City of Johannesburg Metropolitan Municipality (“COJ”) has taken the view that rating categorisations and tariffs are not linked to each other, and that this accordingly entitles it to change a consumer’s tariff without changing the consumer’s corresponding rating categorization as provided for in the Local Government: Municipal Property Rates Act (“the Act”). The procedure to change a rating categorization in terms of the Act (which would then result in a change of the corresponding tariff) is for the property to appear on a roll and for the municipal valuer (following an objection to that roll) or the Valuation Appeals Board (following an appeal to an objection on that roll) to amend the rating categorization as provided for in the Act.
This issue was recently canvassed and adjudicated by the Gauteng Local Division of the High Court (the Johannesburg High Court) in the unreported case of Mignon Smit v The City of Johannesburg . Before the facts and outcome of the case are discussed, it is necessary to understand the difference between a property’s zoning, categorization and the tariff that is charged in relation thereto.
How property rates are charged
In terms of the Act a consumer’s liability for property rates is determined by two factors, the first of which is the municipal property valuation and the second of which is the rating categorisation that the property is put into by the municipal valuer. The rating
categorisation must be one of the listed categories in the City’s Rates Policy, which the City amends each year. Examples of common rating categories would be residential, vacant land, business and commercial, and multiple purpose (also known as mixed use).
A tariff is another name for an amount charged by a municipality for a particular service or tax. In relation to rates tariffs, the tariff sheet (which is also amended each year by the municipality) sets out the cost or price associated with each rating categorization that appears in the City’s Rates Policy . The amount of money that a consumer is charged for property rates is based on a simple calculation: municipal valuation (e.g. R10,000,000) x tariff applied to rating categorisation (e.g. 0.005686) = R 56,860 per annum. Divide this by 12 to get the monthly rate = R 4,738.34 per month. This simple example ignores any rebates.
A Property’s Zoning
Zoning is completely different. A property’s zoning is a list of rights that dictate what uses the property can legally be put to. A property’s zoning is determined by the applicable town planning scheme, and amendments made thereto, as well as national legislation that deals with land use and management. To find out what your zoning is, you need to get a zoning certificate from the municipality’s offices.
You often find properties with a zoning ‘label’ (for example,”business”) where those properties have zoning rights to be used in a completely different way (for example, to be used to build residential homes on). So a property’s zoning label can often be misleading, as it does not describe the full extent of the use rights that the property is entitled to, and in fact, the label of the zoning might be completely different to the use rights given to that particular property. The ‘label’ attached to a property’s zoning thus only describes its main legal use – for example, residential, business, industrial – but it does not describe all of the rights attached to the property. This is why it is very important to look not only at the zoning ‘label’ but also the rights given to that property in terms of all relevant laws and schemes.
The Smit Case
In this case, the Applicant had purchased a residential property with the view of using same as a commune and accordingly made application to the City for consent to use to property as a residential boarding house (which would entitle her to make use of the property for these purposes). The consent sought by the Applicant in this regard was to ensure that her zoning was appropriate for the use that she had put the property to.
The Applicant’s initial consent use application (to be allowed to have a commune) was dismissed by the City due to a technicality. The Applicant thus made a second application for the appropriate zoning rights, this time asking for permission to change the zoning of the property from Residential 1 to Residential 4, to accommodate the commune. The City took almost 3 years to come to a decision with regard to the re-zoning of the property, due to its implementation of the “Corridors of Freedom project” which allegedly delayed its ability to make a decision in relation to the rezoning application submitted. During this time, the Applicant started using the property for the purposes for which it had been purchased – namely as a commune (which technically speaking was not legally permissible because the zoning was not appropriate for that kind of use at that particular time, because the rezoning application submitted had not yet been approved).
Due to the fact that the Applicant was making use of the property without the necessary zoning application having been approved, the City’s Rates Department classified the property as being an “illegal use” property. “Illegal Use” is one of the categories that appears in the City’s Rates Policy, and so the Rates Department believed that it was entitled to change the Applicant’s tariff (ie the price that she paid for her rates each month) from residential to “Illegal Use” which increased her monthly rates bill by a factor of almost 5.
The City did this because it is of the view that it is lawfully entitled to unilaterally change a consumer’s tariff without following the procedure set out in the Rates Act to change the categorization that the tariff is meant to be connected to – in other words, the City is of the view that the tariff and rating categorization can be “delinked” whenever convenient to the City so that it can change the tariff and charge the consumer whatever it feels is appropriate for rates, even if the municipal valuer (who is tasked in law with deciding what the categorization should be) does not hold the same view.
The Applicant took the City to court because the City had charged her rates on the “illegal use tariff’ for some time, and she was of the view that this was unlawful, because it was not lawfully permissible for the City to simply unilaterally amend her tariff without first amending the rating categorization on the property roll. She brought a court application to ask the court to declare that the City could not hold her liable for the rates based on the “illegal use tariff” and needed to reverse these incorrect charges.
It was argued that in terms of section 8 of the Act, as well as the City’s own Rates Policy, a tariff is directly linked to the categorization of a property. Moreover, it was argued, that in terms of section 78 of the Act, the only way in which the City is legally entitled to change the categorization of a property, is to place same onto a Valuation Roll (either a General Valuation Roll or any of the subsequent Supplementary Rolls) and to afford a consumer the opportunity to object to the change of the categorization of its property. Thereafter the outcome of the objection (or ultimately of an appeal, if it follows the objection) will determine the rating categorization of the property concerned.
It was thus argued that as the City had unilaterally and of its own accord changed the tariff of the Applicant without following the procedure set out in the Act (ie putting the property onto a roll and following the objection/appeal procedure to obtain a change of rating category, which would then lead to a change in tariff to “illegal use”) and that same was not in accordance with the Act and its own Rates Policy and was thus unlawful.
The Court, while scathing of the Applicant’s illegal use of the Property as a commune for the period before the rezoning application giving her those zoning rights was granted, agreed that the City was not legally entitled to change the tariff of a property without first changing the category of the property in one of its Valuation Rolls and in doing so providing the consumer with an opportunity to make an objection thereto if the consumer so wished.
The City was accordingly ordered to write off the charges billed to the Applicant’s account based on the “illegal use” tariff and to rebill the Applicant in accordance with the categorization of the property, as determined by the prior general valuation roll. Accordingly the Court confirmed that a unilateral tariff change by the City, without first changing the categorization of the property in the manner that has been prescribed by the City’s own policy and the Act, is unlawful.
It is imperative for property owners to be aware of the categorizations of their properties, the zoning of their property, as well as the tariff that they are being charged on, as all three factors can affect the amounts that they pay to the municipality (even though only the categorization should determine this). The authors are thus of the view that, the City has interpreted the law incorrectly with regards to its contention that it can unilaterally amend a tariff without first changing the linked rating categorization by following the procedure set out in the Act. Consumers facing the same problem can use this judgment as a precedent to assist them in court, should this be necessary.
Partner at Schindlers Attorneys
Phone: +27 (0) 11 448 9678
Senior Associate at Schindlers Attorneys
Phone: +2 (0) 11 448 9679