Concerns over compensation rates for land acquisition

• Estate valuers to propose unified market-related rates

The inadequacy of current compensation and acquisition practices has continued to generate concerns among practitioners because of its inability to account for the losses incurred by project-affected persons. While advocating reforms in the compulsory acquisition process that guarantees transparency, and prompt payment, they want the government to balance development needs with human dignity and social justice, CHINEDUM UWAEGBULAM reports.

There is uneasy calm in the construction and real estate sector, following agitations to reform and establish equitable compensation rates for land acquisition in the country.

The demand for the review of laws establishing the compensation for land acquired for public purposes has been recurring as the various legislation governing compensation payments are not always in alignment. The constitution provides for the payment of compensation where property is acquired for public purposes.

The Petroleum and Minerals Act also provides for compensation where land is required for activities related to petroleum projects and adopts a market approach in the assessment of compensation.

However, the Land Use Act (LUA) is the most problematic in that it vests ownership of all land in the state through the governor, which is contrary to the reality in most communities where the people believe they have absolute ownership.

The Act prescribes a method of assessment of the quantum of compensation, through the depreciated replacement approach, that ignores the value of land since the land belongs to the state, which has led to inadequate compensation.

Experts are seeking the introduction of a new framework for assessing the value of crops and economic trees, which are not regularly, traded commodities like houses. They said most of the figures derived from the rates prescribed by the land officers of the Federal Ministry of Housing and Urban Development are obsolete and need to be updated.

The Chairman, Compensation and Right of Way Faculty, Nigerian Institution of Estate Surveyors and Valuers (NIESV), Mr Ezenwa Odigbo, told The Guardian that assessment of the quantum of compensation under the LUA, through the depreciated replacement approach, that ignores the value of land is inadequate.

“The claim is restricted to replacement cost of structures, crops, economic trees and rent, if any, paid on the land in the year of acquisition. This is restrictive and ignores issues of cost of alternative land, injurious affection, loss of income, economic and social costs of dislocation and resettlement,” he said.

He said compensation that is not market-related is inadequate, adding, “The owners of bare land risk receiving no compensation as the exclusion of land value in computation of compensation is a great injustice.”

According to him, most acquiring authorities do not have adequate budgets for compensation and seek to pay arbitrary sums assessed by non-valuers. “The delay in payment of assessed compensation can last for several years during which time inflation and other factors have rendered the valuations obsolete and the project-affected persons will be unable to afford replacement property.

“Within the period, issues of encroachment and construction of houses of the proposed project site/route arise together with litigation and petitions,” he said.

He told The Guardian that the institution is already in the process of producing an updated unified market-related compensation rate schedule to be used in the industry. He said there should be adequate budgetary allocation for compensation payments and prolonged delays should be avoided as it leads to complications, litigation and project abandonment.

The Branch Chairman, NIESV Rivers State, Hamilton Odom, said that the affected properties are assessed based on their replacement cost rather than what a willing buyer will pay for such properties in the open market.

“It is even more worrisome that land is only factored into the extent of ground rent paid during the year of acquisition. This is often a negligible sum if paid at all. The land value component is practically absent in the valuation computations.

“All these place claimants in disadvantaged positions, which negate the basic principle of compulsory acquisition, which is to put all claimants in the position they were before the acquisition,” he said.

He emphasised that compulsory acquisition payment for land, crops and economic trees, structures, installations and other improvements is grossly inadequate. “If the purpose of the law is to ensure a just and equitable payment to all claimants for their affected properties, then valuation should be viewed on an open market basis.

“Crops and economic trees should be assessed by looking at the farm gate prices and net yearly incomes capitalised over the life of such crops and economic trees. The current practice where rates are arbitrarily fixed by the Chief Lands Officer of a state is unfair, unjust and unequitable. Some of the rates adopted have not been reviewed for more than 20 years.

“Compulsorily acquiring someone’s land without paying for it is punitive, draconian and unprogressive. People’s livelihoods are sometimes tied to the land they farm, build or live in. Our laws should be people-centred, rather than a tool to drive people into poverty and misery,” Odom said.

For him, “replacement costs for structures, installations and improvements should also take adequate cognisance of prevailing construction costs in the country. It is rather unfortunate that some of the rates adopted by acquiring authorities are obsolete and do not reflect current market trends.”

He noted the lack of transparency in the valuation process after enumeration. “The current practice where everything is shrouded in secrecy to the extent that no one knows what is to be paid is unacceptable,” Odom added.

Professor of Land Management and Valuation, Rivers State University of Science and Technology (RSUST), Iyenemi Kakulu, told The Guardian that the issues are multiple, but the bottom line is that compensation should be adequate.

“It should be such that the individual should not be in a worse position than he/she would have been, had the land or property not been acquired in the first place.

“Payments of refunds for ground rents paid during the year of revocation and for crops and other unexhausted improvements are some of the many things that should be compensated for to arrive at adequacy.”

Kakulu explained that the only reason for compulsory acquisition is an overriding public interest. “The public needs to be notified explicitly as to what this overriding interest is, why it overrides their constitutional rights to own land, and what the benefits to the public would be as this would get their buy-in.”

According to her, the compensation rates in use are a form of mass appraisal. “Their use is suitable provided they are determined as at the time of valuation and then applied to a large expanse and are not historical rates. With inflation and other economic parameters changing frequently, historical rates may lead to undervaluation.”

NIESV’s Second Vice President, Dr Emmanuel Mark, said the country’s development trajectory requires a humane approach to compulsory land acquisition issues, adding that the current process often prioritises progress over people, leading to displacement, livelihood loss, and social unrest. He told The Guardian that by adopting scientific reforms in the compulsory acquisition process, “we can balance development needs with human dignity and social justice.”

Mark, a past president, International Right of Ways (IRWA) Nigeria, said practitioners will continue to raise concerns about the inadequacy of current compensation and acquisition practices, because of its inability to fully account for the losses incurred by Project Affected persons (PAPs). He disclosed that compensation for structures and installations does not account for the cost of reconstruction, relocation, or replacement.

“Historically, determining compensation for land acquisition has been a subjective process, relying on surveyors’ opinions and market research. However, this approach has led to inconsistencies, disputes, and mistrust,” Mark added.