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IOLProperty - South African Property For Sale
Monday Mar 12, 2012

Sapoa mulls court action on surcharge

The South African Property Owners Association (Sapoa) is on the verge of taking the eThekwini Municipality to the High Court in a legal effort to have the development surcharges that are being levied against property developers declared illegal and thus withdrawn from implementation.

Developers of commercial and multi-unit residential property are having to shell out for this development fee, which the municipality says is a surcharge for infrastructure, as well as the traditional development charges for new projects. This is affecting the feasibility of such developments as well as making the cost of buying property in the Durban area extremely high.

In November 2010, Sapoa made written representations to the municipality on what were then its 2010/11 tariffs, which included a development surcharge.

Sapoa says the surcharge is indistinguishable from the development charge proposed in the draft policy. When this was repeated in the 2011/2012 tariffs, Sapoa took a stand on the matter, and is in the process of challenging the legality of what was described in the draft policy as a "development charge".

"Notwithstanding what Sapoa considers to be the illegality of the development surcharges, a review conducted on its behalf shows that the inclusion of a development surcharge tariff, unique to ethekwini, makes i t the most expensive municipality in which to undertake a number of types of commercial development," says Sapoa's legal services manager, Portia Matsane.

The review tracked the municipal tariffs associated with four development scenarios, namely residential, regional retail centres, commercial office blocks and large industrial factories.

"This represents a significant challenge in the city's efforts to attract new investment and development. If the surcharge is not included in ethekwini's tariff structure, the municipal area compares very favourably to the other major metropolitan areas and also compares favourably from the point of view of consumption charges," Matsane says.

Sapoa believes that negotiations with government and organs of state on key policy issues affecting property developers and owners will be critical in improving property development in SA, as there are many and varied stakeholders that are key players in the property sector.

Sapoa says in the past it has engaged constructively with ethekwini Municipality on many issues, trying to foster the best interests of both the municipality and developers, and to find solutions to the challenges of infrastructure investment.

"We are doing so now in relation to the draft development charges policy, and remain willing to do so in the future," says Matsane.

"The decision to pursue litigation against the municipality has, however, been forced upon us by the unlawful nature of the surcharge, its major financial implications for development, and the fact that, contrary to past practice, the municipality has not at any stage consulted or engaged with Sapoa or the broader development community on its imposition."

Call Matsane on 011 883 0679.

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