Legal Alert – April 2015 – Grading and Classification of Hotels and Tourism Establishments Regulations

Introduction

According to BusinessDictionary.com, there is no globally accepted, industry generally recognised benchmark(s) for the grading, rating or classifying of Hotels and other Hospitality Establishments.

Large Hotel Chains, Groups and Hotel Associations in different countries however have some globally recognised Guide which though is/are only implemented within the Hotel Chain, Group or Association itself.

Presently in Nigeria, one of the Codified legal framework in this area is the Nigerian Tourism Development Corporation Act from which the Hospitality and Tourism Establishments (Registration, Grading and Classification) Regulations were made.

There is also for Lagos State, the Lagos State Hotel Licensing Law which authorises the Lagos State Ministry of Tourism and Inter-governmental Relations, through the Lagos State Hotel Licensing Authority, to classify, regulate, standardise and grade hospitality and other tourism businesses in Lagos State.

Guide to Grading and Classification Criteria

Hospitality and Tourism Establishments are required to be graded and classified based on the minimum operating standards of the facilities and the services provided, managed and maintained in each Grade or Class of such establishment.

A review of the various Grading or Classification Criteria in different countries reveals the following common minimum requirements for each Class or Grade of Hotel, Restaurant, or such other Hospitality Establishment. Some of these minimum requirements are examined in the following paragraphs.

ONE STAR – A One-Star Hotel has some modest, limited range of facilities, furnishing and refreshment with at least ten (10) ensuite bedrooms. It adheres to a high standard of facilities-wide cleanliness. Such Hotels are generally located in an accessible section of the City, with onsite representatives on a twenty-four (24) hour, seven (7) days a week basis.

TWO STAR – This grade of Hotel offers a higher standard of accommodation, with at least twenty (20) better-equipped ensuite bedrooms than a One Star Hotel. Each Guest Room must have a telephone and a coloured television (“TV”). It must also have a minimum parking area for at least 10 Guests cars.

THREE STAR – This grade of Hotel offers more spacious, nicer, better-equipped furnished ensuite rooms when compared to One Star and Two Star Hotels. It also has high-class decorations, coloured television in the ensuite rooms, showers, central air-conditioning, valet and room service, one or more bars and lounges in the Hotel, on-site Restaurant, and a small fitness centre with a standard swimming pool. It must also have a minimum of thirty (30) ensuite rooms in a more high-brow location of the City where it is located.

FOUR STAR – A Four Star Hotel comes with exceptionally well furnished ensuite rooms, with central air-conditioning, room and valet service, excellent restaurant and cuisine, concierge, porterage and luggage handling services, laundry, standard swimming pool and other recreational facilities. The location and environment where the Hotel is situated should be suitable for a Hotel with international standards. A Four Star Hotel also offers at least Fifty (50) ensuite rooms – 20% of which must be Suites and 25% must be single rooms.

A Four Star Hotel must also have at least one serviced elevator for its Guests, and another service elevator for its staff. Other facilities that it must have include: – fire detection facilities, closed circuit television (CCTV), a dining room, an internationally trained Manager, car park for at least 50 cars, Reception/Information Counter, Conference and Banquets Halls. At least 70% of its employees must be professionally trained.

FIVE STAR – This is usually an internationally recognised branded Hotel, offering the highest standards and luxuries in its premises, with some of the finest architecture, ambience, accommodation, amenities, range of top-class guests and services provided. A Five Star Hotel should have a gym, a bigger sized Swimming Pool, Cuisines, more than one Restaurant, Casino, on-site shopping facilities and other in-premises recreational facilities.

A Five Star Hotel also offers at least one serviced lift/elevator for its Guests and another lift/elevator for its employees and goods. It must have at least 100 bedrooms; 25% of these rooms must be Suites and 20% must be Single Rooms. It must also have Gardens,  a Lawn or Roof Garden, Reception and Information Centre, 24hours Concierge and Porter Service, room service, a central Air-Conditioning System, CCTV,  Wake-up Call Service, Conference and Banquet Halls, at least 2 Restaurants, Dining Rooms, 24hours coffee shop, a well-equipped Bar and a Car Park for at least 50 Guest cars.

