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Joburg property rates mess heads to court

Valuation Appeals Board locked out of its offices.

The City of Johannesburg is losing huge amounts of money as a result of its failure to properly administer property rates, Advocate Anthonie Viviers, chair of the city’s 2008 Valuation Appeal Board states in an affidavit in support of an urgent High Court application.

On the other hand, ratepayers who have been slapped with inflated valuations are prejudiced by delays in finalising their appeals. Such delays are due to the messy state of Joburg’s property rates administration, according to Viviers.

Ben Espach, director evaluations at Rates Watch told Moneyweb on Thursday that the rates bill of a shopping mall valued at R3.5 billion – and Joburg has some of those – amounts to more than R5 million per month. If the valuation is too high, the owner will oppose it. If it is too low, it can go unnoticed and the city will lose that money. If it is incorrectly valued at R2 billion, the city would lose R2 million per month.

He further points out that rates on commercial buildings are recovered from tenants. If the valuation is adjusted and rates recovered retrospectively, those tenants might have left, which leaves the owner with a problem. He says some valuations are blatantly wrong and it can take years to have it rectified.

Viviers is the deponent in an application expected to serve before court on September 27 and aimed at getting access for the Valuation Appeal Board to its own offices and records after the city locked it out.

The city confirmed having received the application and said it has taken legal advice. Moneyweb has learnt that the city has given notice that it will oppose the application in which Mayor Herman Mashaba is one of seven respondents. Relief is however only sought against the city itself and group head of its property unit, Sihle More.

According to Viviers’ statement, the Valuation Appeal Board is a statutory body appointed in terms of the Local Government: Municipal Property Rates Act by the MEC for local government. It is responsible for hearing appeals by ratepayers or the city, as well as reviewing certain decisions of the municipal valuer.

In terms of the Act, the city has to provide the board with administrative support, including staff and pay for its costs, including the remuneration of board members. The board has to sit in the municipality whose valuation role it considers.

Viviers explains that the board was appointed to consider matters emanating from the 2008 valuation roll and supplementary rolls and amendments based on that roll.

He says there were 11 supplementary rolls, the last of which is especially problematic since it was published without a specific date and after the general valuation roll of 2012 had already been published. This, he says, led to 22 448 objections, 2 489 appeals and 9 652 automatic reviews, with the City of Joburg submitting a further 13 406 objections, 4 680 reviews and 815 appeals. The condonation of late appeals further resulted in a flurry of new appeals to be heard, he states.

According to Viviers “the City of Johannesburg’s administration has not been what it should have been.” He says the municipal valuer in many cases failed to submit, as the Act requires, all relevant documentation for the board to consider when dealing with reviews. “In many cases values were inflated and we had to consider such values without the required information in the interests of various objectors.”

Often there was no input from objectors, as the city lost its objection forms and the board had to consider the valuations afresh by checking and verifying information from the land information system and the geographic information system.

Viviers mentions other problems, such as the lack of information upon which the valuation is based. It further seemed as if objectors were not properly notified of hearings or the outcomes of such hearings.

He says “the board experienced grave difficulty in effectively getting their work done”.

The city further failed to record many of the board’s rulings in its systems, which means changes in billings were never made. The board is now verifying the capturing of its rulings and has so far found that the city captured 12% to 14% of its decisions incorrectly, Viviers states.

As an example, he states that a valuation of R941.46 million was attached to one of the stands that the Fourways Mall is situated on. “Such amendment has still not been captured by the City of Johannesburg and the municipality is actually losing hundreds of thousands, if not millions of rands in lost rates and taxes over the last six-year period.”

It is however this verification process that the City of Joburg questions. In response to questions from Moneyweb it said: “This is something they ought to have done as an ongoing process. They have completed their appeals and reviews and now seek to verify that all their decisions have been implemented since 2008. The city is of the view that this should have occurred throughout their tenure.”

Viviers describes how the relationship with More became more and more strained since last year as she started questioning every action and expense by the board. According to Viviers she became “obstructive” as she seemingly tried to pressurise the board to complete its task.

On August 15 the board’s boardroom was locked on instruction by More and since then it had not been able to access the room or its records at all. More stated that the city was “validating” its budget and the board would only be allowed back once that had been completed.

Viviers says the city is obliged to pay for the board’s functioning. “It is inconceivable that after all these years of budgeting and paying for the board and the other boards that have been in existence, that there suddenly is no budget for the current board to perform its functions. It is the statutory obligation of the City of Johannesburg to pay for the functions of the board.”

The city however says it did not budget for an extra verification process and does not have the funds allocated to continue paying the board members. “This was communicated to the board last financial year and they were to have completed their work in the previous financial year that ended on June 30 2016. They failed do to this and therefore no money was made available this financial year. The city suggested four alternative ways the board would undertake the verification, these were rejected.”

The city says it has not filed its opposing affidavit yet and has offered to give the board access to their office. “This however is on the basis that the board understands that there are no funds to remunerate them henceforth.”

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Sound typical of Parks Tau administration – need the money for parties

Like the billing crisis following a botched corrupt billing tender gone wrong, where the city lost out on billions on unbilled rates and utilities over a six to nine month stretch (examples include Liberty Properties’ own portfolio was eventually ‘settled’ at R5m on a R25m debt and this is just one out of hundreds), the valuation role stems from ANC style ill fated tender procedures gone wrong.

The whole system needs an overhaul and lost out monies repaid.

The municipal rates act is fundamentally flawed. Let me explain why.

Municipal budgets increase every year due to inflation and economic growth in their given area. According to the municipal rates act, the revenue of the municipality is linked directly to the market value of property as rates are levied based on the market value of the subject property. This methodology works well when property values are assumed to rise indefinitely BUT should property values decline, do Municipalities adjust their budgets accordingly?

The answer is no, and thus the whole premise collapses. Hence we see municipalities aggressively increasing the rate in the Rand on which rates are levied, in order to compensate for the loss of income.

This brilliant idea is brought to you by a clever and well paid consultant from Canada. This was done prior to the financial collapse in 2008 which was also based on the assumption that property values increase up infinito… Time to head back to the drawing board I’m afraid…

Rocketmongoose… you sound intelligent, but sadly, you spout hogwash… on several layers. South Africa did not get its Valuations model from Canada. The law is clear… municipal values must reflect market values, whether property values go up or down.

The municipal budgetary process is almost diametrically different to what you explain. Please, I beg you, do not talk about things you know nothing about. It is people like you who simply add more confusion to an already confused issue.

Another sad indictment on this country. Every administrative task is awash with corruption and incompetence.

…and overpaid consultants!

Mayor Mashaba… you have a working model in the City of Cape Town. Speak to your colleagues in Cape Town and ask them to help. The people of Johannesburg put their faith in you and your party to solve this mess…

End of comments.





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