It is no longer news that the Lagos state government recently repealed its 2001 Land Use Charge Law, LUC, replacing it with a new LUC, 2018. The Law, which was reviewed by the Lagos State House of Assembly and signed into Law by the State Governor, Mr. Akinwunmi Ambode on February 8, 2018, merges all Property and Land Based Rates and Charges in the State.  It came on board as a result of the need to repeal the old law which had not been reviewed since it was promulgated in 2001.

Under the old law, LUC rate was totally inaccurate and retrogressive which deprived the State of keeping track of all economic activities that relate to land in Lagos State. The new law is, therefore, a consolidation of Ground Rent, Tenement Rate, and Neighbourhood Improvement Levy. This charge is payable annually in respect of all real estate properties in the State, which means owners and occupiers holding a lease to a Property for ten (10) years or more are now liable to pay the annual LUC invoice charged.

With this new development, the Tenement Rates Law, the Land Based Rates Law, the Neighbourhood Improvement Charge and all other similar Property Rates or Charges, Laws or amendments to any such property Laws shall cease to apply to any property in Lagos State as from 2018.  Nonetheless, all pending invoices, orders, rules, regulations, etc. under the 2001 repealed Law shall continue to be in effect until such obligations are discharged.

Property owners can now determine the amount payable by multiplying the Market Value of their property by the Applicable Relief Rate of 40 per cent and Annual Charge rate. The implication of this is that the new law gives room for self assessment.  This basically means that payers can calculate the amount of LUC payable on their respective properties by themselves. Thus, payers no longer need to wait to receive a Demand Notice on his/her property before making payment. The main intent of this is to boost compliance, enhance the appropriateness of collections and block leakages, as much as possible. Prior to this new order, formula for LUC’s determination were not plainly classified. This made room for prejudice in the calculation of LUC to be paid.

It needs to be stressed that LUC is an annual tax which becomes payable from the first day of each New Year and what is payable on a property is arrived at by multiplying the Market Value (MV) of the property by the valid  Relief Rate (RR) and Annual Charge Rate (CR), using the prescribed formula of calculating. RR from tax ( if any) that is applicable to the Owner-Occupier in the circumstances shall be determined by the Commissioner for Finance and published in the State’s  official Gazette and in one or more newspapers circulating within the state and reviewed by the Commissioner once every five years. Vacant properties are to be treated based on owner-occupier and not as a commercial property, explaining that the target of government is to make commercial property owners to pay a little bit more.

Annual Charge Rate expressed as a percentage of the assessed Market Value of the property might vary at the discretion of the state government from one category of property to the other. The new law gives a strong legal and regulatory structure to sustain current LUC administration reforms which are principally aimed at developing the state’s economy. Revenue that accrues from the new LUC is to be shared between the state government and all the local council areas. The government agency that is directly in charge of all issues pertaining to LUC is the state’s Ministry of Finance.

The LUC classifies property assessment into 3 broad categories viz 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. This will, however, only be applicable where the property owner is the occupier of the property. 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 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. For a landlord that occupies his/her property with his family members only, with no tenants, the annual value of the property multiplied by 0.076. For instance, if the property is valued at N20m, the LUC payable on the property is 0.076 % of the total value which is N15, 200 per annum. On the other hand, if the landlord lives in the property in the company of tenants, the LUC payable on the property is 0.256% of N20m which is N51, 200.

It needs to be clarified that the LUC law does not apply to all properties in the State. Properties that are exempted from the operation of the law are government-owned properties and other properties used for public, religious and charitable activities. The new law also exempts properties belonging to pensioners and retirees. However, this exemption will only be granted where an application for exemption is made to the State Commissioner for Finance. 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.

In the event that a property owner received the Tenement rate demand notice and has made payment before receiving the LUC demand notice for the first time, the amount paid should be deducted from the LUC (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 LUC demand notice is received before any of the consolidated charges i.e. tenement rate, ground rent and neighborhood improvement charges, LUC should be paid as it covers all these rates and charges.

Meanwhile, the state government has extended the period for the payment of all annual LUC Demand Notices for 2018, to Saturday, April 14th, 2018. This is to enable Property Owners and affected occupiers take the option of enjoying the discounts available for the prompt and early payment of LUC invoices.


For further clarifications on all issues relating to the LUC, members of the public are enjoined to visit www.landusecharge.com or the Ministry of Finance, The Secretariat, Alausa, Ikeja.




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