The Chairman, Nigerian Institution of Estate Surveyors and
Valuers, Lagos State branch, Mr. Rogba Orimalade,
tells TOBI AWORINDE that the reduction of the
land use charge by the Lagos State Government is a step in the
right direction
W hat is
your reaction to the new Lagos Land Use Charge?
There is movement from the government, which I believe, after
the outcry and calls from quite a number of professional
organisations regarding the flaws in the law, is commendable. I
think it is commendable that government was able to shift ground in
trying to reduce the overall charges of the LUC. It should be
commendable, moving from a position of where we were two weeks ago.
At least, there is some movement down the line. I think the key
thing is to, first of all, appreciate that move. However, also
important to note — and this is something that the media especially
and social critics noted — that even when government mentioned that
it was going to the state House of Assembly to make necessary
amendments. (What is the meaning of this sentence
please?)
Now, that is the area I feel, as the Chairman of the (Lagos)
branch (of the Nigerian Institution of Estate Surveyors and
Valuers), people and stakeholders should explore, instead of making
statements totally condemning the decision. What we have done as an
institution is to inform the government, which we have done through
the Commissioner for Finance, at the stakeholders meeting, which
was a few days ago. Continentally, it was held on the same day that
decision was made that inasmuch as government has shifted ground,
it is not ‘hip hop hurray’. Based on that, the institution has
actually set up a technical committee made up of some of the best
brains in the institution to come up with a technical report within
10 days that we will present to government.
What are the factors to consider in the
LUC?
The issue of government making use of market value as the
methodology to generate whatever charges that is given at the end
of the day. This basically means using the capital value of the
property and using the necessary tax reliefs and other charge rates
to reduce it. That is an ongoing debate and it’s a debate that we
feel in this institution is healthy. However, the reality is that
market value is a methodology that is used in lots of countries in
the world, even one or two countries in Africa. It is basically
capital value that is used in South Africa. So, that is a fact.
The right method to use in this context — that is, in Nigeria,
for a yearly charge — is debatable. However, I think the fact has
to be established that market value can be used. It might not be
the ideal, but it can be used, and that is what (the Lagos State)
government has used. I am stressing this so that we get the issues
very clearly. The main issue is a situation where, by virtue of
using capital value and the relief is not sufficient enough to
reduce the impact of that capital value that will bring about a
realistic annual charge; that, we feel, is the area that government
can look at.
What can the government do?
There are so many ways that they can look at it. They can look
at it from the angle of readjusting further the tax relief. They
are looking at 40 per cent now, irrespective of the fact that, at
the end of the day, they said, ’50 per cent off’. We feel that you
could look at even that tax relief and increase it, such that you
will thoroughly discount that capital value and bring it down to a
level that is almost like converting it to an annual rental,
without initially changing any part of the formula or methodology
in arriving at that. The question I ask people is, ‘Why is it that
last year or the year before, people were not shouting?’ The reason
why they are shouting now is that, all of a sudden, there is an
increase. So, the argument that there is an amalgamation of the
laws and that the tenement rate, which is there, shouldn’t be there
is something that, I believe, from the outset when this law was
created — even though there was a bit of noise — should have been
taken up at that time. That is my personal opinion; that is not the
opinion of the institution.
Irrespective of that, right now, the focus for me, personally,
without pre-empting the technical report coming up, the point is
that capital value being brought up has to be heavily discounted in
such a way that it will invariably create an annual rental, almost
like an annual minimum charge that should not come close to the
parting rent of that kind of asset. What the government has done is
put a certain tax relief of 40 per cent, put charge rates on
various classes of property, and give, as they have done now, 50
per cent (discounts). We are not talking about the 50 per cent.
That is commendable, but we are looking at the fundamentals. If you
are going to use capital value, you are going to discount it to a
level in which it will make sense and it will be able to take into
consideration modern realities in the economy as of now. A lot of
these issues are things which we are x-raying and it is going to
form a strong part of our technical report. But I just feel it is
important to clarify the argument regarding market value.
Government has decided what it wants to use. From its angle,
there are countries that have used it and they have used it well.
That is, I believe, government’s position. However, in those
countries, do they significantly discount the capital value because
it is a yearly charge? That, I believe, should be the key focus.
Everything I am saying is what I am aware of now. I don’t know of
(the charge) previously. I don’t even know of this (current) charge
that came. I don’t know anything about us being involved in that.
But right now, thank God I am the Chairman of the branch, I can
confirm this now.
Can you elaborate on the charge rate and how it will
affect Lagosians?
We run an economy where even the retirees pay rent, an economy
like Nigeria, where we don’t have mortgage. If the statisticians
can bring up the percentages of mortgage, how many people own
houses? It is very minimal. So, if you are leasing your property
and you are paid rent, you own a property and are using it as an
investment tool. That means the occupants who pay rent are going to
be liable to pay those charges. In an economy, unlike other
economies in the world, where mortgage works, if you are now
increasing that kind of charge, it is only natural that you are
going to have the kind of outcry that you have had. So, the charge
rate is also something that should be looked at, especially
focusing on properties that are commercially inclined. We believe
that the basic principles of charge rate on the various classes of
property should be looked at properly. They form a majority of the
property classes — properties that people live in that either
generate rent or (the occupants) pay rent.
