per annum of the assessed property value
- Vacant property and open empty land –0.0761% per annum of the assessed property value.
How is Land Use Charge derived?
5.) LUC payable on a property shall be arrived at by multiplying the Market Value (“MV”) of that property by the applicable Relief Rate (“RR”)and Charge Rate (“CR”), using the prescribed formula.
6.) The formula that shall be used to determine the annual amount of LUC payable is:
- LUC = (Land Value + Building Development Value) x Relief Rate x Charge Rate.
7.) The formula can be interpreted as:
- LUC = [(LA x LR) + (BA x BR x DR) x RR x CR]
Where
LA= area of the land parcel in square metres
LR= average Market Value of a land parcel in the neighbourhood, on a per square metre basis in Naira as determined by professional values, appointed the Commissioner for Finance for that purpose
BA= the total developed floor area of building on the plot of land per square metres.
BR=average construction value of medium quality buildings and improvements in the neighbourhood, on a per square metre basis in Naira based on the market value of the property as determined by professional values, appointed the Commissioner for Finance for that purpose
DR= the Depreciation Rate for the buildings and improvements of land which accounts for the building being of higher or lower value than the average buildings in the neighbourhood and which also accounts for the degree of completion of construction of the building.
RR= rate of relief from tax (if any) applicable to the owner/occupier in the circumstances shall be determined by the Commissioner. This must also be published in the state government official gazette and in one or more newspapers circulating within the state and reviewed by the commissioner once every five years.
CR= annual charge rate expressed as a percentage of the assessed market value of the property and which may, at the State Government’s discretion, vary between:
- Owner occupied and other properties;
- Residential property and commercial (revenue-generating property);
- Physically-challenged persons; and
- Persons who have been resident at the same location for at least 12 years, minor, retired owners and occupiers.
8.) Refusal to comply with any provision of this Law when required to do so by the Property Identification Officer or an Assessor is an offense and the person shall be liable on summary conviction to a maximum fine of two hundred and fifty thousand Naira only (₦250,000) or to a maximum term of imprisonment for a period of three (3) months or both
9.) Properties that are exempted from the operation of the law are government-owned properties, and other properties used for public, religious, and charitable activities.
10.) However, the exemption will be approved only if an application for exemption is made to the Lagos State Commissioner of Finance.
This is especially useful for entrepreneurs in the property and real estate industry.
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