15 STATUTORY LAWS GOVERNING LAND/PROPERTY TRANSACTIONS IN NIGERIA: PART 2

15 STATUTORY LAWS GOVERNING LAND/PROPERTY TRANSACTIONS IN NIGERIA: PART 2

In my last post, I talked about the first part of the various statutory laws governing land/property transactions in Nigeria (http://realestatesurveyor.blogspot.com/2014/02/15-statutory-laws-governing.html)

So today, I will be writing on the concluding part of those statutory laws governing land and landed property transactions in Nigeria.

The purpose of writing on these statutory laws is basically to enlighten and expose all those people carrying or aspiring to carry out land and property transactions (mortgage, lease, assignment/conveyance, alienation, transfer and ownership) in Nigeria about the various government laws regulating and guiding any of those transactions.

The second part of the statutory laws governing land and property transactions in Nigeria are:

8        Stamp Duty Act

9        Withholding Tax Act

10    Capital Gains Tax Act

11    Value Added Tax Act

12    Personal Income Tax Act

13    Federal Mortgage Bank Act

14    Mortgage Institutions Act

15    National Housing Fund Act

8.         STAMP DUTY ACT CAP. S8 LFN 2004

This is a statutory levy that is imposed on certain matters in Nigeria inclusive of land and landed property transactions such as mortgage bonds, settlement of estates, lease agreements and conveyance of property.

The law stipulated various stamp duty charges payable on any land and property transactions in Nigeria.

Any transaction relating to the exchange, conveyance, lease, mortgage of land and landed property document/agreement that is not duly stamped with the appropriate postage stamp will be regarded as been useless and illegal because stamping of land/property transaction document is a compulsory requirement for registering of title documents/instruments as well as getting governor’s consent in any land and property transaction.

The relevant sections in the Act guiding land and property transactions in Nigeria are: 52,53,54,55,56,57.58,59,62,63,64,65, 68,69,70, 80,81 and 82

9.         WITHHOLDING TAX ACT

Withholding tax is the deduction of a payable levy due to a benefitting party by the paying party for onward remittance to the appropriate tax authority of the benefitting party.

Withholding tax is a form of tax required by statutory law to be withhold by a party from each payment made to another contracting party from the in­come or services rendered to such party.

Withholding tax been witheld is required to be remitted to Federal Inland Revenue Service (FIRS) at the appropriate period as stipulated in the law establishing the act. if such withholding tax is received from corporate companies, while the one for individuals is remitted to the State Inland Revenue Service (SIRS) board in each state of the federation on behalf of the state government.

The Inland Revenue Service is in turn mandated by the withholding tax law to issue a Withholding Tax Credit Note for the benefit of the latter party, part of whose income was withheld.

The various aspects of land and property transactions in Nigeria where withholding tax is applicable are:

·         All aspect of building, construction and related services

·         All types of contract and agency arrangement, other than outright sale and purchase of goods and property in the ordinary course of business

·         Consultancy, Technical and Professional services

·         Management services

·         Commissions

10.       CAPITAL GAINS TAX ACT CAP 354 LFN 1990

This is a form of tax payable on gains made on the disposal of chargeable asset by any person in Nigeria either an individual or a corporate entity.

The motive behind the enactment of the act was to levy a certain amount of money inform of tax on gains accruing to chargeable persons in Nigeria from the disposal of their chargeable assets.

Chargeable persons include:

·         Individuals (both residents and non-residents)

·         Trustees in respect of chargeable asset by the trust disposed

·         Partners in respect of chargeable assets of the partnership disposed

·         Personal representatives in respect of chargeable assets of a deceased person disposed to 3^rd parties other than the beneficiaries

·         Companies on chargeable assets of the company disposed.

Section 3 of the Act defined chargeable assets as-

(a)   Options, debts and incorporeal property generally;

(b)   Any currency other than Nigerian currency; and

(c)    Any form of property created by the person disposing of it, or otherwise coming to be owned without been acquired.

Gains arising from the disposal of assets are taxed at the rate of 10%. Taxable assets include land and building situated in Nigeria, as well as plant and machinery.

11.       VALUE ADDED TAX (AMENDMENT) ACT of 2007

Value added tax is a tax imposed, charged and payable on the supply of certain goods and services in Nigeria.

