There are many ways through which the recently and hurriedly enacted Lagos State Land Use Charge Law 2018 (LUC Law) may be looked at as an anti-people, draconian and highly insentient law that is unworthy of a distressed state like Lagos or a country like Nigeria. To say the least, the law speaks volume of the kind of parochial minds elected to run our political sphere. In my earlier article on this subject titled ‘Lagos Land Use Charge Law 2018: Just Before Lagos Covers Its Mess’, I have made a subtle response to the failed attempts made by the Executive Chairman of Lagos Internal Revenue Service (LIRS) and the convener of Coalition of Real Estate Investors and Surveyors in Lagos, Mr. Ayokunle Gregory to play a shield for the LUC Law.
In this present article, I will consider the difficult and inequitable situation that tenants and lessees are going to be put through by the LUC Law, but before then I shall briefly comment on some of the assertions made by the Governor of Lagos State, Mr. Akinwunmi Ambode, on the LUC Law at a parley he had with some business executives under the auspices of the Organized Private Sector (OPS) on 6th March 2018. The Governor affirmatively said at the parley that the whole essence of the review of the LUC Law was to take care of infrastructural deficits in Lagos State. To justify and defend the LUC Law, he reportedly said that:
“We are 24 million. Taxable adults in Lagos are eight million. The number of people that actually submitted tax returns in 2017 is two million and then only 700,000 people paid their taxes”
The validity of this statement as a means of justification for the present scope of liable properties and persons under the LUC Law is absolutely doubtful. Assuming without conceding that the taxable adults in Lagos is mere eight million out of which only two million indeed submitted tax returns annually, His Excellency will agree with me that Lagos State has the machinery and facility to track down the remaining six million taxable people, instead of imposing additional taxes on persons and properties that have already parted with consideration in respect of the properties that they are being asked to pay land use charge on. In this respect, I have both corporate and individual tenants/lessees in mind.
If indeed there are eight million taxable adults in Lagos State and the population of Lagos is believed by the Governor to be 24 million, where do we classify the remaining 16 million people and why are they not taxable? What I see is a situation where we have suitable millions of adults who are unemployed and as such are not eligible to pay taxes. What Mr. Ambode therefore failed to appreciate in his defence of the LUC Law is that most of these millions of unemployed and underemployed people are tenants and lessees, and Lagos State is imposing the responsibility to pay land use charge on them in spite of their already depressed and unemployed/underemployed state?
The Inequitable Burden on Tenants and Lessees:
I have argued earlier that the land use charge is a form of property tax, and for all intent and purposes, it should be imposed on the owners who are receiving gains, rents or enjoying the tenements—not on tenants or lessees who have already paid consideration for their occupation of the property to the owners. In most of the reviews on the LUC Law I have read, little or no emphasis has been placed on how Lagos State Government has inconsiderably and inequitably placed contractual tenants (such as yearly, half-yearly or monthly tenants) in a situation where the assessed land use charge is most likely to be paid by them, and not the landlords of the chargeable properties to whom the tenants have already paid rents.
To bring this point home, terms such as ‘lodger’, ‘occupier’, ‘owner’ and ‘chargeable person’ have to be critically considered as defined under the LUC Law. A lodger is simply defined as a licensee with very limited rights on the property. An occupier may be a tenant or lessee who is occupying the property. An owner (landlord) is the one that owns the property and receives money, rents and proceeds from the lodger (i.e licensee) and occupier (i.e tenant or lessee) for the occupation of the property. A chargeable person is defined as a person liable to pay the land use charge.
The liability provision of the LUC Law is contained in section 9(1) which provides, inter alia, that ‘the owner of a property or occupier of a lease of less than ten (10) years is liable to pay Land Use Charge in respect of a taxable property.’ It should be understood that contractual tenants and contractual tenancy come under a lease of less than ten years. The reason for this is that there is really no strict and legally significant distinction between a lease and a tenancy. Both of them have the same features and ingredients. As a matter of fact, the Tenancy Law of Lagos State 2011 has established a type of tenancy known as fixed tenancy which is exactly a lease. As such, the provision of section 9(1) of the LUC Law covers tenants of all descriptions and types. The only occupier of a property that the LUC Law intends to exclude and impliedly excludes is the lodger or licensee as defined under the definition section of the law. This is how the drafters of the LUC Law wittingly established the liability of tenants or lessees whose occupation of the property is less than ten years to pay the land use charge.
Now, section 9(1) uses a disjunctive preposition ‘or’ which means that it does not state categorically who between the owner (landlord) of the property and the occupier (i.e tenant or lessee) should bear the land use charge— because it is a compulsory payment, either of them must pay it. This is where the approach of Lagos State Government in this regard is insensitive, inequitable and inconsiderate. I will advance the following reasons to buttress this point:
- Owing to serious housing challenges in Lagos State, the tenant or lessee does not always have equal bargaining power when it comes to letting or leasing property from the landlord. The indecisiveness of Lagos State Government on who should pay between the landlord and the occupier under the instant LUC Law will equip the landlord with a weapon to (by hook or by crook) impose the liability to pay on the tenant/lessee who has already paid rents to the landlord in respect of the property being charged. This has a resemblance of double taxation or we can call it being asked to pay for the use of a property which you have already paid for. We always see this happen every time in practice.
- When Tenancy Law of Lagos State 2011 was enacted, Lagos State Government completely took out the rent control regulation that had been used for about 15 years to prevent landlords from indiscriminate rent increase. Since this rent deregulation, landlords have singlehandedly and continuously increased rents year in, year out without considering the economic realities that appear to affect the tenants more than the landlords. While battling with this issue without the State’s willingness to bring back the rent control regulation, Lagos State Government still put the tenant/lessee in a difficult position where the payment of the accrued land use charge may ultimately fall on them.
This is and will be the quagmire of tenants/lessees occupying a tenancy or lease of less than 10 years in Lagos State, as the LUC Law took effect in February 2018. This inequity is more severe for tenants/lessees involved in a tenancy or lease for 10 years and above. For such occupants, the responsibility to pay the assessed land use charge is unarguably taken away from the landlord and imposed on the tenant/lessee outright. I submit that asking a tenant/lessee of a 10-year and above lease to mandatorily be the one to pay the land use charge after already paying consideration for his occupation to the landlord of the property is a misplacement of justice. It is repugnant, and it is not suitable for any State that has the best interest of both its individual and corporate residents in mind.
When Mr. Ambode finished his speech at the parley he had with the OPS which had business executives such as Alhaji Dangote, Otunba Subomi Balogun, Alhaji Rasak Okoya, Jim Ovia, Tony Elemelu, Oba Otudeko among others in attendance, he was commended by them, and Jim Ovia gave him assurance that his mandate would be renewed by them in 2019. Mr. Ambode may have, in his mind and because of the assurance given to him by the OPS capitalists and oligarchs, pretended that all is well with the supposed 25 million residents of Lagos. I wonder if what we run now is Oligarchy and not Democracy. What the LUC Law has created for Lagos State Government is a mess, and I honestly believe no degree of sugar-coated tales can clean the mess, except through a responsible reversal or review of the LUC Law. May I quickly remind His Excellency that the power to even increase what is to be collected as tenement rate or land use charge is not that of the Governor of Lagos State or Lagos State House of Assembly. All the State Government can do is to make law for it, not to usurp the local government councils’ constitutional power to determine what they want to charge or collect as tenement rate or land use charge. This is a constitutional question. When we get to that bridge, we will cross it.
–Bolaji Ramos, Esq.