Skyline view of Johannesburg. Picture: Werner Beukes/SAPA
Owners of sectional title residential properties that were incorrectly classified as businesses during the recent valuation process by the City of Johannesburg (CoJ) may face an uphill battle to get this corrected and may have little choice but to pay their outstanding bills to avoid having their services cut off, even though the amounts may be multiples of what they rightfully owe.
The problem seems to be the result of an erroneous interpretation of the CoJ’s rates policy and affects residential sectional title units that were developed on land zoned for business purposes, even though the units were correctly categorised prior to July 1 when the new valuation roll took effect.
In a letter, Sihle More, head of the CoJ’s property unit, notes that the zoning determines the category of property. The highest permissible zoning determines which category is applied. However, where a property is used for residential purposes, but zoned for other purposes, the owner may apply that residential rates be levied.
Yet the Municipal Property Rates Act defines residential property as “a property included in a valuation roll … in respect of which the primary use or permitted use is for residential purposes …” At the same time, the city’s rates policy for 2018/19 states that “all rateable property will be classified in a category and will be rated based on the category of the property from the valuation roll which is based on the primary permitted use of the property”.
Rates Watch director of valuations Ben Espach estimates that several thousand units could be affected.
While owners had an opportunity to lodge an objection against the new valuation roll prior to its implementation in July, owners who only checked the new market value – and didn’t realise that a sectional title flat had been categorised as a business – may have had a severe shock when their bills arrived in July.
I am one of these owners.
The valuation of my property – a small residential sectional title unit in Johannesburg’s north-western suburbs – rose by roughly 18%, but because it was recategorised as a sectional title business, the monthly rates bill jumped from R406 to R1 296. Despite a lengthy call to the call centre in late July and submitting an application that residential rates should be applied to the property on the same date – and lodging an application that a high-density residential rebate should be applied a month later (residential developments with a density of more than 80 units per hectare qualify for 5% discount on their property rates) – I received a bill of R3 972 on October 4. This is despite paying total rates of R1 406 between July and September.
On October 4, the CoJ notified me that unless I pay the outstanding amount immediately, it would issue an instruction to cut off my services, and would institute legal action.
Espach says he has dealt with cases where categories that were previously corrected during an appeals process have now been changed to businesses again.
He says the city may cut off a resident’s services even where an appropriate amount of money has been paid to them. From July 1, properties were valued at a certain market value and categorised a certain way, and the rates are based on these results. An objection should have been lodged against the incorrect category.
Where owners have objected, and unless in arrears, their accounts have been flagged and they may continue to pay an amount equal to their previous rates bill, and the city won’t threaten legal action or cut off their services.
But for people like me who only realised that the categorisation was incorrect after the deadline, this is not the case, he says.
“The risk is that your services will be cut off,” he says.
One could allow the legal process to run its course, but services will likely still be cut off before a court date can be arranged, Espach adds.
Residents could also approach the council to arrange a payment plan to avoid services from being cut off, but this would only provide relief for amounts already outstanding and may only kick the can down the road.
In these instances, requesting that residential rates be applied is probably an owner’s best bet, but this may still be a slow process, and may only provide a temporary solution as the incorrect categorisation will remain a problem each time the valuation process is repeated, Espach says.
Using an external rates specialist to remedy the classification can cost anything between R1 700 and R5 200 and the process can take months to complete, without any guarantee that it will be successful.
Kutlwano Olifant, stakeholder manager in the office of the MMC at the CoJ, says the property in question (mine) is a sectional title complex that is built on land that is zoned “business 2”.
“Zoning is the permissible use that is aligned to the piece of land, and this can only be changed by the owner of the land through an application process with the Development Planning.
“The mistake was in the General Valuation 2013, however, it has been corrected so that the city accounts are correct, and that there is alignment between the General Valuation 2018 and the billing system.
“It should be noted that the client or owner of this property has applied in July for the rebate and once captured, this rebate will be backdated from date of application.”
Olifant says the city received over 20 000 applications for all different rebates that had lapsed as well as new ones.
“The team is working through the applications, and will inform the clients as they finalise the applications.
“There are a number of sectional title units that were incorrectly categorised in the previous 2013 General Valuation, these errors have now been corrected and the clients’ needs to apply.”
Brought to you by Moneyweb
Download our app and read this and other great stories on the move. Available for Android and iOS.
