Land Use Charge (LUC) is a Lagos State Property Tax backed by the Land Use Charge Law of 2018. It is a consolidation of Ground Rent, Tenement Rate, and Neighborhood Improvement Levy. Land Use Charge is not a new form of tax and it encompasses all real estate property situated in Lagos State and it is an annual tax. The Law backing LUC was first enacted in 2001 but was repealed and re-enacted to address some of the identified challenges which are;

1. Lack of clarity on the LUC formula to support self-assessment;
2. Obsolete rates which had not been reviewed in over a decade;
3. Need to improve LUC administration efficiency; etc.

The new Land Use Charge Law provides a robust legal and regulatory framework to support ongoing LUC administration reforms aimed at growing the State’s economy.

WHO BENEFITS FROM Land Use Charge (LUC) REVENUE COLLECTED

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. Invariably, all residents and visitors in Lagos State directly benefits from the Land Use Charge Scheme.

Administration of LUC is under the purview of the Lagos State Ministry of Finance (“MoF”). Owners of property and Lessee of property- who then looks up to the property owner for reimbursement from any money due to him/ her are liable to pay Land Use Charge fees.

Also click to read: Taxes and their Collection Bodies in Nigeria
THE CONCEPT OF SELF-ASSESSMENT AND ITS IMPLICATION
• Self-assessment essentially means that payers can compute the amount of LUC payable on their respective property by themselves.
•A fair assessment can be confirmed from the value assigned to the property.
• We expect that this will drive up compliance, improve the timeliness of collections and minimize leakages.
Land Use Charge 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 which is LUC = (Land Value + Building Development Value) x Relief Rate x Charge Rate. The formula is interpreted as thus;

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 neighborhood, on a per square metre basis in Naira based on Market Value property as determined by professional valuers 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 neighborhood, on a per square metre basis in Naira based on the market value of the property as determined by professional valuers 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 neighborhood 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 and 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:
a)owner occupied and other properties;
b)residential property and commercial (revenue-generating property);
c)physically-challenged persons; and
d)persons who have been resident at the same location for at least 12 years, minor, retired owners and occupiers.


The Annual Charge Rate to be applied to eligible property in Lagos State shall be as follows:

1. Owner-occupied residential property–0.0761% per annum of the assessed property value
2. Owner-occupied pensioner’s property–Exempted from LUC
3. Lagos State Government property – Exempted from LUC
4. Industrial premises of manufacturing concerns–0.255% per annum of the assessed property value
5. Residential property (owner and third party–0.255% per annum of the assessed property value
6. Residential property (without owner in residence)–0.761% per annum of the assessed property value
7. Commercial property (used by occupier for business purposes)–0.761% per annum of the assessed property value
8. Vacant property and open empty land–0.0761% per annum of the assessed property value

RELIEFS FOR LAND USE CHARGE PAYERS
•The reliefs include:
a)General relief of 40% (applicable to all property liable to pay LUC); and
b)Specific reliefs applicable to property owners and leases of 10 years and above for:
I. Pensioners (60 years and above)–100% for owner-occupied property
II. Persons with disability–10% for owner-occupied property
III. Aged persons (70 years and above) –10% for owner-occupied property
IV. Age of property–10% for property aged 25 years and above
V. Long occupation by owners–5% for 12 years and above
VI. Federal and other State Government property–20% for non-revenue generating property
VII. Partial relief under the LUC Law–20% for Non-Profit-making Organizations

Please note that you will need to provide relevant documentary evidence to support their relief claims and all application for reliefs can be made to the Commissioner for Finance for approval and supported with relevant documents.
All Land Use Charge paid within 15 days of receipt of Demand Notice will enjoy a timely payment discount of 15%.
Also note that the minimum LUC payable on any given property shall not be less than ₦5,000 irrespective of any LUC relief granted on the property and property enumeration and valuationis an exclusive right of the Commissioner for Finance to appoint Property Identification Officers, Professional Valuers and other persons as may be considered necessary for the purpose of assessing the charge applicable to a property.

The following category of property are exempted from LUC:
1. Property owned and occupied by a religious body and used exclusively as a place of worship or religious education;
2. Public cemeteries and burial grounds;
3. Property used as a registered educational institution certified by the commissioner to be non-profit making;
4. Property used as public library or as a private library certified by the commissioner to be non-profit making;
5. Any property specifically exempted by the Executive Governor by notice published in the State Official Gazette; and
6. All palaces of recognized Obas and Chiefs in the State provided that if any of the exempted property is leased out to private entities for revenue generation, it shall forfeit its exemption status as contemplated under the provisions of this Law.

OFFENCES AND PENALTIES
Any person who Refuses or neglects to comply with any provision of this Law when required to do so by the Property Identification Officer or an Assessor; or Prevents, hinders, or obstructs any Property Identification Officer or an Assessor in the course of lawful duty; or removes, damages or destroys a Property Identification plaque on any Property or building, commits an offence and 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.

Anyone who incites another person to refuse to pay LUC; or Incites or assists any person to misrepresent in any way the person’s chargeable property; commits an offence and shall on summary conviction be liable 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.

DISPUTE RESOLUTION MECHANISM
The new LUC Law establishes an Assessment Appeal Tribunal (“the Tribunal”) in each division of the State to treat all appeals and resolve any potential disputes; Each Tribunal shall consist of:
1. A Chairman who shall be a legal practitioner of not less than 15 years post-call experience;
2. A representative of the Attorney-General;
3. A registered town planner;
4. A registered land surveyor;
5. A registered estate valuer;
6. A representative of the Lagos State Valuation Office;
7. A person with cognate experience in accounting and taxation; and
8. Two (2) persons from the private sector.

A person may make an appeal to the Tribunal if aggrieved by:
1. A decision that the property which the person owns is a chargeable property, or that the person is liable to pay LUC in respect of such property; or
2. Any calculation of an amount which the person is liable to pay as LUC, and the Tribunal shall make such decision as it deems fit.

Conclusively, in resolving disputes arising from the provisions of this Law, the parties shall submit to a confidential mediation in an effort to resolve such disputes and where the mediation does not resolve the dispute within 45 working days of the first session or when the mediator declares an impasse, the mediation shall be deemed inconclusive and parties shall be at liberty to resolve their dispute formally at the Tribunal or through any other lawful means.

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