The rate of tax chargeable on all goods and services is 5% except those exempted in the First Schedule of the Act.

The act went further in defining taxable persons to “include an individual or body of individuals, family, corporations sole, trustee or executor or, a person who carries out in a place an economic activity, a person exploiting tangible or intangible property for the purpose of obtaining income there from by way of trade or business or a person or agency of government acting in that capacity”

The act makes it mandatory for professional Estate Surveyors and Valuers to include a 5% levy as Value Added Tax on the gross professional fee or commission charged their clients on any professional services relating to land and property transactions rendered to such clients.

The 5% VAT been levied on clients is for the professional services rendered to them by the professional Estate Surveyor and Valuer.

12.       PERSONAL INCOME TAX ACT

This is another important statutory law imposed on any income gained from the ownership, leased, assignment and transfer of land and landed properties by the owner or trustees of such land and landed property.

Section 1 of the act states that “There is hereby imposed a tax on the income-

(a) of individuals, communities and families; and

(b) arising or due to a trustee or estate,

which shall be determined under and be subject to the provisions of this Act”

Various sections in the act that governs any land and property transactions in Nigeria are: 1,2,3,4,5,16, 27, 40, 41, 54, 55, 56, 68, 69, 74, 76, 77, 79, 80, 85, 94, 95 and 96

13.       FEDERAL MORTGAGE BANK ACT

The establish of the Federal Mortgage Bank of Nigeria is to provide long-term credit facilities to mortgage institutions in Nigeria and encourage and promote the development of mortgage institutions at the rural, local, State and Federal levels.

Section 5 explained the functions of the Mortgage Bank shall be “To

 (a) provide long-term credit facilities to mortgage institutions in Nigeria at such rates and such terms as may be determined by the Board in accordance with the policy directed by the Federal Government, being rates and terms designed to enable the mortgage institutions to grant comparable facilities to Nigerian individuals desiring to acquire houses of their own;

(b) license and encourage the emergence and growth of the required number of viable secondary mortgage institutions to service the need of housing delivery in all parts of Nigeria”

The federal mortgage bank of Nigeria operates as a secondary mortgage institution to serve the needs of the housing delivery in all parts of Nigeria, as well as provide credit facilities to primary mortgage institutions, real estate development companies or bodies, housing corporations and housing operatives in Nigeria at such rates and on such terms and conditions as may be determined, from time to time, by the Board of the Mortgage Bank in accordance with the Regulations or Guidelines of the Central Bank of Nigeria. 

Section 6 explains the powers of the Mortgage Bank to carry out researches that will improve the housing patterns in both rural and urban centres as well as on the activities of primary mortgage institutions’ activities and the construction industry in Nigeria.

Section 6 (1) of the Mortgage Bank Act states that “Without prejudice to the generality of section 5 of this Act, the Mortgage Bank shall have power to-

(d) carry out research aimed at improving housing patterns and standards in both urban and rural areas of Nigeria;

(e) carry out research on mortgage finance activities and the building construction industry in Nigeria”

14.       MORTGAGE INSTITUTIONS ACT

The Act made provisions for the establishment and licensing of mortgage institutions in Nigeria to grant loans and advance to individuals for the purchase or construction of a dwelling house; carry out improvement or extension of an existing dwelling house; and to accept savings and deposits from members of the public and to pay interest thereon.

Relevant sections of the Mortgage Institutions Act that pertains to land/property ownership or transaction in Nigeria are; Sections 1, 5, 6 and 7 

SECTION 1 (1) of the Act states that “No mortgage business shall be transacted in Nigeria except by a company which is duly incorporated in Nigeria for that purpose and in possession of a valid license granted by the Minister authorizing it to do so”

The same Act also identified the basic requirements needed for any company desirous of carrying out mortgage business in Nigeria.

Section 5 of the Act make provisions for the power granted mortgage institutions in Nigeria to grant loan advancement to people for the purpose of purchasing/constructing a dwelling house or carry out improvement/extension on an existing dwelling house, as well as determine the interest rate applicable/payable on such loan, deposit and/or advancement.

