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Monday Mar 25, 2013

Questions over property rates for Cape Town sectional title garages

  • Valuer's error could mean you're paying too much

    Since writing the article that was published on March 9 under the headline "If your sectional title property has a garage, check rates valuation - and object", I have found the Cape Town City Council Rates Policy for 2012/2013.

    I think it gives further reason to object if the garage section associated with your residential section is classified as non-rebated. I will also point out what I believe is a flaw in the valuers' approach to comparative sales which may give rise to grounds for a successful objection to the valuation of your residential flat - particularly if you own a garage which is a section as well - but even if you do not own a garage.

    First, let's have a look at the Rates Policy for 2012/ 2013 (which you can find atwww.capetown.gov.za/en/Budget/Budget%20201213/Annexure%207%20-%20Rates%20Policy.pdf). It has two interesting provisions.

    5.1.1 The city will not levy a rate on the first value up to R200 000 of market value as per the valuation roll of residential property..."

    5.1.2 The maximum reduction of up to R200 000 will be granted to every individually valued residential property.

    The definition of a residential property in the policy expressly includes a garage section and domestic worker's section that is owned by the same owner as a residential section in the same scheme.

    So, if your residential section is classified (as it ought to be) rebated, and your associated garage or other section is classified non-rebated, you will pay rates on your flat at the residential rate, and on your garage at the commercial rate, which is usually double.

    The definition of residential property in the rates policy goes on to say that for rating purposes "(a)ny such grouping shall be regarded as one residential property for rate rebate or valuation reduction purposes, and for clearance application purposes".

    Clearly, the logical intention is that the sectional flat and sectional garage should be rated on the combined values as a single entity. For as long as the garage is classified as nonrebated, the council will have no incentive to comply with its rating policy, as it derives a financial advantage by wrongly classifying the garage. If the garage is classified rebated, then the council will be in a hurry to comply with its rating policy and combine the garage and flat for rating purposes.

    I suspect that before the council could rate a flat and a garage together, they would have to have the same classification of rebated. These are further reasons to object to the wrong classification of a garage.

    Now, let me deal with what I see as a flaw in the valuers' approach to the comparative sales of sections in a sectional title scheme where garages are registered sections. This flaw may give rise to a sound objection to the valuation of your flat. I know for certain that the flaw exists in certain schemes. I suspect it probably exists in all schemes. It is up to you to determine if it exists in your scheme and then to object to the affected value if it does.

    First, study the comparative sales data that is available on the council's website relative to your flat and garage (web1.capetown.gov.za/web1/g v2012/ SearchProperty. aspx). You will probably find there is little or no comparative sales data relating to garages. Consider, then, that every sale that is recorded which included a garage has its price supported or increased or inflated by the garage, as the garages are seldom sold separately.

    Now look for the sale of a flat which took place near July 1, last year (the valuation date), which you know included a garage, and look at the value ascribed to the flat in the 2012 valuation roll.

    If the sale took place near July 1 and the value ascribed to the flat in the roll is very close to the selling price, then I submit it is reasonable to assume that the valuers have not deducted any amount for the garage, although they have valued the garage separately.

    Now look at the value of the garage associated with the flat and add that value to that of the flat. That is the value on which rates will be calculated if the council applies its policy as detailed above. The effect is that rates will be paid twice on the value of the garage - once because the garage value is to be added to the value of the flat, and once because it is already there.

    You will find that in your scheme all values will probably be the same. You may even find that flats that do not have garages are valued at exactly the same value as ones that do have a garage.

    Don't misinterpret this as consistency. It may simply mean that all flats in the scheme are over-valued because the valuer has failed to appreciate that he is relying on sales that include garages in order to value a flat exclusive of its garage.

    Donald Moore is an attorney at Guthrie & Rushton attorneys, notaries and conveyancers, Fish Hoek.

  • No rebate on garages linked to residential sections - valuer

    In the Weekend Argus property pages of March 9, attorney Donald Moore raised the issue of garages linked to residential sections being classified as "non-rebated" in the latest general valuation roll of 2012 ("If your sectional title property has a garage, check rates valuation - and object").

    He argued that garage sections should be rebated, as is the case with residential (apartment) sections so that they enjoy the residential and not commercial tariff. The current tariff for residential property is 0.0060620 cents in the rand compared with 0.0121240 cents in the rand for commercial properties. This translates into rates for commercial properties that are about double that for residential properties with similar municipal values. Also, the first R200 000 of a residential property's municipal value is rebated.

    Moore said the municipal valuer had for the first time determined a real market value for garage sections in residential sectional title schemes. In the past, nominal values were applied to such sections. In terms of current rating policy, sections valued at under R50 000 attract no rates. These previously included garage sections valued at less than R50 000.

    Although residential garage sections were shown as non-rebated, they were linked to residential sections and should be rebated, Moore said.

    We took this matter up with the Cape Town municipal valuer, who confirmed that garage sections linked to residential sections in a sectional title scheme are classified as non-rebated, but that the city would be linking the garages and residential sections through the registered owner's name, with only the principal section receiving the R200 000 rebate.

    The residential tariff will, however, be applied to the group of units with the same owner.

    This means that where the registered owner of residential and garage sections are one and the same, the residential tariff will be applied to all such sections, although the garage section is classified as non-rebated.

    If the registered owner of your garage section differs from that of your residential section, lodge an objection with the city based on the fact that the garage is linked to your residential section.

    If you would like a property valuer at Steer & Co to object on your behalf, send an e-mail to pauline-AT-steer.co-DOT-za.

    Nina Vass is a candidate valuer at Steer & Co.

  • City tells how garages are rated

    Alderman Ian Neilson, mayoral committee member for finance, has responded to the articles on rates valuations for sectional title garages, writing that:

    The City of Cape Town would like to provide clarification to the issues raised in your article published on March 9, "If your sectional title property has a garage, check rates valuation - and object".

    The rates policy distinguishes between "residential" and "non-residential" properties. Residential properties receive the residential rebate (currently R200 000) for each property and the residential tariff is applied.

    Non-residential and therefore non-rebated properties do not receive a rebate and rates are levied at the higher rate.

    A garage is not a residential unit and cannot qualify for the R200 000 rebate. It is therefore categorised as "non-residential or non-rebated".

    However, where a garage is owned in a sectional title development together with a residential section, then the units will be grouped together for billing purposes and the units will be billed at the lower residential tariff on the total value less the R200 000. That is, the residential rebate of R200 000 will be applied once.

    Where a property owner owns only a garage in a sectional title development unit, then that garage will not receive the residential rebate and the non- residential full tariff will be applied.

    Garages can consequently not be listed on the valuation roll as "rebated" because they would qualify for the rebate. The city endeavours to identify all sectional title units that are owned together and to bill accordingly.

    Where units are not billed together the owner should call 0860 103 089 or e-mail accounts@ capetown. gov. za with the complaint.

    Weekend Argus (Saturday Edition)

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