Its Manager must be internationally trained and should speak, where possible, more than one internationally recognised language. At least 80% of its other personnel must be trained in providing the highest quality of hospitality services.

Classification of Restaurants

For Restaurants, their classification or grading is usually in One, Two, Three or Four Crown classification.

Offences

It is an offence for any Owner or Manager of any Hospitality, Leisure or Tourism Establishment to use any Star or Crown other than the one approved by the Hospitality Regulator. Fines and terms of imprisonment apply where such Owner or Manager is found guilty of any grading or classification infraction.

The Hospitality Regulator also has the legal authority to seal any business premises that constantly breaches any of the above Grading or Classification Regulations.

Conclusion

A nationally transparent, buyers and sellers accepted good-faith Criteria and Regulations for the grading and classifying of Hotels and other Hospitality Establishments is very important in building consumer confidence and trust in the Hospitality, Tourism and other leisure sectors of the economy.

DISCLAIMER NOTICE

This is a free educational material which is not intended to serve as a source of solicitation, advertisement or offering any legal advice. No Client/Attorney relationship is therefore created by this material. Readers are strongly advised to always seek professional legal advice to their specific individual situation(s) from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.Legal Alert – April 2015 – Grading and Classification of Hotels and Tourism Establishments Regulations

Legal Alert March 2015 Entertainment and Events Centre Tax

Introduction – FCT Entertainment and Events Centres Tax

To aid the development of Tourism Infrastructure in the Federal Capital Territory (“FCT”), the Federal Capital Territory Authority (“FCTA”) recently published the Entertainment and Events Centres Fees Regulations 2014 (“the Entertainment Fees Regulations 2014”).

The Entertainment Tax Act, Cap. 498 Laws of the FCT Nigeria 2007, which is the principal statute from which the FCT Minister derived the authority to publish the Entertainment Fees Regulations 2014, authorises the FCTA to require the proprietors of commercial entertainment establishments to charge the Patrons or Customers of such establishments, on behalf of the FCTA, an Entertainment Tax, which is charged at the rate of 5% of the total invoice issued to a customer, to the exclusion of the 5% Value Added Tax Charge.

An Entertainment Tax is not charged on the net proceeds of an entertainment activity devoted entirely to educational, artistic, literary, scientific, philanthropic or other charitable objectives. An Exemption Certification from the FCT Minister is however required for the exempted matters not to be charged to this tax.

Penalties and Fines

Some of the penalties for non-compliance with this Law include; not charging and remitting this Tax to the FCTA designated bank accounts; obstructing a Police Officer or other Officer from the FCTA from entering into the entertainment location to check on the property’s due compliance with this Law; fraud or forgeries of any paper-work relating to this Tax; etc.

Fines and Terms of imprisonment apply to any non-compliance with the provisions of this Law. Also, where either the Owner or the Manager of the entertainment establishment, and the patron or customer do not charge and pay the entertainment tax on the goods and services provided in such establishment, all the parties connected to the transaction are jointly and severally liable for any non-compliance with the provisions of this Law.

Entertainment and Events Centres Fee Regulations, 2014

Pursuant to Section 11 of the FCT Entertainment Tax Act, Cap. 498, the Minister for the FCT has now published the Entertainment and Events Centres Fees Regulations, 2014 (“the Entertainment Fees Regulations 2014”). The commencement date for these Regulations is 1st February, 2013.

The Entertainment Fees Regulations imposes on every patron or customer who uses or derives any benefit from any goods or services provided in a hospitality or leisure establishment in the FCT, a Five Per Cent (“5%”) Entertainment Fee on the total bill or invoice to the exclusion of the 5% Value Added Tax (“VAT”) on the same bill or invoice.

The goods and services contemplated in the Entertainment Fees Regulations includes the use of any Hotel, other Hospitality or Leisure Facilities or other Events Centres; and any goods and services consumed in any Restaurant; or the subscription to any paid television network, internet facilities or travelling agency services.

