Local Government:Municipal Property Rates

Amendment Bill (B33-2013)

Public HearingsPortfolio Committee on Co-operative

Governance and Traditional affairs29th January 2014

Presented by:

Ben Espach– Professional Valuer– Life Member of The South African Institute of

Valuers– Past Deputy Director: Property Valuation ,City

Tshwane– Director of Valuations Rates Watch (Pty) Ltd

2

RATES WATCH ACHIEVEMENTS1ST JULY 2009 – 30TH JUNE 2013

3

1. RATES POLICIES

• Rates policies were approved after the rolls were submitted by:– Ekurhuleni, Johannesburg Tshwane and other

municipalities.

• Salt to the wound-– The policies were only approved after the closing

date for objections!– Public mislead to in believing that the roll was

prepared in line with the rates policy.

4

RATES POLICIES ..

• MPRA does not specify the date by which the rates policy must be approved.

• Rate policy must be completed prior to the submission of the valuation roll.

5

RATES POLICIES ..

COURT RULING•Supreme Court of Appeal of South Africa.– City of Tshwane vs Marius Blom and other

•“that only once the determination of different categories of rateable property in terms of sect 8 is completed, the valuation process begins.”

6

RATES POLICIES: SOLUTION

• In line with the Supreme Court of Appeal ruling:– Municipalities must be compelled to approve the

rates policy before the compilation of the roll.

7

2. ADMINISTRATIVE ACTION - PAJA• The action of a Municipal Valuer is

administrative.• No provision in the MPRA to enforce this.• Certain Municipal Valuers hold that they are

not subjected to the provisions of PAJA and therefore:– not obliged to comply with the supplying of

adequate reasons; or– not obliged to grant an applicant a right of review.

8

ADMINISTRATIVE ACTION …

Two important High Court cases.•South Gauteng High Court– Mandamus Application (case no 4693/2010)• Rates Watch (Pty) Ltd vs Ekurhuleni Metropolitan

Municipality and the Municipal Valuer of Ekurhuleni.– Municipal Valuer was compelled to provide adequate and

proper reasons.

9

ADMINISTRATIVE ACTION ..

• Hugh Bevis Roberts and others vs Valuation Appeal Board of Johannesburg

(case no 12/19375 ) – Judge AJ Foulkes ruled as follows:

• Sect 6 of PAJA is applicable and the applicant did have a right of review.

• The action of the Municipal Valuer was “Administrative”• A Municipal Valuer cannot make a decision that cannot be

reviewed.• The provisions of PAJA do apply to a Municipal Valuer.

10

ADMINISTRATIVE ACTION:SOLUTION

• Include under Section 43 that:-– The action of a Municipal Valuer is

“Administrative”.– The functions of a Municipal Valuer are subject to

the provisions of PAJA.

11

3. LIFE CYCLE OF VALUATION ROLLS• Extending the life cycle of valuation rolls is a

retrogressive step.• Not in line with international mass appraisal

standards.

12

LIFE CYCLE: SOLUTIONS

• Valuation rolls of any Metropolitan Municipality must not endure for more than 3 years.

• Larger municipalities not more than 4 years.• Smaller municipalities not more than 5 years.

13

METROPOLITAN MUNICIPALITIES 3 YEARS

LARGER MUNICIPALITIES 4 YEARS

SMALLER MUNICIPALITIES 5 YEARS 5 YEARS

4. PAYMENT OF RATES PENDING OUTCOME OF OBJECTION AND/OR

APPEAL• Example

– Entry on the valuation roll: R30 million.– Rates payable: R44,010 per month.– Objection lodged– Value reduced to 6 million rand.– New rates payable: R8,800 per month.– Unnecessary delays are placing substantial cash flow burdens on the

property owner.– Faced with disconnection of essential services.

• The appeal of ERPM in Ekurhuleni Metro has still not been finalised since 2009.

• Major mistakes admitted by Municipal Valuers, yet owners are required to pay rates that are inherently incorrect.

14

PENDING OBJECTION/APPEAL OUTCOME: SOLUTION

• Amend section 50(6) by allowing rates to be determined on the previous valuation pending the outcome of the objection and subsequent appeal.

• Amend section 54(4) by allowing rates to be determined on the previous valuation pending the decision of the Valuation Appeal Board.

15

5. COMPULSORY CONSIDERATION OF QUERIES

• No provision in the MPRA to regulate the submission of queries relating to incorrect entries on the roll.

• Property owner is being substantially prejudiced by the delay or refusal of the Municipal Valuer.

• Of 478 queries submitted by Rates Watch to Ekurhuleni:– Reductions of 928 Million Rand were made!!!– 74% of applications were successful.

16

QUERIES: SOLUTIONS

• Create a new section in the Act.– Municipalities must be compelled to accept any

query.– Municipal Valuer must be compelled to consider

the query and make a decision within 30 days.– Municipal Valuer must notify the applicant and

provide reasons for his decision.– His decision irrespective of a change or not, must

be included in a supplementary valuation roll.

17

6. NO CHANGE DECISION OF A MUNICIPAL VALUER

• Certain Municipal Valuers are of the view that:-– They are not obliged to provide reasons for their

decisions regarding a query; nor

– obligated to include a “NO Change” decision in a supplementary valuation roll.

