By Chantelle Gladwin-Wood, Partner and Maike Gohl, Senior Associate
This article examines the instances in which the City of Johannesburg Metropolitan Municipality (“COJ”) charges residential property owners business rates, the legality thereof, and what a consumer faced with such a problem can do about it.
Legal Basis for Levying Rates
The relevant law (set out in the Local Government: Municipal Property Rates Act and the COJ’s prevailing Rates Policy) prescribes that a municipality may levy rates on a property based on either the use or the zoning (“permitted use”) of a property, or a combination of both. Most municipalities levy rates based on use but some municipalities use zoning or a combination thereof to levy rates. The COJ has a “zoning driven rating policy”, which means that it primarily uses zoning to determine the rating category into which a property falls for rating purposes. This is perfectly lawful provided that it is done in accordance with the law, after the relevant processes have been followed and due notice has been given.
Sectional Title Units: Residential Use but Business Rates
In many cases in Johannesburg, sectional title schemes that are residential in nature are built upon properties that have an underlying zoning of something other than residential (most commonly the underlying zoning will be something like business, special, general or undetermined). These categories of zoning rights determine the lawful uses to which a property may be put. It is important to understand that a property’s zoning is a bundle of rights, and that often a property with a zoning label of “business” (or special, or undefined, or general) will afford the property owner residential rights as well. It is therefore important to look at the set of rights that attach to the property and not only to the “label” given to the zoning category into which the property is placed.
The COJ unfortunately does not understand this concept, and we have seen many cases in which it has started charging residential sectional title property owners business rates because the zoning label applied to the unit is something other than residential. Unfortunately, the frequency with which this happens is increasing at an alarming rate.
This is happening even where the properties have approved building plans, occupation certificates issued in respect of the buildings built thereon and zoning rights for residential units. The owners of the residential units are thus penalised by the municipality by the levying of business rates when the property is constructed and utilized entirely lawfully as a residential property, purely as a result of this “zoning driven rating policy”.
How does this happen?
#1. Change of tariff by billing department
Sometimes the COJ’s billing department receives information to the effect that the property on which the sectional title unit is located is zoned something other than residential. In this regard the COJ looks only at the label applied to the zoning category ascribed to the property and not the set of rights that actually apply to the property (which would, of course, include residential rights). The billing department then changes the property’s tariff (the price paid for rates, calculated on a cent in the rand ratio based on the valuation of the property) from the sectional title residential tariff to the sectional title business tariff (which is significantly higher), causing the consumer’s rates to increase by more than double. If this happens, it is unlawful, because the power to amend a consumer’s rating categorisation in law lies only with the municipal valuer. The incorrect tariff should simply be corrected by the billing department and the incorrect charges reversed to correct the invoices.
#2. Amendment of categorisation on property roll
In other cases the COJ’s valuation department publishes a supplementary roll or a general valuation roll and when the property appears on this roll it has an incorrect category of ‘business sectional title’. If this happens the consumer needs to file an objection to the incorrect categorisation, and follow the normal objection/appeal process through to its conclusion in order to have the incorrect rating categorisation corrected.
#3. Amendment of categorisation by s 78(5) notice
The COJ’s valuation department can also alter the property’s rating categorisation by sending out a “section 78(5) notice”, warning consumers that the rating category will change. Consumers can make representations to the valuer as to why he or she should not amend the categorisation as proposed in the notice, but if the municipal valuer does not accept this and the change is implemented, the consumer can still file a formal objection when the property appears on the next supplementary roll and follow the normal objection/appeal procedure through to its conclusion in order to change the incorrect categorisation.
Consumers should note that because COJ’s valuers subscribe to an absolute “zoning driven rating policy” philosophy they will not ordinarily agree to correct an incorrect property categorisation in the circumstances described above. This means that it is likely that the consumer’s objection will be rejected, and the consumer will need to appeal to the Valuation Appeals Board (“VAB”) to correct the categorisation. In all cases brought by Schindlers to the VAB thus far, it has applied the correct legal principles and found the sectional title residential properties to be residential in nature and has amended the incorrect rating categorisations. That being said, there is never any guarantee in any case that the way that things have happened in the past will be determinative of the way that things will happen in the future.
#4. Section 52 review
It might also happen that several years after an objection to a roll has been finalized, a section 52 review is held in the consumer’s absence, which results in a change of categorisation. If this occurs, the consumer will have had no notice of the date of the hearing and no opportunity to make representations, and so most often the consumer is taken by surprize when receiving an invoice with several months (or years) worth of (what appears to be incorrect) charges on it, and upon querying it is told that the bill is correct and must be paid. Unfortunately, if a section 52 review outcome is the cause of the problem, there is no internal remedy that a consumer can follow to correct the problem and the only remedy available to him/her would be to review the decision of the VAB in court.
It is evident from the above that there are numerous situations that might result in a consumer receiving a large and (apparently) unexplained bill for property rates which result from a change of the tariff or rating categorisation in connection to the problem of residential sectional title properties being regarded as business sectional title for rating purposes. It often takes a concerted effort to investigate the matter by persons who are experts in this area of the law, to understand what has happened. It is critical to understand how the problem arose, because the different problems have differed “fixes” and if you utilize the wrong “fix” (not knowing that you are acting inappropriately) the problem will not be resolved.
COJ”s “Tariff Change Application”
COJ often advises consumers who are being charged incorrectly to complete a form known as a “tariff change application” in terms of which a sectional title consumer who is being incorrectly billed business rates, can obtain relief relatively quickly. Although this process will ordinarily result in the COJ reducing the monthly rate charged, it is unlawful, because the COJ is actually amending the tariff applicable (by switching it from business to residential) when it has no power in law to charge any tariff other than the one that linked to the rating categorisation determined by the municipal valuer. Be this as it may, many consumers obtain relief in this regard, only to find later that this relief only partly addressed the problem because it is not retrospective (and thus cannot address any incorrect charges billed before the application was completed), and it further lapses in certain instances and needs to be re-applied for.
Consumers need to be extremely vigilant and check every property roll to ensure that their properties are correctly categorised thereon. If they are not, they need to take timeous action to file the appropriate objection. Consumers also need to check their post and react proactively to any valuation notices that they receive, within the prescribed time limits. Lastly, consumers who notice that their rates have increased should query same with the municipality’s valuations department (or if this does not yield fruit, with an expert in valuation law) in order to determine the cause of the increase before taking any action to remedy it, in order to ensure that the appropriate action is taken. If the consumer does not take the appropriate action the consumer may never obtain redress no matter how many years the dispute rages for – if you haven’t completed the correct forms, and submitted them to the correct department, you have no right in law to expect a change. Consult an expert if you are in doubt as to what the best course of action is, because the cost of doing nothing (or doing the wrong thing) can far outweigh the costs of consulting an expert and getting it right the first time.