Registration, Collection and Remittance of Entertainment “Fees”

The Owner, Manager or Controller of any hospitality or other leisure business in the FCT is statutorily appointed as the Collecting Agent of this “Fee” on behalf of and to the sole benefit of the FCTA without any deductions made from the fee/tax.

All Hospitality establishments in the FCT are therefore required to, within a period of thirty (30) days of their commencement of business, register with the FCTA Entertainment and Events Centres Unit as a Collection Agent under these Regulations.

All Collecting Agents are also required to keep, maintain and preserve all their transaction records using an electronic billing and payment system; and to remit to the FCTA designated bank account, all the Entertainment Fees collected for the preceding week, on or before the close of business of the Monday of the following week.

All Entertainment fees are deemed to be a debt due from the Collecting Agent to the FCTA and are recoverable by the FCTA through the normal debt recovery process.

Penalties for Non-Compliance

Where a Collecting Agent fails to file a Return and remit the Entertainment “fees” collected within seven (7) days of such collection, as is required by the Entertainment Fees Regulations, such a Collecting Agent shall suffer a penalty of Ten Per Cent (“10%”), plus a additional fine of Five Per Cent (“5%”) on the interest charged Per Annum, over and above the prevailing Central Bank of Nigeria Minimum Rediscount Rate on the amount of the Entertainment fees due for payment.

Also, any Director, Manager, Senior Officer, Agent or employee of a Collecting Agent who connives to breach any of the provisions of the Entertainment Fees Regulations shall on conviction be guilty of an offence and liable on conviction to a term of imprisonment of Six (6) months, or to a fine of Two Million Naira (N2,000,000.00), or to both the fine and the term of imprisonment.

Appeals, Jurisdiction and Distrain.

Any person aggrieved with an entertainment tax assessment issued under the Entertainment Tax Act, must within Seven (7) days of the receipt of the assessment, appeal to the FCTA for a review, amendment or reversal of the assessment. Where the application for a review of the assessment is refused by the FCTA, the Complainant is entitled to institute a law suit against such an assessment at the High Court of Justice in the FCT. If no law suit or other challenge is lodged within Seven (7) days of the service of the assessment, the assessment shall be deemed to be final and conclusive.

The FCTA is empowered to seal and confiscate by distrain, the movable goods and other property of any defaulter to the registration, filing of returns and remittance(s) of the Entertainment Tax to FCTA. Where the assets distrained are of an immovable nature, an Order from a FCT High Court must be obtained before such immovable goods or property can be sold to satisfy such a final and conclusive entertainment tax assessment.

A Critic of the Entertainment Tax Act and Regulations.

A Tax or a Fee? The Entertainment Fees Regulations, 2014 changed the word “Tax”, which is the word used in the Entertainment Tax Act, to “Fees”. In addition to the absurdity of a Regulation(s) seeking to amend a Statute from which the Regulations was made, a fee is a terminology that is unknown to any Tax Law as a Fee can only be charged for a service rendered.

Constitutionality of Consumption Tax Laws –The power to pass any law imposing any form of tax must be derived or obtained from the Constitution.

It is therefore a matter of contention whether under the 1999 Constitution of the Federal Republic of Nigeria, and the Taxes and Levies (Approved List for Collection) Act, States Houses of Assembly have the taxing powers to legislate on Consumption and other Leisure Taxes as the Value Added Tax and the Taxation of Incomes, Profits and Capital Gains remains under the Exclusive Legislative List over which only the National Assembly, to the exclusion of the States Houses of Assembly, can enact laws.

Double Taxation? It is our further opinion that until the 1999 Constitution of the Federal Republic of Nigeria is again amended, all States and FCT Consumption Taxes in Nigeria, that are charged along-side Value Added Tax, infringe the double taxation rule; as the same subject matter or tax base should not incur a tax twice or multiple times. The latter practice is a very strong disincentive to voluntary tax compliance; and increases the prices of goods or services which impede the growth of commerce in an economy with a very weak consumer purchasing power.

