Author : Dykes, van Heerden – ATTORNEYS & CONVEYANCERS
PROPERTY RATES BILL:
The Local Government Municipal Property Rates Bill came into effect on the 1st of July 2004 and has caused much debate in South Africa. In this article is an overview of important sections which will ultimately affect the rates and taxes that will be paid by each property owner in South Africa. The Rates Bill regulates the power of the 284 municipalities in South Africa to impose rates on property and deals with the exclusion of certain properties from rating in the national interest, provisions for municipalities to implement a transparent and fair system of exemptions, reductions and rebates through their rating policies, provisions for fair and equitable valuation methods of properties, and provisions for the objection and appeal process. Section 229 of the Constitution clearly states that any municipality may impose:-
1. Rates on a property;
2. Surcharges on fees for services provided by or on behalf of the municipality
3. All other taxes, levies or duties.
The Rates Bill therefore regulates and provides a uniform framework for the rating of property in accordance with Section 229 of our Constitution. It is crucial that the exact workings of the Rates Bill is properly understood in order to ensure that municipalities succeed in their goals and that property rates are applied.
The council of the municipality must adopt a policy consistent with the Rates Bill in respect of the levying of rates on rateable property situated within the area of the municipality. A rates policy adopted takes effect on the effective date of the first valuation roll prepared by the municipality. A rates policy must:-
1. Treat all persons liable for rates equitably;
2. Determine the criteria to be applied by the municipality in arriving at its rates policy.
It is very important to note that before a municipality can adopt its rates policy, the municipality must follow a process of community participation. The municipal manager must conspicuously display a draft rates policy for a period of at least 30 (thirty) days at the municipality’s head and satellite offices and libraries and if the municipality has a website, display such draft rates policy on its website and advertise in the media inviting the local community to submit comments and representations to the municipality concerned within a specific period which may not be less than 30 (thirty) days. After approval the draft rates policy becomes the final rates policy which must be reviewed annually.
Levying of Rates
Rates must be levied on all rateable property. Rates may differ depending on the, use of property, the permitted use of property and the geographical area in which the property is situated. The Rates bill makes provision for various categories of rateable property. Some examples of such categories are residential properties, industrial properties, business and commercial properties, farm properties, small holdings, state owned municipal properties, public service infrastructure, privately owned towns and formal and informal settlements.
The Amount Due for Rates
The rate levied by the municipality on property must be a certain amount in the Rand calculated on the market value of the property. The rate becomes payable from the start of the municipality’s financial year. The rate that is to be levied by the municipality must be passed by a majority resolution by the municipal council. This resolution must be promulgated by publishing it in the provincial gazette.
Exemptions, Reductions and Rebates
A municipality may exempt a specific category of owners of property from payment of the rate levied on their property. Property owners that may qualify for an exemption, reduction or rebate include owners who are dependant on pensions or social grants for their livelihood and owners temporally without income. It is important to note that municipalities may not exercise this power to levy rates on property in a way that would materially and unreasonably prejudice the national economic policies or economic activities across its boundaries.
Newly rateable properties
A newly rateable property means any rateable property on which property rates were not levied before. The rate levied on such newly rateable properties must be phased in over a period of 3 (three) financial years in order to assist such owners.
Liability for rates
The rate levied by a municipality on property must be paid by the owner of the property. Joint owners are jointly and severally liable for the amount due. A municipality must furnish each person liable for the payment of a rate with a written account specifying the amount due for rates, the date on or before which the amount is payable, how the amount was calculated, and the market value of the property.
However, the onus is on the property owner to ensure that he receives such written account and if no written account has been received, such property owner must make the necessary enquiries from the municipality.
General valuation of rateable property
The municipality must prepare a general valuation of all properties within its area. In order to prepare the valuation roll a municipality must designate a person as its municipal valuer. It is the municipal valuer’s duty to value all properties, to prepare a valuation roll, sign and certify the valuation roll, submit the valuation roll to the municipal manager, consider and decide on objections to the valuation roll, attend meetings of the appeals board and provide the municipality with administrative support incidental to the valuations roll.
The municipal valuer is a very important person that plays a key role in ultimately determining the rates that each property owner in South Africa will pay. Such municipal valuer must be a registered professional valuer or a professional associated valuer.
There are a number of methods to prepare the valuation roll. One method is to do an inspection of each and every property. The municipal valuer may between 07h30 and 19h00 on any day, except a Sunday or public holiday, enter any property in the municipal area and inspect the property for the purpose of the valuation. Don’t allow any person into your property on the basis that he is a municipal valuer unless such person produces an identity card. The municipal valuer is entitled to information regarding the property and the property owner must provide any additional information required by the municipal valuer in order to assist the municipal valuer in determining the new value of the property.
All properties must be valued in accordance with generally recognized valuation practices, methods and standards. A physical inspection of the property to be valued is optional. Comparative, analytical and other techniques may be used, and if the available market related data of a rateable property is not sufficient to determine the market value, then the municipal valuer may value the property in accordance with any mass valuation system or technique approved by the municipality concerned.
The property will be valued in terms of its market value. The market value of a property is defined as the amount the property would have realized if sold on the date of valuation in the open market by a willing seller to a willing buyer.
Once all properties have been valued a valuation roll must be prepared. This must list all properties within the municipality’s area. The valuation roll must reflect the registered description of the property, the physical address, the extent and the market value of the property and the name of the owner.
The valuation roll must be handed to the municipal manager who must within 21 days from receipt of the roll publish the valuation roll in the provincial gazette and in the media, and must clearly state that the roll is open for public inspection for a period of not less than 30 days. It is vital that each and every property owner in South Africa scrutinizes the valuation roll in order to ascertain that the new valuation attached to the property is fair and reasonable. Should any property owner believe that the new valuation is not fair and reasonable and is not market related, then such property owner can object to the valuation roll.
The objection must be made in writing to the municipal valuer who must consider the objection and decide, adjust or add to the valuation roll in accordance with his decision taken. Should a property owner not be satisfied with the decision taken after an objection has been lodged, then such property owner may lodge an appeal to an Appeal’s Board clearly stating that such property owner is not satisfied with the decision of the municipal valuer. The chairperson of the Appeal’s Board must then convene a meeting of the Appeal’s Board in order to make a final decision. If an appeal is lodged, such appeal does not defer a property owner’s liability for payment of rates during the period of the appeal.
Sectional title schemes
The new Rate Bill provides that a rate on property which is subject to a sectional title scheme must be levied on the individual sectional title units and not on the property as a whole. Therefore the rates levied is payable by the owner of the unit. The municipality may not recover the rate on a sectional title unit from the Body Corporate and the Body Corporate may not apportion and collect rates from the owners of the sectional title units in the scheme. The same principal applies to a cluster development.
There is no doubt that the new Rates Bill has caused much controversy. If it is applied fairly, it should not have a great impact on the property market. The public must however use every opportunity to ensure that the rate charged is fair and reasonable and that the monies collected are not wasted.
The above should be seen as a brief comment on the property rates bill and our interpretation thereof and should not be seen as an extensive guideline.
Please obtain a full legal opinion if you wish to act on any aspect hereof as the guideline is not fully comprehensive.