Culled From Punch
The Chairman, Nigerian Institution of Estate Surveyors and
Valuers, Lagos State branch, Mr. Rogba Orimalade,
tells TOBI AWORINDE that the reduction of the
land use charge by the Lagos State Government is a step in the
right direction
W hat is
your reaction to the new Lagos Land Use Charge?
There is movement from the government, which I believe, after
the outcry and calls from quite a number of professional
organisations regarding the flaws in the law, is commendable. I
think it is commendable that government was able to shift ground in
trying to reduce the overall charges of the LUC. It should be
commendable, moving from a position of where we were two weeks ago.
At least, there is some movement down the line. I think the key
thing is to, first of all, appreciate that move. However, also
important to note — and this is something that the media especially
and social critics noted — that even when government mentioned that
it was going to the state House of Assembly to make necessary
amendments. (What is the meaning of this sentence
please?)
Now, that is the area I feel, as the Chairman of the (Lagos)
branch (of the Nigerian Institution of Estate Surveyors and
Valuers), people and stakeholders should explore, instead of making
statements totally condemning the decision. What we have done as an
institution is to inform the government, which we have done through
the Commissioner for Finance, at the stakeholders meeting, which
was a few days ago. Continentally, it was held on the same day that
decision was made that inasmuch as government has shifted ground,
it is not ‘hip hop hurray’. Based on that, the institution has
actually set up a technical committee made up of some of the best
brains in the institution to come up with a technical report within
10 days that we will present to government.
What are the factors to consider in the
LUC?
The issue of government making use of market value as the
methodology to generate whatever charges that is given at the end
of the day. This basically means using the capital value of the
property and using the necessary tax reliefs and other charge rates
to reduce it. That is an ongoing debate and it’s a debate that we
feel in this institution is healthy. However, the reality is that
market value is a methodology that is used in lots of countries in
the world, even one or two countries in Africa. It is basically
capital value that is used in South Africa. So, that is a fact.
The right method to use in this context — that is, in Nigeria,
for a yearly charge — is debatable. However, I think the fact has
to be established that market value can be used. It might not be
the ideal, but it can be used, and that is what (the Lagos State)
government has used. I am stressing this so that we get the issues
very clearly. The main issue is a situation where, by virtue of
using capital value and the relief is not sufficient enough to
reduce the impact of that capital value that will bring about a
realistic annual charge; that, we feel, is the area that government
can look at.
What can the government do?
There are so many ways that they can look at it. They can look
at it from the angle of readjusting further the tax relief. They
are looking at 40 per cent now, irrespective of the fact that, at
the end of the day, they said, ’50 per cent off’. We feel that you
could look at even that tax relief and increase it, such that you
will thoroughly discount that capital value and bring it down to a
level that is almost like converting it to an annual rental,
without initially changing any part of the formula or methodology
in arriving at that. The question I ask people is, ‘Why is it that
last year or the year before, people were not shouting?’ The reason
why they are shouting now is that, all of a sudden, there is an
increase. So, the argument that there is an amalgamation of the
laws and that the tenement rate, which is there, shouldn’t be there
is something that, I believe, from the outset when this law was
created — even though there was a bit of noise — should have been
taken up at that time. That is my personal opinion; that is not the
opinion of the institution.
Irrespective of that, right now, the focus for me, personally,
without pre-empting the technical report coming up, the point is
that capital value being brought up has to be heavily discounted in
such a way that it will invariably create an annual rental, almost
like an annual minimum charge that should not come close to the
parting rent of that kind of asset. What the government has done is
put a certain tax relief of 40 per cent, put charge rates on
various classes of property, and give, as they have done now, 50
per cent (discounts). We are not talking about the 50 per cent.
That is commendable, but we are looking at the fundamentals. If you
are going to use capital value, you are going to discount it to a
level in which it will make sense and it will be able to take into
consideration modern realities in the economy as of now. A lot of
these issues are things which we are x-raying and it is going to
form a strong part of our technical report. But I just feel it is
important to clarify the argument regarding market value.
Government has decided what it wants to use. From its angle,
there are countries that have used it and they have used it well.
That is, I believe, government’s position. However, in those
countries, do they significantly discount the capital value because
it is a yearly charge? That, I believe, should be the key focus.
Everything I am saying is what I am aware of now. I don’t know of
(the charge) previously. I don’t even know of this (current) charge
that came. I don’t know anything about us being involved in that.
But right now, thank God I am the Chairman of the branch, I can
confirm this now.
Can you elaborate on the charge rate and how it will
affect Lagosians?
We run an economy where even the retirees pay rent, an economy
like Nigeria, where we don’t have mortgage. If the statisticians
can bring up the percentages of mortgage, how many people own
houses? It is very minimal. So, if you are leasing your property
and you are paid rent, you own a property and are using it as an
investment tool. That means the occupants who pay rent are going to
be liable to pay those charges. In an economy, unlike other
economies in the world, where mortgage works, if you are now
increasing that kind of charge, it is only natural that you are
going to have the kind of outcry that you have had. So, the charge
rate is also something that should be looked at, especially
focusing on properties that are commercially inclined. We believe
that the basic principles of charge rate on the various classes of
property should be looked at properly. They form a majority of the
property classes — properties that people live in that either
generate rent or (the occupants) pay rent.
Culled From Punch
Read more https://nairalaw.com/lagos-land-use-charge-method-is-globally-accepted-estate-valuers/