This article explains why some customers of the City of Johannesburg Metropolitan Municipality (“COJ”) refer to the COJ’s mixed use sewer tariffs as being “silly”. Others refer to them as discriminatory, and others still as unfair.
WHAT US “MIXED USE” WHEN IT COMES TO SEWERS?
Mixed use or multipurpose is a term used to describe a building or property that has one bulk water supply and sewer supply, but which building/property is used for more than one purpose (typical examples might include residential, business and commercial, or industrial). Typically, a mixed use building would have one or two floors of commercial, business or retail space on the ground and lower floors, and everything above that would be residential apartments. These buildings do not have a “split supply” meaning that they have one bulk water/sewer supply for the entire building, which services all of the uses.
There are many reasons why a property owner might not have a split supply for different uses at a property, including that the building is old and was simply built that way, or that there are issues with reticulating the supply internally, or that it might be exorbitantly expensive (costing hundreds of thousands or even millions of rands) to change the bulk supply into a split supply.
In order to understand why COJ is criticized for its mixed use sewer tariff, we first need to understand how COJ’s mixed use water tariff works (because the two work in contradictory and antagonizing ways).
COJ’S MIXED WATER TARIFF
In terms of the structure of the COJ’s mixed use water tariffs (which have remained relatively constant from around 2014 until present) the COJ charges a building that has a mixed use for water consumed on the “mixed use” tariff, which is
charged at a scale similar to that of the residential scale, provided that the building/property is predominantly residential in nature. To determine this, you look to the floor area of the building. If the floor area of the building in question is mostly (50% + 1%) residential in nature then ordinarily the “mixed use” tariff will apply.
COJ should then also, in terms of its tariffs, be obliged to take into account the number of residential dwelling units at the property when calculating the water charges on the mixed use tariff because the COJ’s mixed use tariff requires the City to aggregate the charges amongst the number of dwelling units at the property.
It is critical for tenants in mixed use buildings to be charged based on the mixed use tariff because it is very similar to the residential tariff (which is much cheaper than the business tariff that would otherwise apply), and for residential tenants, having to pay for sewer based on a business rate would make living in that building unaffordable. This is also critical to the landlord of such a tenant because the landlord is inevitably invoiced by the municipality for water and sewer consumption and passes the charge on to the tenant. If the landlord were billed by the COJ for all water and sewer consumption at a business rate (and the landlord passed that charge onto the tenant) the landlord would not be able to place tenants in the property because no tenant would go into a lease in a property where they had to pay much more for their water and sewer than if they simply rented in another building that was billed for water and sewer at a residential rate.
Now that we understand how the COJ’s mixed use water tariff works (in terms of which the COJ essentially bills the landlord of a mixed use building for water consumption on residential rates, allowing the landlord to rent it out to residential tenants and pass the residential charge onto its residential tenants) we can look at how the COJ’s mixed use sewer tariff works.
COJ’S MIXED SEWER TARIFF
It would be logical for COJ to mirror the requirements of its mixed use water tariff in relation to sewer, such that if a building/property is more than 50% plus 1% residential in nature by floor area, it would be charged the residential rate for sewer as well as water. Sadly, this is not so in COJ.
Alarmingly, although COJ recognizes the need to charge mixed use buildings for water consumption on the residential rate taking into account the number of residential units at the building and applying residential charges, it does not recognize the same in respect of sewer. COJ has, since 2014, charged “residential heavy” mixed use buildings for sewer based on a business rate. The result of this is that in many (but not all) cases the benefit obtained by the tenant (and the landlord) in respect of the residential rate being applied for the water charges is entirely undone by the City charging the landlord sewer charges for the mixed use building at business rates. In fact, because sewer charges on at the business rate can be so expensive (the charge will obviously vary from one building to a next depending on a number of factors) in some cases it renders the entire project of renting out the residential component of a mixed use building nugatory because the amount that a landlord would need to pay to the municipality each month to service the charges essentially eats away all of the landlord’s profits made by the residential letting.
In the same vein, if the landlord passes the charge onto the tenant, chances are it wouldn’t find any tenants when they could chose between living in a building in which they pay for sewer at the residential rate, rather than living in the building in question and paying for sewer at the more expensive business rate.
LAWFULNESS OF THE SILLY SEWER TARIFF
Bear in mind that the buildings we are talking about here (mixed use buildings within the jurisdiction of the COJ) will face this problem even if they are fully compliant with all zoning, building, environmental and all other property laws. This is not a penalty tariff; this is just the COJ’s way of charging mixed use buildings. You win on the water but lose on the sewer. But is this lawful? It is a municipality’s prerogative to design and price it’s tariffs any way it wants to, provided that this does not violate any other laws. One of the laws that a municipality should not violate when designing and pricing a tariff is that of the rule of law, which is protected by our Constitution and which is expressed in many principals, one of which is that laws made must be rational and reasonable. To the extent that they fail the rationality and reason-ability
test, they would be considered unlawful. We submit that the manner in which the COJ is charging residential units for sewer on the mixed use tariff, is neither rational nor reasonable for the reasons explained above. This particular problem only applies to mixed use buildings within the COJ. One must ask whether there is a lawful reason for charging tenants who live in residential units on properties that are lawfully zoned, built in accordance with law and occupied according to same, business rates for sewer charges.
Another relevant constitutional principle that might find application is that of unfair discrimination. It is questionable as to why the only category of residential tenants in COJ that have to suffer being billed for sewer charges on the business rate, are those in mixed use buildings. We have not yet come across a rational and reasonable explanation for the above and we call upon COJ to provide one to the public and more particularly the tenants affected.
We are of the view that there is a strong case to be made that in the manner in which COJ charges for sewer supplied to residential heavy mixed use buildings (in relation to the residential component of those buildings) is unlawful for lack of rationality / reasonableness, and unfairly discriminatory, and could be set aside by a court. However, until such time as a court draws this conclusion the current tariffs will remain in place and the municipality will be able to compel compliance therewith.
Anyone who wants to challenge this can also comment on the tariffs when they are published by the municipality each year before they come into operation.
Written by Chantelle Gladwin-Wood and Maike Gohl
06 November 2019