This above legislation regulates the power of a Municipality to impose rates and taxes on property owners in the area falling under a Municipality to enable Government, at a local level, to develop and address service delivery priorities for the country and also promote the economic and financial viability of the cost relating to the running of Municipalities.
The Constitution of the Republic of South Africa, 1996, obliges Municipalities to be part of the development and service delivery requirements of the country. Property rates are therefore a critical source of revenue for Municipalities to achieve their constitutional objectives.
It is necessary for the Council of a Municipality to adopt a policy regarding the raising of rates on property owners and such Rates Policy must:
• Treat persons liable for rates equitably;
• Determine different criteria to be applied for different categories of properties;
• Exempt certain category of owners of properties from payment of rates;
• Grant rebates or a reduction in the rate to certain owners of a specific category of properties; and
• Increase rates for properties in the Municipality.
To determine the amount of rates payable, the Municipality is required to ascertain the market value of the property in question. Once the market value of a property is determined, the Municipality then applies a rating factor to that property in accordance with the use of such property as determined by the zoning categories. This is known as the “rating factor”. Invariably commercial properties, by way of example, will have a higher rating factor than those properties used for residential purposes.
Certain property owners, as stated, are able to be exempted from paying rates and such category of owners may include:
• Indigent owners;
• Owners dependent on pensions or social grants for their livelihood;
• Owners temporarily without income;
• Owners of residential properties with a market value lower than an amount determined by the Municipality; or
• Owners of agricultural properties who are bona fide farmers.
It is incumbent upon the Municipal Manager to annually table in the Council of the Municipality a list of all exemptions, rebates and reductions granted by the Municipality.
The starting point is for the Municipality to cause a general valuation to be made of all properties in the Municipality and a Valuation Role to be prepared for the properties. The properties are valued during a general valuation which is required to be made available for public inspection by property owners. Owners are afforded an opportunity to object to the value which the Municipality has placed on the owner’s property. Once the market value has been determined in accordance with the Valuation Role, the value is valid for that financial year and further financial years but not for a period of more than four (4) financial years.
This year is the date for the amended general Valuation Role to be finalised and the Nelson Mandela Bay Municipality has caused notices to be sent out to property owners advising of the market value of the property owned by them and informing owners that objections to the valuation will be accommodated during the period 26 February 2021 to 30 April 2021. Any objections received after this date will be rejected.
When ascertaining the market value of a property, certain valuation criteria are required to be followed by the Municipality including:
• A physical inspection of the property as an option;
• Comparative, analytical and other systems or techniques including aerial photography and computer assisted mass appraisal systems or techniques; and
• Market related data relating to any category of rateable property.
Most Municipalities utilise a mass appraisal system relating to residential properties which includes a comparative analysis of property prices realised in the area where the property exists. However, such mass appraisal system can, in certain instances, produce unsubstantiated variations in an area where certain properties are not comparable to other properties in terms of their market value. Accordingly, whilst the mass appraisal system is cost effective for a Municipality, it cannot serve to distinguish accurately between individual valuations placed on residential properties and accordingly there may be an unjustified variance relating to the true market value of a residential property.
Commercial and Industrial valuations are based upon data analysis of an average rental per square meter rate achieved by tenants in “like” properties in the areas. Certain adjustments are made to a general formula which then forms the basis for determining a market valuation. Again, there are instances where certain factors may not be taken into account by the Municipality when determining its market value as opposed to such factors determining the true market value of the property.
Once an objection has been lodged and the outcome conveyed to the owner, an aggrieved owner is still able to appeal the outcome of the decision to an Appeal Board.
Author: Guy Dakin