Private Tax Collectors –Though the Federal Government has reportedly banned the use of private Tax Consultants or Collectors to collect taxes, their continuing use to the detriment of enhancing the infrastructure and other efficiency of the Federal and States Inland Revenue Services, is also a matter of much concern. This is especially when only the Inland Revenue Service of a State or of the Federal Government has the exclusive statutory authority to control the assessment, collection and accounting for all the taxes accruable to the relevant Government.

The guess that these private tax consultants are appointed under the delegative authority allowed for none core tax responsibilities under the First Schedule of the Companies Income Tax Act and Section 88 of the Personal Income Tax Act (as amended) is very doubtful as in practice, these private tax consultants are performing the exclusive core functions of the Inland Revenue Service.

DISCLAIMER NOTICE

This is a free educational material which is not intended to serve as a source of solicitation, advertisement or offering any legal advice. No Client/Attorney relationship is therefore created by this material. Readers are strongly advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

Legal Alert – February 2015 – Kinds and Proof of Land Ownership

Introduction

Land continues to be a very significant aspect of human existence and wealth creation. In recognition of this reality, the land laws in most countries make the ownership of land and the right to alienate such ownership to other persons, an inalienable constitutional right.

Due to insufficient enlightenment on the lawful methods to validly obtain and retain legal title to land, proof of ownership to land continues to be very contentious and litigious.

To mitigate against some of the risks associated with land acquisition and ownership, let us consider some of the most common methods of owning and retaining ownership to land, pre and post the enactment of twenty-first century land legislations.

Historical Methods of Land Ownership

FIRST SETTLERS – From time immemorial, the first legally recognised method of land ownership was with the first settlers on any land, who located, de-forested and cultivated the land over a very long period of time.

WAR AND CONQUEST – Tribal wars and victors from such wars usually took as spoils of such wars, the lands of the losing tribe.

CUSTOMARY GRANTS OF TITLE – Before the passing into Law of land legislations, land allocation and transfer were mostly done by the Community Head of the area where the land is situated.

INHERITANCE – Title to land has also evolved from one generation to the next generation by way of hereditary succession.

GIFTS – Title to some land have passed to other people by virtue of the legitimate owner of the land making a gift of the land to another person. It is however recommended that in this present day, where a gift of land is made, it should be embodied in a Deed of Gift to which the consent of the appropriate statutory authority should be obtained.

SALE OF LAND – Advancements in civilisation, industrialisation and the economic migration of people have led to the sale of land being the most common method of acquiring title to land. Where a sale of land is under customary law, such sale will only be valid where money is paid and the land is delivered to the buyer in the presence of at least two (2) witnesses. Where a sale of land is not under customary law, a formal written agreement is required to validate the sale.

Land Use Act and Land Ownership 

The enactment of the Land Use Act in 1978 has brought into force the jettisoning of the old methods of acquiring land, as enumerated above; with all land not previously owned before 1978, now vested in the Governor of the State – for land in urban areas – or the Chairman of the Local Government Area – for land in rural areas; both of whom hold all such land in trust, for the common benefit of the people of such a State or Local Government Area where the land is situated.

CERTIFICATE OF OCCUPANCY. In furtherance of the authority conferred on the Governor by the Land Use Act, a Governor of a State is the only authority permitted to issue a Certificate of Occupancy to Applicants that fulfil the conditions precedent for the issuance of a Certificate of Occupancy; upon the payment of the prescribed fees. For land in rural areas, it is the Local Government Chairman that issues the Customary Rights of Occupancy.

Like any other contract, the terms and conditions of a Certificate of Occupancy, which includes the payment of the annual rent, must be strictly adhered to as any breach or default will lead to the Certificate of Occupancy or the Customary Right of Occupancy being revoked.