Section 5 (1) states that “Every mortgage institution shall have power to- 

(a)   grant loan and advance to an individual for the purchase or construction of a dwelling house

(b)   grant loan and advance to any person for the improvement or extension of a dwelling house”

Section 5 (2) states that “The interest rate applicable to any deposit, loan and advance shall be in accordance with the interest rate determined by the Federal Mortgage Bank”

The Act also empowers mortgage institutions to conduct evaluation exercise on every mortgage loan proposal brought before it by any person or individual and to also supervise/monitor any construction or extension of a dwelling house in respect for which the loan is granted or to be granted.

Section 6 states that “Every mortgage institution shall-

(a)   conduct proper evaluation of the mortgage loan proposal submitted to it; and

(b)   monitor the construction or extension of any dwelling house in respect of which a loan is granted”

Section 7 of the Mortgage Institutions Act laid emphasis on the requirements as to security for any loan advancement to be granted, and certain restrictions on operations of the mortgage institutions.

The activities and operations of mortgage institutions in Nigeria is monitored and controlled by the Federal Mortgage Bank Act of Nigeria.

15.       NATIONAL HOUSING FUND ACT

This is another important statutory law governing and guiding land and landed property transactions in Nigeria in the form of either home ownership or development by anybody who aspires to own a dwelling house of their own. 

Section 1 of the National Housing Fund act states that-

(1) There is hereby established a fund to be known as the National Housing Fund (in this Act referred to as "the Fund").

(2) All contributions and other monies required or prescribed by this Act shall be paid into the Fund

Section 2 explained the aims and objectives of the Fund shall be to-

(a) facilitate the mobilisation of the Fund for the provision of houses for Nigerians at affordable prices;

(b) ensure the constant supply of loans to Nigerians for the purpose of building, purchasing and improvement of residential houses;

(c) provide incentives for the capital market to invest in property development;

(d) encourage the development of specific programmes that would ensure effective financing of housing development, in particular low cost housing for low income workers;

(e) provide proper policy control over the allocation of resources and funds between the housing sector and other sectors of the Nigerian economy; and

(j) provide long-term loans to mortgage institutions for on-lending to contributions to the Fund.

To qualify for this fund, any aspiring home owner must have been a contributor to the National Housing Fund Scheme from his/her paid employment. Such contribution must have been for a period not less than 6 months with satisfactory evidence of steady flow of income from their employment in order to guarantee loan repayment.

The National Housing Fund Act also stipulate the conditions for contributing into the fund by Nigerian workers as well as the interest rate payable on such contribution made

Section 4 states that-

(1) A Nigerian worker earning an income of N3,OOO and above per annum in both the public and the private sectors of the economy shall contribute 2.5 per cent of his basic monthly salary to the Fund.

(2) An interest rate of 4 per cent shall be payable on contributions made under subsection (1) of this section.

The act also refers to a contributor to be a worker from whose basic salary or income deductions are made and paid into the Fund in accordance with the provisions of the Act. While a "worker" means an employee to whom salaries are paid and include a self-employed person who derives income from his/her employment.

A contributor to the National Housing Fund scheme is entitled to a maximum loan advancement of fifteen million naira (N15,000,000) or as may be determined by the primary mortgage institution in the country. An individual borrower can not be granted loan advancement in excess of 90% of the total cost or value of the property to be mortgaged.

The interest rate for each loan advancement as stipulated in the Act is not more than 6% per annum with a repayment period of not more than 25-30 years.

Relevant sections in the act governing land and property transaction/ownership in Nigeria are: 1, 2, 3, 4, 9, 10, 14, 16, 17, 20, 21 and 22 

All these fifteen (15) statutory laws that I have written about are very important to be taken cognizance of by all those aspiring to embark on any form of land and/or landed property transactions either in the form of mortgage, lease, assignment/conveyance, alienation, transfer and ownership as they will help guide through a smooth completion of any of those land and property transactions

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ABOUT THE AUTHOR

Adeniyi Akinjiyan is a Higher National Diploma (HND) holder of Estate Management from the prestigious Yaba College of Technology, Yaba, Lagos state, Nigeria. He possesses a Professional Practice Certificate in Estate Surveying and Valuation from the Nigerian Institution of Estate Surveyors and Valuers (NIESV).

He is the principal consultant of Aakient Consultants Ltd, a highly progressive and consolidated property and construction project management company, which is committed to providing the highest level of professional services in meeting clients’ real estate needs.

Feel free to contact him at: aakientconsultants@gmail.com