BusinessDay 21 Sep 2017

BUSINESS DAY
25
Thursday 21 September 2017
BDLegalBusiness
C002D5556
Research Intelligence Practice Management Industry Report Partnerships
INSIDE
Obaseki, Irukera
join Conversation
on Consumer Protection
in Benin City
Pg 26
Mahmoud describes
2016/2017 Legal Year as
a year of ‘undiluted
pleasure’
Pg 26
Mediation seen as future for
dispute resolution in Nigeria
for dispute resolution
Taxability of voluntary pension
contributions in Nigeria: Appraising
the public notices issued by
the Lagos State Internal Revenue
Service and The Joint Tax Board
Pg 28
Pg 27
Evaluating the regulation of real estate
in Lagos state; the clock is ticking
The city of Lagos, popularly referred to as “Las
Gidi” by its young and vibrant inhabitants, is
known as one of Africa’s most vivacious and
culturally diverse cities. Many residents of
the city who pride themselves as “Lagosians”
may not understand why this is so. Perhaps, those who
appreciate its commercial history, will understand why
although, the smallest state in the country in terms of
land mass, Lagos will potentially remain industrious,
highly populated and the preferred city for multinationals
and locals alike to do business in Nigeria.
Due to its coastal nature, and resultant ease of travel,
Lagos in the pre-colonial era, attracted individuals
from various tribes within Nigeria who were interested
in fishing and other economic activities. In addition,
Lagos served as a center of trans-atlantic slave trade
for the Portuguese and other European countries
in West Africa. During the colonial era, its potential
to drive income for the British colony was quickly
identified. By creating ports, duties and administrative
levies were charged on imported and exported
goods. Courts were established not only to resolve
disputes but also to generate revenue for the colony.
As economic activities increased, markets were built,
financial institutions were established and roads were
constructed to continue the facilitation of trade. This
in summary is how Lagos became and remains the
economic capital of Nigeria.
Across the world, urban development is recognised
as a major contributor to economic development. In
other words, real estate is fundamental to financial
advancement. Lagos as a fast growing city, is not left
out in identifying this fact. It is for this reason that
the past and present governments of the State have
aspired to develop Lagos into a mega city. To achieve
this however, availability of housing, healthcare, effective
sewage, drainage and waste management systems,
hotels, education and recreational amenities is crucial.
Local and Foreign Investment by the private sector is
also paramount in developing these facilities.
According to the Central Bank of Nigeria, Lagos
State’s real estate sector is valued at about $45.6 Billion.
Specifically, due to the exponential growth of its ever
increasing population, and its increasing need for infrastructure,
the state government in 2003, signed into
law, the Public Private Partnership law to encourage
private participation in infrastructural development to
enable the state meet its housing and basic infrastructure
demands. To promote investment in the real estate
sector, one notable regulatory development in Nigeria
is that REITs have now been granted pioneer status,
effective August 2017. In effect, companies registered as REITs and
listed on the Nigerian Stock exchange will be granted tax holidays
for a period of 3 to 5 years.
Challenges
Similar to other emerging economies however, investment in
real estate is not without drawbacks. Some will argue that Lagos is
closer to becoming one of the biggest slums in the world than it is
to becoming a mega city. This observation arises due to the impact
of urbanization on major cities across the world.
Ownership
For every law student and commercial lawyer in Nigeria, one issue
remains mind-boggling. The Land Use Act which is the federal
law governing interest in land in Nigeria, vests title in land in the
state to be held in trust for its citizens. This therefore, is not peculiar
to Lagos State, as the law is applicable to Nigeria’s 36 states. Following
that position of the law after its promulgation in 1979, every
person who acquires interest in land is granted a Certificate of
Occupancy for a period not exceeding 99 years.
In essence under the law, there is no freehold interest in land
and any acquisition or transfer in title to a third party only grants
interest for the remainder years from the date of the Certificate
of Occupancy. The questions therefore arise- Does the allocation
automatically renew after 99 years? Is the holder of legal title
required to pay huge sums of money to retain possession after
99years? In any case, what happens to developments on the land
where renewal is not achievable? These are pertinent questions
that remain unanswered and create uncertainties for both local
and foreign investors. Hopefully, the government will recognise
the need for a clear policy direction on this issue.
Construction
According to the media, in 2016, Lagos recorded the highest
number of incidents of building collapses in the past 10 years.
Many will recall the incident involving a six-storey building popularly
known as “The Synagogue” which left over 100 people dead
and scores injured. Many will also recall the more recent tragedy
which occurred within an estate known as The Lekki Gardens
which left about 35 workers dead. According to reports, orders
of the Lagos State Building Control Agency, prohibiting further
construction of the building were flouted. Generally, building
collapses have been identified to be caused by failure to abide
by building codes, using substandard materials, improper piling,
foundational faults, amongst others.
To control indiscriminate construction in Lagos State, the
previous administration passed into law, the Urban and Regional
Planning and Development Law (2010). Under this law, the Lagos
State Building and Control Agency is conferred with the primary
responsibility of enforcing construction regulations and issuing
building permits. The same law also creates a number of other
agencies responsible for ensuring quality control, inspection and
testing of building materials, and issuing certificates verifying
that buildings are safe and fit for purpose.
It is due to non-compliance with this law, that structures, for
which no permits/approvals were obtained are demolished from
time to time. The demolition exercises are however criticized
by many and labelled as being targeted at the more vulnerable
population without providing them with alternative homes or
business locations.
The reality however remains that, majority of the agencies do
not give effect to the purpose for which they were established. It
is not uncommon in Lagos Island for example to see evidently
illegal developments for which permits could not have been lawfully
issued or obtained due to their location and structure. It is
ADERONKE ALEX-ADEDIPE
STRACHAN PARTNERS
Continues on page 27