TRANSFER OF TITLE – Assignment, Mortgage, long Lease or Sublease. It is unlawful for any Certificate of Occupancy or any Customary Right of Occupancy to be transferred to another party by assignment, mortgage, transfer of possession, sublease or otherwise without the consent of the Governor – or Local Government Chairman as may apply – being first obtained. For land in urban areas, it is the consent of the Governor of that State that is required; and for land in the rural areas, it is the consent of the Chairman of the Local Government that is required.

Where the prior consent of the Governor or Local Government Chairman is not obtained to any alienation of any interest in land, such alienation shall be held to be null and void.

Conclusion

As owing any form of interest in any real estate is a very important business decision that an individual or corporate entity will make during his or her or its lifetime, greater care and circumspect must be exercised in acquiring and retaining valid legal title to this continually appreciating asset.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

Legal Alert – January 2015 – Change of Accounting Year – Law and Tax Implications

Introduction

By Law, every registered corporation must at least on an annual basis, file with the Companies Registry, its Audited Accounts or Audited Financial Statements which is a periodic summary of the transactions of the company for the subject period.

The Audited Financial Statements usually discloses the company’s assets, its liabilities, balance sheet, profit and loss accounts which in some jurisdictions is also known as the Income Statements.

Traditionally, the Accounting Reporting Period of a company is 1st January to 31st December of each calendar year. A company can however elect or choose to change its accounting date, subject to compliances with the provisions of the Companies and Allied Matters Act (“CAMA”), and the Companies Income Tax Act (“CITA”).

Possible Reasons for Change of Accounting Date

Some of the reasons that may warrant a company to change its accounting reporting date include:-

  1. The need to synchronise the accounting reporting dates of a company with the accounting reporting dates of other companies within a Group of companies.
  2. The convenience of having a singular stock and audit process at the same period of the year for companies within the same group, with common ownership and control.
  3. Where a merger or acquisition occurs, the accounting dates of the affected companies will need to be harmonised into a single accounting reporting date.

Companies Registry – Notice of Change of Accounting Date

CAMA gives to the Directors of a company the discretion to determine on what date, and for what period in each calendar year, the company’s Audited Financial Statements will be published. Once the date for the publishing of the Financial Statements is determined, a formal communication of such notification must be transmitted to the Corporate Affairs Commission (“CAC”) within fourteen (14) days.

Where the accounting period and the publication date of a company’s Audited Financial Statement is changed by a Shareholders’ special resolution, notice of such change must also be communicated to CAC.

However, the period between a former accounting date and a new one must not exceed eighteen (18) months.

For a holding company, except for good reason(s), the financial reporting dates for the holding company and its subsidiaries must be the same date.

Tax Implication of Change of Accounting Dates.

To prevent the deliberate failure to pay taxes, or to pay a properly assessed tax, or to delay in paying its taxes; which is commonly known as tax evasion; and thereby incur punitive penalties for non-compliance, it is highly recommended that a company that changes its accounting reporting dates must ensure that it files it’s tax returns covering each and every day, from the date of the last tax return to the new accounting reporting date.

By the provisions of the Companies Income Tax Act  (“CITA”), any company that changes its accounting reporting date from the traditional 1st January – 31st December of each year, to another reporting period, must communicate the change to the Tax Authority, which is the Federal Inland Revenue Service (“FIRS”).

The Tax Authority is in turn required to, on the receipt of the notice of change of accounting date, compute such a company’s taxes from the date of the last filed tax return to the last date before the new accounting reporting date commences.

Penalty for Failure to File Tax Returns After Date Change

Where however, a company that changes its accounting reporting date fails to file its tax returns with the Audited Accounts or Financial Statements attached, up to the last date before the new accounting date starts, the tax authority is required to compute such a company’s taxes for the relevant year and for the next two (2) years following by utilising the Tax Authority’s Best Of Judgment Assessment in arriving at the taxes payable by such a company.

Taxation and Best of Judgement

A Best of Judgement Tax Assessment arises where a tax payer, in response to a formal tax demand, fails to provide to the Tax Authority sufficient and convincing income records; or does not pay any tax for the tax assessment period in question.

Our Courts of Law do not however allow a Best of Judgement Tax Assessment that is manifestly unreasonable, irrespective of whether the tax payer challenges the Best of Judgement tax assessment or not.

