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Monday Feb 24, 2014

Exorbitant rates loom for Joburg high-rise properties

Tenants in the inner city of Joburg could be forced to pay 300 percent more in municipal rates than residents of Sandton if the City of Joburg has its way in a potential landmark case.

The city plans to apply commercial rates to residential buildings when the building is a mixed-use one and there are shops on the ground floor.

This is what the Property Owners and Managers' Association (Poma) chairman, Renny Plit, said following a Supreme Court of Appeal (SCA) hearing in which the city has applied to overturn the previous rulings of the Valuations Appeal Board and the Johannesburg High Court.

'This is affordable housing that cannot afford to carry these costs. It's not just and fair,' said Plit. 'It would mean a tenant in town is paying 300 percent more than those in residential areas in Sandton. The problem we are facing is that commercial property tariffs are 300 percent more than residential tariffs.'

The city brought its case to the SCA this week against Connaught Properties, which owns a block of flats in Hillbrow called Park Mews. Previous rulings stated that the building should be paying 80 percent residential rates and 20 percent business rates.

According to the city's 2008 valuation roll, the total market value of the properties is R3.3 million. The residential component's value for the first property is R156 300, with the business section valued at R13 700, while in the second building, the value is R259 000 for shops and R2.9 million for the residential sector.

Yet the council is levying business rates for both components. It argued that although 80 percent of the building was residential, this should be ignored.

In 2009, Connaught successfully appealed to the Valuations Appeal Board against incorrect definition of zoning in terms of the municipality's rates policy by the municipal valuer, leading to the city applying the highest rate in case of multiple purpose use - residential and business.

The board said the decision of the municipality must ensure that ratepayers were treated equitably and that this was consistent with the provisions of the constitution and the rates act.

But the City took the matter for a review in the Johannesburg High Court in 2012.

The court however upheld the ruling of the Valuations Appeal Board that the city was illegally applying commercial rates to residential buildings that have only a few shops on the ground floor.

Judge Moroa Tsoka, in a ruling against the city, said such buildings should be categorised as 'multiple purpose'.

Such a categorisation, the court found, meant that the rates applicable should be apportioned accordingly.

Judge Tsoka found that the municipality's rates policy was not consistent with the Municipal Property Rates Act and that the council must use differential rates reflecting the use of the property as for business and residential.

However in its submission to the SCA, the city said Judge Tsoka erred in interpreting the law on creating categories for differential rating purposes.

The city argued that there is a fundamental difference between zoned or permitted use and actual use of the property.

'The conclusion reached by the court fails to recognise this fundamental difference,' the council said in its papers.

Advocate Hilton West on behalf of Connaught sought the dismissal of the appeal with costs. Judgment was reserved.

Plit said: 'If you were paying R10 000 for residential property rates, you could pay R30 000 for business rates and that translates into higher rent for tenants.'

Saturday Star


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