Commercial property owners vs City of Joburg

The South African Property Owners Association (Sapoa) is set to reply to the City of Johannesburg's response to the association's High Court Application to set aside the 2009/2010 municipal budget as a result of the city's failure to adhere to prescribed procedures during the adoption of its budget for the rates for commercial properties.

Commercial property rates were increased by an additional 18% over and above the city's initial 10% across-the-board increase in the city's 2009/2010 budget.

This has had an extraordinary and negative impact on commercial property owners and their tenants alike. It has severely affected the local economy.

In its Answering Affidavit, the City of Joburg has agreed to and admitted to most of Sapoa's allegations in particular that there was limited public participation before the implementation of the increased rates, citing a lack of trained staff as its defence.

However, no indication has been given as to how this situation will be remedied.

We are compiling our Replying Affidavit for submission, however Sapoa is still open to negotiations with the City of Joburg, should they wish to enter these. We are of strong opinion that an injustice has been done and that our members are entitled to be heard.

Sapoa is the voice of commercial property in South Africa with a member compliment in excess of 1050. Initially it sought negotiations with the City of Joburg regarding the issue, but, after its written requests went unanswered, it launched its High Court Application.

Sapoa and its members are of the view that procedures adopted and followed by the City of Joburg in the increase of commercial property rates were unlawful and inconsistent with statutory provisions regulating the imposition, increase and review of rates.

The 18% increase of the commercial property rates is inconsistent and offends the provisions of section 229 of the Constitution and, more pertinently, it is in conflict with the National Economic Policy. The increase is iniquitous: it has been lumped on to commercial property owners as they are perceived as soft targets and will be forced to pay the increased rates.

The relief sought by Sapoa is either the setting aside the city's annual budget for the year 2009/2010 and the setting aside the promulgation of the rate tariff increase for commercial property, or declaring that the city failed to comply with the legislative procedures and principles of legality when deciding to increase the rates ratios applicable to business, industrial and commercial property from 3:1 to 3.5:1, and setting aside the decision.

The City of Joburg claims that the increase in commercial property rates was necessary to overcome an apparent shortfall in revenue that became apparent after the finalisation of the valuation roll in March 2009 which revealed a reduced tax base. However, Sapoa asserts that the reduced tax base was due to a vast number of properties being undervalued by the City Valuer.

Increasing the commercial property ratio rather than addressing the undervaluation problem will perpetuate the error and its unsound results.

Sapoa suggestion the solution to this fundamental problem is for the City of Joburg to immediately commence correcting the values of properties and their records regarding property use to ensure the tax-base is correct. This will ensure that the correct rates are received by the City of Johannesburg on an equal basis that does not discriminate against certain property owners.

*Tsakane Shilubane is Sapoa's Legal Manager

Article by: Tsakane Shilubane -