Mindful of the judicial authorities on this point, the Federal Inland Revenue Service has issued tax circulars which naturally emphasises that a Best of Judgement tax assessment for an on-going business concern will be based on the preceding year’s tax assessment, with the next two (2) years following the year when the accounting date change occurred.

Naturally, the greater of the aggregate tax assessment for the last accounting period and the tax assessment for the subsequent two (2) years will be chosen by the Tax Authority as the Best of Judgment tax assessment for the tax payer to liquidate this tax debt.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

Introduction.

Taxation is a statutory contract between a government and its citizens, for the citizen’s proportionate financial contributions with which public services that will enhance development and general well-being are provided.

Like all contracts, the statute of limitation rule also applies to tax and pension matters.

A Statute of Limitation is the time limit or period within which a claim can be asserted or insisted upon. Some of the reasons for the statute of limitation rule include the need for claims to be timely and diligently pursued or presented while the evidence and the witnesses are available, and their memory of the facts and events are fresh.

A further reason for the statute of limitation rule is that it brings predictability and finality to claims within a reasonable period of time.

Statute of Limitation in Tax Matters.

Under the Companies Income Tax Act and the Personal Income Tax Act, the limitation period for asserting tax claims is six (6) years from the date when the final tax assessment became due for payment.

The statute of limitation rule will not however apply where the tax payer is guilty of fraud, wilful default or neglect in the settlement of a tax assessment. These very wide exemptions to the limitation period rule continues to be used by the tax authorities to deprive tax payers of claiming relinquishment of “stale” tax assessments under this six (6) years rule.

What is Fraud, Wilful Default or Neglect?

Fraud is the deliberate misrepresentation or perversion or concealment of the truth with the intention that another person will rely on such misrepresentation, perversion or concealment, to his, or her, or its detriment or prejudice.

Wilful Default on the other hand is the voluntary and intentional omission to carry out a duty.

Neglect is the omission to pay proper attention.

Pre–Action Notice and Statute of Limitation

By Section 12 (2) of the Education Tax Act, legal actions against the Education Trust Fund, its Board of Trustees and other senior officers of the Education Trust Fund must be commenced within three (3) months after the infringing act, neglect or default has occurred. Where the damage or injury is of a continuing nature, legal action must be commenced within six (6) months after the continuance complained about ceased.

To commence a legal action against the Education Trust Fund, a one (1) month pre-action notice must be served on this Fund. And the pre-action notice must disclose the name and place of abode of the complainant, the particulars of the injury, the neglect or default complained about, and the reliefs intended to be claimed as a result.

Under the Pension Reform Act 2014, a pre-action notice of thirty (30) days is also required to be served on the National Pension Commission before any law suit can be validly commenced.

Conclusion

A judicial pronouncement on what amounts to wilful default or neglect in asserting a tax claim that is unpaid six (6) years after the final assessment was issued will be very helpful in reconciling the current practice where the interpretation of what amounts to wilful default or neglect by the tax authorities administratively holds unchallengeably.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website http://www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

Introduction.

The joint ownership of a property or properties continues to be a more common means of wealth creation. Joint ownership in some other instances serve as a succession plan that reduces estate taxes, Attorney Fees, etc.

As it is common with humans, the joint ownership of a property, either by contract, gift or by inheritance can lead to disputes and litigation between the surviving owner or owners and the deceased owner’s heirs, especially if the joint ownership instrument is not carefully drafted.

Joint Tenancy.

Joint Tenancy is the right to the ownership of a property, by more than one person, such that on the death of any of the joint owners, the deceased owner’s portion of the property passes to the surviving owner or owners of the property. The deceased owner’s estate and heirs under a joint ownership structure will receive absolutely nothing.

Also, subject to whether words of severance or separation are used in the title instrument under which the property is held, an owner to a jointly held property cannot alienate his or her interest in such a property without the express consent of the other co-owner(s) to the property.

Joint Owners and Tenants-in-Common.

