There Might Be Good News for Some Homeowners

Property owners don't have to fear being bankrupted by new property rates to be implemented in most municipalities in July next year.

While owners expect to pay more, as rates are to be charged according to the market value of the property and not just the land value, the metropolitan municipalities say the rate in the rand to be paid will actually decrease.

This, they say, is because of the increase in the number of property owners having to pay rates for the first time. Those who will feel the pinch will be first-time ratepayers, but their fees are to be phased in so that they can get used to the additional monthly expense.

Johannesburg residents were upset this week following reports that property owners would be paying 15c for every rand of the value of their properties in rates. It seemed to mean that the municipal tax payable on a property worth R1 million would be R12 500 a month. This would be more than the average bond.

But the Johannesburg metro quickly denied this, emphasising that the rates in the rand would decrease in terms of the new policy being finalised for implementation on July 1 2008.

Mandy Jean Woods, the Johannesburg metro spokesperson, said: "It is impossible for anybody in the country to determine the rates until the valuation roll has been completed and all objections have been processed. The rates policy will determine the benchmarks, the parameters and the level of rebates that people will get.

"The 15c mentioned is an extreme example used in explaining how the rates will be calculated. Whatever people may have read anywhere is only assumptions. The only thing we can guarantee is that the rates will drop."

Tshwane, Ekurhuleni, Johannesburg, Nelson Mandela Bay and eThekwini municipal officials said the idea was not to milk residents, but to collect enough money so that better services could be offered.

"It will be a tight package where we will not burden the residents of the city. We are aware of the fear that people will lose their houses, and that is why the new rates will be phased in for those who have never had to pay them before," said a Johannesburg official.

"It would be premature and irresponsible for anyone to speculate as to what kind of increases people can and cannot expect," said Roland Williams, a Nelson Mandela metro spokesperson.

Werner Sarvari, Johannesburg's director of valuation services, said the draft valuation roll published for inspection and comment this week showed that the total market value of the approximately 826 000 properties in Johannesburg exceeded R600-billion - markedly higher than the R49,9-billion total in 2001, when the city's last general valuation roll was compiled.

"The good news is that, as a result of the huge increase in the rates base, the public can expect to see a significant decrease in the rate in the rand, which is used in a specific formula, together with the property value, to determine the actual rates payable by individual property owners," said Sarvari.

The rate to be charged will be known only in March or April, once the draft valuation roll has been finalised and after the draft rates policy has been approved.

Sarvari explained that the tariff was determined "when the value of the property is multiplied by the tariff to determine the annual rate payable".

This is then divided into 12 monthly instalments to get the monthly rate payable.

The rebates applicable, which will be determined by the final rates policy, are applied to the formula when determining the annual rate.

"Obviously there is a significant difference in that, in 2001, the valuation roll was based on site value [land value] only, while the current roll is based on market value [land value and improvements]," he said.

Sectional-title properties, of which there are an estimated 155 000 in Johannesburg, have a total value of about R87,1-billion.

City officials will be meeting this week with managing agents, chairpersons and trustees of bodies corporate as well as individual owners of sectional-title properties. They will, in future, have to pay rates directly to the municipality and not to the body corporate.

In terms of the law, sectional-title properties, schools and a number of other institutions will, for the first time, be paying rates.

Johannesburg, like the other metros, is considering exempting certain non-governmental organisations, religious organisations, the disabled, the indigent and low-income earners from paying rates. Pensioners, too, could expect some form of relief and, in Durban, child-headed households are expected to be exempt.

Sarvari said the valuation roll had been made available ahead of the formal objection period, planned for between February and April. "We've had a phenomenal response in the few days that the roll has been available for inspection," he noted.

The City of Cape Town is the only metropolitan municipality to have implemented the Municipal Property Rates Act, which it did on July 1 this year. A municipal official said that, in terms of the municipality's policy, residential properties valued at less than R88 000 were exempt from rates, and senior citizens, the indigent and low-income earners qualified for rebates.

In Cape Town, residential property owners pay less than half-a-cent for each rand in rates, while commercial property owners pay just under one cent in the rand.

The Tshwane municipality is expecting to complete its property valuations next month and finalise its roll by January. Residents will have 21 days to lodge objections when the roll is published in February. The community participation process will take place only next year, and the council hopes to adopt its rates policy on March 29.

Williams said the Nelson Mandela metro's public participation process would start in the next two weeks and a draft roll would be published for objections within the next two months.

Louis Kruger of the eThekwini municipality said the city's community participation process started on Friday and ends on December 7. Individual property owners will know the value of their properties by February, and the aim is to have the rates policy approved by the end of April.

The draft policy document is currently available at all community halls, libraries and municipal offices, as well as on the Internet for perusal and comment, and notices have been sent out with this month's electricity bills.

Lindiwe Msengana-Ndlela, the director-general of the department of provincial and local government, said the department was closely monitoring the implementation process. The provincial authorities were also providing hands-on support to municipalities that needed it.

Article by: Eleanor Momberg -