• This denies the applicant the right of objection in terms of section 50.

18

NO CHANGE DECISION ..

COURT DECISIONS•South Gauteng High Court:– Hugh Bevis Roberts vs Valuation Appeal Board• Judge AJ Foulkes ruled that:

– The denial of a review is a substantial breach of the South African judicial system.

– A Municipal Valuer cannot be the judge of his own action.– The Municipal Valuer cannot be seen to be acting impartially

where he has not included his “No Change” decision in a supplementary valuation roll.

19

NO CHANGE: SOLUTIONS

• Include under section 34– A further function of the municipal valuer is to make a

supplementary valuation of all queries submitted to him.

• Include in a supplementary valuation roll all query decisions including “No Change” decisions.

• Add to section 78 that a query submitted to a Municipal Valuer shall form part of section 78(1).

20

7. COMPULSORY REVIEW OF MUNICIPAL VALUER'S DECISIONS

All decisions of a municipal valuer by more than 10% must be reviewed by the Valuation Appeal Board.•Lengthy delays before these reviews are made.•High administrative cost relating to review decisions.

21

REVIEWS …

Case study:– Value in roll: R33 million– Owner objects.– Municipal Valuer reduces the valuation to• R22 million.

– Owner is happy with the reduction and accepts the decision in good faith.

– Does not appeal against this decision.

22

REVIEW - Case study ..

• Appeal Board amends the decision of the Municipal Valuer– Increase the value to R29 million.

• Owner is not present at review hearing.• Denied his administrative right of review and

submission.• Only recourse is via High Court application.

23

REVIEW …

• Cape Town Appeal Board have adopted a policy that where they revoke or amend a decision of the Municipal Valuer they will:– Postpone the hearing.

and– Request that the objector to be present.

• This is in accordance with the provisions of PAJA and the Constitution.

24

REVIEW: SOLUTIONS

• Include after section 52(3) a further section to state that:– Where a Valuation Board decides to amend or

revoke any decision of the Municipal Valuer, they are obliged to:-

– notify the objector to address the Valuation Appeal Board.

• Increase margin for reviews to 20%.

25

8. EFFECTIVE DATE AND CAUSA:SUPPLEMENTARY VALUATION ROLL

• Section 78 does not require the insertion of the:

Effective date and causa on the supplementary valuation roll.

Example• Ekurhuleni Municipal Valuer concedes at Appeal Board hearing that property was

incorrectly categorised ab initio.• Appellant requests VAB to determine the effective date to general valuation roll.• VAB rules - unable to do so - not reflected in the roll.• Applicant then applies to South Gauteng High Court for a mandamus compelling

Municipal Valuer to back date.• Applicant successfully sues the Ekurhuleni Metro for unjust enrichment.• Magistrate rules that a municipality cannot be enriched by their own mistake.

–In certain cases the incorrect section of 78 is applied by Municipal Valuers.

26

EFFECTIVE DATE AND CAUSA: SOLUTION

• Amend section 48(i) to :– Include the effective date of the supplementary

valuation.– To state the sub section of section 78 in terms of

which the supplementary valuation was made.

27

9. INCORRECT CATEGORY • Municipal Valuers frequently enter the incorrect category

of a property as defined in the rates policy.• As a result incorrect rates are levied by the municipality.• Where a category has been incorrectly reflected ab initio, it

has to be corrected retrospectively to the date the error first appeared.

• In the matter of Bairos Investments vs Ekurhuleni Metropolitan Municipality the magistrate ruled that:– A municipality cannot be enriched by its own mistake.– Rates must be adjusted to the date of the mistake of the

municipal valuer – date of general valuation roll.• There is no provision in section 78 to change an incorrect

category.

28

CATEGORY CHANGE: SOLUTION

• Expand section 78(1) (h) to include:– “The value and category of which was incorrectly

recorded in the valuation roll as a result of a clerical or typing error.”

• Rates become payable from the date the incorrect category entry was made.

29

FREQUENCY OF SUPPLEMENTARY VALUATIONS

• The proposed amendment of section 78 regarding the implementation of a supplementary valuation is positive.

• However, a Municipal Valuer needs to be obliged to compile supplementary valuations as quickly as possible.

• Property owners especially township owners are severely prejudiced whilst waiting for adjustments to their township valuations.

• Municipalities are also losing a substantial amount of rates income due to mistakes and omissions made by the Municipal Valuer.

• Until recently, Ekurhuleni Municipality has had no Municipal Valuer to compile supplementary valuations.– Their loss of rates income is substantial.

30

SUPPLEMENTARY VALUATIONS: SOLUTION

• To include under section 34 that:– A Municipal Valuer is obliged to make a

supplementary valuation within 30 days from being advised or requested that a supplementary valuation is required.

31

CONCLUSION

Our comments are based on:•Hands on experience.•Lodging of a substantial amount of successful objections, appeals and valuation queries.•Precedent case law•Wherever possible the Act must be peremptory and not discretionary.•Our suggestions are practical and will enhance the workability of an essentially good Act.

32