Do property owners pay rates on hijacked buildings?

It’s a question owners of hijacked properties commonly ask their lawyers: If my building is illegally occupied, must I still pay rates and taxes?

The bad news is that rates are deemed a tax and must be paid, even if the property is hijacked. This is begging for a Constitutional Court (ConCourt) hearing, and will likely get one in the near future given the dreadful state of the Joburg CBD, where anything between 40 and 150 buildings are believed to have been hijacked.

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“The orthodoxy is that rates are always due because they are a property tax, and you are obliged to pay them even if your building is hijacked,” says Greg Vermaak of attorneys Vermaak Marshal Wellbeloved (VMW) Inc.

But when it comes to lights and water, there is an escape valve, provided the owner notifies the municipality that the building has been hijacked and demands that services be terminated. At that point, the municipality is at risk if it fails to disconnect water and lights.

But this is South Africa, and things are never that simple …

“In most cases we have seen, the city or the municipality will not disconnect water and lights because their administration is so backlogged, or service cut-off agents are bribed, so they will still come after the owner for unpaid services because they know they will get nothing from the tenants or the hijackers,” adds Vermaak.

Jac Marais, head of dispute resolution at Adams & Adams, says with state powers come certain duties.

“There comes a point where inaction, dysfunction, and ineffectiveness are such that the court will have no option but to become involved.

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“It is in fact the court’s constitutional duty to do so, and we are seeing increasingly more examples where the courts are stepping up to direct the state to fulfil its duties,” says Marais.

“The principles apply wherever the state has obligations, including to protect business from criminality, to safeguard basic human rights, and to protect privately owned property.”

One case among many …

In 2023, the Gauteng High Court ordered the Ekurhuleni Metro to compensate property developer Living Africa One for failing to relocate nearly 700 illegal households occupying its land.

The developer had tried for a decade to remove the illegal occupants, securing an eviction order in 2014 that required the municipality to provide the occupiers with temporary emergency accommodation.

Despite this, the property owner has had to continue paying rates on the land.

The municipality secured a nearby piece of land to accommodate the occupiers, but the Gauteng Department of Agriculture and Rural Development froze any further development due to environmental non-compliance.

Like many cases of illegal occupation in SA, this one floundered on the issue of temporary emergency accommodation (TEA).

We know from court filings that Ekurhuleni, like Joburg, has no TEA.

Buildings that were supposed to accommodate at-risk evictees have turned into permanent accommodation, as should have been predicted.

TEA is supposed to be a six-month way-stop for people at risk of homelessness, giving them time to get on their feet and find permanent accommodation. That seldom happens.

Adding to the complexities …

Complicating the picture is that the occupants in most of these buildings are foreigners, many of them illegal.

That means the Department of Home Affairs (DHA) and the South African Police Service have to get involved to ascertain their legal status and personal circumstances. Courts will not grant an eviction order without this information.

But we also know from court documents that DHA officials have a hard time interviewing illegal foreigners, given their fear of deportation if found out.

The situation in Joburg is so bad that the Joburg High Court dismissed an application for the eviction of illegal occupants in two Doornfontein commercial buildings in 2023 on the grounds that the city had no alternative accommodation for them.

The judge argued that there was no imminent danger to the properties if the illegal occupants were allowed to stay.

In this case, as with Living One Africa, the property owner is compelled to pay rates to the city.

Laws make it easy to game the system

The story is the same across the country, where property rights are sterilised by municipalities failing in their constitutional obligation to provide temporary emergency accommodation to people at risk and by-laws that make it easy for hijackers to game the system and run up legal costs in excess of R1 million for any property owner seeking to evict them.

The Prevention of Illegal Eviction from Unlawful Occupation of Land Act prohibits anyone from receiving rent unless they are the owner and allows the courts to issue eviction orders against occupants after considering all their “relevant circumstances”.

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This wording has launched a flotilla of litigation, with the ‘landlords’ of hijacked buildings successfully arguing that the occupants have nowhere else to go and that evicting them would violate their constitutional rights.

Opposing eviction orders prolongs the legal process and allows hijackers to continue collecting rent, sometimes for several more years.

The situation is aggravated by the fact that 17% of tenants are in arrears on their rents, slightly better than the 18% recorded in the fourth quarter of 2022, according to the latest PayProp Rental Index. Dire economic circumstances at the lower end of the economic ladder create a crisis that the courts are expected to adjudicate.

Land invasions

The Modderklip judgment by the Constitutional Court addressed the issue of land invasions at the Modderklip farm near Daveyton, east of Joburg. Benoni City Council tried to shift responsibility to evict the land occupiers to the Modderklip Broerdery, which pushed the problem back to the city council.

Despite convictions for trespassing against the occupiers, they simply returned to the farm, which eventually became known as the Chris Hani informal settlement. State departments were asked to get involved in resolving the problem as the population grew to more than 40 000.

The ConCourt eventually ruled that the state, by its inaction, had infringed the rights of Modderklip Broerdery, which was entitled to compensation from the Department of Agriculture and Land Affairs.

The illegal occupiers were allowed to stay on the land until alternative land was found for them.

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The Modderklip judgment is weighted in favour of the landowner, but it seems inevitable that the ConCourt will eventually be asked to adjudicate whether the owner of a hijacked property should be obliged to continue paying rates.

“The fact that your building is hijacked and you are not getting rent does not absolve you of your obligation to pay rates,” says Vermaak.

“The situation is different, as in the Modderklip case, when you start taking on the state’s obligations to provide accommodation.

“This is where you can sue the state for damages.”

This article was republished from Moneyweb. Read the original here