Court Rules On Voluntariness Of Residents’ Associations On Payment Of Dues, Levies

In Nigeria, especially in Lagos, developers of residential estates are known to make purchasers in the completed estate to become members of an ‘estate association’. The developers posit that the association put in place oversees in the estate the provision of shared services such as security, waste management, streetlights, among others.

Developers coordinate such facility services issues on a group basis and collect dues/levies in form of an annual service charge from members of the Estate’s Residential Association. Residential communities have also adopted the same strategy by forming similar associations to ensure peaceful coexistence, maintaining the community as well as protecting the collective interests of members of the association.

Upon becoming a resident of the community, you automatically become a member of such associations, while dues/levies/monthly or annual service charges are collected from the members to carry out developmental projects in the community. The issue of whether residents are obliged to join these associations has been tested in a suit at the Federal High Court, Lagos which rule on it.

According to a statement from ProShare, the Federal High Court sitting in Lagos recently delivered a judgment in the case of Megawatts Nigeria Limited v. Registered Trustees of Gbagada Phase II Residents’ Association (Suit No. FHC/L/CS/982/2020) (“the Megawatts Case”), that persons who live in a residential estate cannot be compelled to join the membership of the residential associations.

Therefore, compelling residents to be members of the estate association has been declared unconstitutional. In the absence of membership, there is no basis for the association seeking to collect dues/levies from a resident. By implication, this means that membership of such associations and payment of dues/levies by residents of an estate is now voluntary.

ProShare stated that sometime in January 2016, Megawatts Nigeria Ltd (“the Company”) moved its head office into Gbagada Phase II, Lagos. It was requested by the Gbagada Phase II Residents’ Association (the “Association”) which was established in 2008 to pay its estate dues from 2017 to 2020. Not comfortable with this demand, the Company instituted an action against the Association seeking, among other things, a declaration that it is not a member of the Association and cannot be compelled to join; and a declaration that compelling residents of Gbagada Phase II to be members of the Association is unconstitutional.

The Company then argued that it is not a member of the Association, insisting that since it provides its own security, waste management system and other services allegedly provided by the Association, it is not bound to pay dues to the Association. On its part, the Association argued that the Company, by having its office within the estate, is a member of the Association and is bound to pay requisite dues and levies, as same is used for the management of the estate.

Justice Oweibo, sitting at the Federal High Court, Lagos on Friday, 25th of September 2020 in its decision considered the provisions of Section 40 and 41 of the Constitution of the Federal Republic of Nigeria 1999 (as amended); and the Supreme Court decision in Agbai & Ors v. Okogbue (1991) LPELR-225 (SC) P 64 to hold as follows:

“Where a person voluntarily becomes a member of an association, the member cannot complain against the custom of the association. However, where a person is presumably a member of an association by operation of an alleged custom, he cannot be compelled to abide by the customs of the association against his will, as that would be unconstitutional. Thus, the court declared that the act of the Association coercing the company into becoming its member is illegal and unconstitutional.”

With this decision, it is envisioned that extant members of residential associations may start withdrawing their memberships from the association; while new residents may decline membership of the association; Members may now refuse to fulfil their financial obligation towards the association; and levies that are due and unpaid may remain outstanding; Ongoing community developmental project may be abandoned when the association runs out of funds to complete them; Embarking on new projects within estates may be difficult, if not impossible; while Management and maintenance of the estate facilities may come to a halt.

Culled from ProShare

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