The opposite to the above described joint tenancy scenario is the principle known as Tenants-in-Common which arises where the property’s instrument of title have words of severance or separation or distribution of the subject jointly held property. Where words of severance or separation are used, the words of severance or separation entitles the heirs or estate of a deceased owner to assume ownership of the deceased share of the property, with the surviving owner or owners of the property.

Conclusion.

Ensuring that the title document under which a property that is jointly owned is carefully drafted to achieve the estate plan of the owners of the property is strongly recommended. Where the joint owner or owners do not want their heirs to inherit any portion of the property on their demise, then no words of severance or separation should be used when drafting the instrument of ownership. Where the intention is for the heirs to inherit, then words of severance, separation or distribution should be used when drafting the instrument of ownership.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

Introduction

A common global money laundering preventative measure is for Banks and other Designated Non-Financial Institutions (“DNFIs”) like Professional Practice Firms, Hotels, Casinos and the like, who perform fiduciary duties to always ensure that before and during the period of rendering these fiduciary services, they obtain and retain updated verifiable identification and location documentation on their customers or clients.

One of the know-your-customer (“KYC”) requirement is for the Institution concerned to request and obtain from all its customers, a third-party reference indicative of the good standing of the Customer to enjoy the fiduciary services of the Institution, Firm or Corporation concerned.

Unfortunately, many third parties who sign Reference Forms are not aware, and where they are aware, they are not mindful of the money laundering risks, which are criminal in nature, of signing Reference Forms in favour of persons whose character they are not very familiar with and cannot therefore vouch for.

Some of the money laundering risks of signing a Reference Form or forms is considered in the following paragraphs.

Money Laundering and KYC

The Money Laundering (Prohibition) Act as amended in 2012, requires all Financial and DNFIs to always ensure that they undertake due diligence investigation when establishing and maintaining a business relationship with a customer.

Such due diligence investigation must authenticate the identity of the customer, the nature of the customer’s business, sources of funds and ascertain a money laundering risk profile for each customer or client.

Some of the verifiable means of identifying a customer includes obtaining the customer’s proof of identification – i.e. international passport or national identity card or driver’s license, etc; and proof of residence – i.e. utility bills; and third-party recommendation – i.e. signed Reference Form by an individual or Institution, Anti-Money Laundering EFCC/SCUML Registration Certificate; Tax Identification Number (“TIN”); etc.

As a result of a Credit Bureau System that is still at its elementary stage of development, cases of the identity of a customer of a financial Institution or a DNFI, when a financial crime is committed, usually exposes the Referee(s) to criminal investigation, with possible police detention and avoidable Attorney fees.

Anti-Money Laundering/Combating Financing of Terrorism Regulation

The Anti-Money Laundering/Combating Financing of Terrorism Regulations (“AML/CFT Regulations”) provides some guidance to financial institutions under the regulatory purview of the Central Bank of Nigeria (“CBN”) regarding compliance with the Laws on money laundering, terrorism, trafficking in human beings and the sexual exploitation of children, etc.

Thus, financial institutions should not establish any business relationship with a customer until all the relevant parties to the transaction are independently identifiable, and the nature of the business that the customer intends to conduct are ascertainable.

The AML/CFT Regulations requires financial institutions to regularly conduct customer due diligence, which for individuals will include confirming the Customer or Client correct legal names, permanent physical and or residential address, telephone numbers and email address, nationality, etc. The customer providing the Bank with his or her or its personal and other Bank References is also a legal requirement.

Some of the sanctions for non-compliance with the above due-diligence requirements include the imposition of a penalty not exceeding N2,000,000 (Two Million Naira) for each infringement, from the first to the fifth infringement. On the sixth infringement, the CBN shall set up an investigation panel to forensically examine the infringements and recommend more punitive punishment for the offenders.

Conclusion

It is strongly recommended that you heed the warning in the Reference Form provided by financial institutions and DFNIs which warning usually states that “CAUTION: it is dangerous to introduce any individual not well known to you”.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, criticisms, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website http://www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

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