This article considers when, and the extent to which, charges ought to be reversed from a consumer’s account as a result of a categorization change.
The law provides that municipalities are entitled to determine the categories in respect of which properties within their jurisdictions fall for rating purposes. These categories must, by law, include certain familiar categories such as residential, business and commercial, industrial, as well as many others that most consumers will not be familiar with. A municipality is also entitled to create additional categories for rating purposes if it deems that this is reasonable in the circumstances.
RATES CHARGES BASED ON CATEGORIZATION
The manner in which a consumer is charged for property rates depends on three factors:
- the valuation,
- the rating categorization,
- the cent-in-the-rand rate applied to that particular rating category (which is set out in the relevant tariff)
For example, if you own a property worth R10 and your property is categorized as business, and the rate-in-the-rand applied to business properties is 0.1, this would mean that your monthly rate for that property would be R10 X 0.1 = R1 ÷ 12 months = 8.5 cents.
CHANGING RATING CATEGORIZATIONS
Historically it appeared that there are two primary but distinct methods that one could utilise to apply to a municipality to change a rating categorization. The first was by objecting to the rating categorization reflected on the municipality’s property valuation roll (when it is open for public comment and objection), and the second was by raising a dispute or logging a query with the municipality concerned in relation to the correctness of a property’s categorization for rating purposes.
However, it has recently been established in talks with the City of Johannesburg Metropolitan Municipality (“COJ”) that COJ understands and administrates the change brought about in the second manner described above not as a change of the rating categorization, but rather as a change of the tariff applicable to that rating categorization.
The fact the COJ regards the two methods as different in nature (namely one being a change of the tariff and the other being a change of the rating categorization) has dire effects for the consumer who does not understand the difference, because the consequences of the change vary according to the type of change made.
In our view it is not legally competent to separate the tariff and the rating categorization, as the two are indivisibly intertwined for the purposes of the charging rates to property owners. This issue will be more considered in a further article. The point of mentioning this here is to draw the readers’s attention to the fact that this means that it has been confirmed, at present, that there is actually only one way in which to change your rating categorization: by the long and arduous objection/appeal route described above and below. What this essentially means is that it is not open to consumers to apply for a change of rating categorization by filling in forms with the municipality. The only way open to a consumer to change its rating categorization, is by objecting to the incorrect categorization on a valuation roll.
OBJECTION TO A ROLL
The manner in which the objection/appeal process can be followed, is dealt with comprehensively in the article entitled “Supplementary Roll 11 to the City of Johannesburg 2008 General Valuation Roll” available at at https://www.schindlers.co.za/supplementary-roll-11-city-johannesburg-2008-general-valuation-roll/. Alternatively, contact the author hereof for more information.
WHEN A CHANGE WILL BE EFFECTIVE FROM AND/OR BACKDATED TO
The law expressly provides in the Local Government: Municipal Property Rates Act 6 of 2004 (hereinafter the “Act”) that where a change is made to a property categorization as a result of an objection lodged to any valuation roll, the charges billed to the consumer for rates shall be reversed with retrospective effect to the date on which the categorization changed.
The precise wording of the Act is (arguably) ambiguous, because in the writers’ opinion and experience, it could be interpreted to mean that the rates reversal must be backdated to either the date upon which the municipality rectified the categorization in its records or the date upon which the actual use of the property physically changed.
In the authors’ opinion it would be irrational to interpret the Act to mean that rates can only be reversed to the date upon which the municipality recorded the change on its systems. It is submitted that it was the intention of the legislature when promulgating this provision to ensure that persons who applied for a change in categorization were not charged rates based on the wrong categorization and that this would apply retrospectively to the date that the property use itself changed.
In the authors’ view, the opposite interpretation cannot be sustained, because this would leave it open for a municipality to either delay or frustrate a consumer’s application for a categorization change simply in order to charge a consumer higher rates for a longer period of time. In addition, such an interpretation would arguably amount to an arbitrary deprivation of property, which is inconsistent with the Constitution.
CONSEQUENCES OF A CHANGE IN RATING CATEGORIZATION– WHILST THE PROCESS IS PENDING
The objection process is lengthy, and the consumer is still required to pay the incorrect rates whilst the objection/appeal process is pending. If a consumer does not pay all amounts billed, he/she/it may be summonsed for payment or be subject to termination of services at the property. This is because the law provides that a consumer must ‘pay now and argue later’ in respect of incorrect charges – meaning that until they are actually reversed from the bill, the municipality is entitled to hold you liable for them, unless you have followed the dispute resolution procedure set out in the relevant municipality’s bylaws.
For this reason some consumers elect to simply pay the incorrect charges for historical periods and to focus their efforts afterwards on prosecuting the objection procedure to finality.
CONSEQUENCES OF A CHANGE IN RATING CATEGORIZATION- AFTER THE OBJECTION /APPEAL PROCESS HAS BEEN CONCLUDED.
If the objection, or later the appeal, is decided in your favor, and the categorization change from a more expensive categorization to a less expensive categorization is approved, then you will be owed a refund. The municipality is legally obliged to backdate the commencement date of the categorization change to the date that it actually happened, which (as we argue above) must mean the date that the actual use of the property changed (or was initially incorrectly recorded). If the converse applies and your categorization change is from a less to a more expensive categorization, then you will receive an invoice for the difference which will become due and payable on the ‘due date’ of the invoice. By law the municipality is entitled to charge interest (if you owe it money) or must refund you interest (if you have already been charged it, and are due a reversal) for the period in respect of which the category change is backdated for.
THE SIGNIFICANCE OF THE DISTINCTION BETWEEN A CATEGORIZATION CHANGE AND A TARIFF CHANGE
This is very important because if you simply fill out forms and cause the tariff, as opposed to the rating categorization to change, you will not ordinarily be entitled to a refund, whereas when a categorization change occurs, you are legally entitled to have that change backdated to the time when it actually took place, which most often will result in a refund
Written by Chantelle Gladwin-Wood and Ramon Pereira.