Testing the Limits of Estate Associations’ Powers: Megawatts Nig Ltd v. Gbagada Phase 2 Residents’ Association

Residents or development associations in gated communities are a reality of urban life in Nigeria- they are like mini local governments, stepping in to provide security, infrastructure, sanitation etc services where government provision is lacking or inadequate.

Issues around the legal standing of estate associations’ rights to compel residents to join the associations and/or pay dues which fund their services generated enormous interest in the last one week with the circulation of an alleged “landmark Judgment” of the Supreme Court of Nigeria, “FAMAKINWA & ORS V. ODOFIN OLOJA ESTATE RESIDENTS’ ASSOCIATION & ORS (2016) LPELR-41066(SC)” , purportedly reported by LawPavilion. LawPavilion issued a disclaimer that it did not report any such case and lawyers have told Arbiterz that they are not aware of any such case.

Arbiterz however found a 2020 Federal High Court Lagos case on the question of whether a residents association of an estate can impose automatic membership on residents. “Megawatts Nig Ltd v. Registered Trustees of Gbagada Phase 2 Residents’ Association”.

Background of the Case

Megawatts Nigeria Limited, a company operating within the Gbagada Phase II estate, was approached by the estate’s residents’ association to pay annual dues ranging from ₦200,000 to ₦300,000. The company contended that it was not a member of the association and that it provided its own security, waste management, and other services, thereby not benefiting from the association’s services. Consequently, Megawatts Nigeria Limited refused to pay the demanded dues.

The residents’ association argued that, as a company operating within the estate, Megawatts Nigeria Limited was automatically a member of the association and was obligated to pay the requisite dues and levies for the management of the estate.

The High Court’s Decision of the Legal Limits to the Power of Estate Associations 

Justice Nicholas Oweibo, presiding over the case, examined Sections 40 and 41 of the Constitution of the Federal Republic of Nigeria 1999 (as amended), which guarantee the rights to freedom of assembly and association. The court held that while individuals who voluntarily become members of an association are bound by its customs, those who are presumed members by operation of an alleged custom cannot be compelled to abide by the association’s customs against their will, as such compulsion would be unconstitutional.

Therefore, the court declared that the act of the association coercing Megawatts Nigeria Limited into becoming its member was illegal and unconstitutional.

At the heart of this case lies the issue of compulsory membership in a residents’ association, a matter that many urban and suburban Nigerian estates grapple with as community associations play an increasingly significant role in the maintenance and management of gated residential environments.

The case, which pits Megawatts Nig Ltd (the claimant) against the Registered Trustees of Gbagada Phase 2 Residents’ Association (the defendant), explores whether such associations can unilaterally impose membership on residents, or if consent must be given by the individual homeowner or tenant.

In the landmark decision, the Federal High Court in Lagos ruled that residents of estates cannot be compelled to join or pay dues to residents’ associations. The judgment, delivered on September 25, 2020 has significant implications for property owners and tenants living in gate communities or estates across Nigeria and the associations which provide critical services in these estates.

 

Implications of the Ruling

For now, the Megawatts Nig Ltd v. Registered Trustees of Gbagada Phase 2 Residents’ Association ruling stands as a landmark decision; it sets a precedent for how the rights and responsibilities of residents and associations are interpreted and enforced, and may guide future litigation on similar issues. It affirms the voluntary nature of membership in residents’ associations and reinforces constitutional rights to freedom of association.

The Federal High Court judgment establishes that membership in such associations is voluntary, and residents cannot be compelled to join or pay dues. This decision may pose challenges to funding and managing communal services traditionally provided by residents’ associations, such as security, waste management, and infrastructure maintenance.

Some lawyers are of the opinion that this decision protects the individual rights of residents and potentially shields them from liability for paying multiple “taxes” for local services.

But the majority opinion seems to be that granting an option not to join and not to pay for the services that residents’ would cripple the capacity of residents’ associations to provide critical services that make gate communities safe and pleasant places to live in.

Membership and Financial Obligations to Estate Associations Are Widely Accepted 

The estate associations are generally accepted to be doing a good job and the overwhelming majority of residents willingly pay dues or levies to fund their activities. The services that the associations provide are “indivisible” i.e. they cannot be provided only to residents who pay to enjoy them.

 

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