Local Government: Municipal Property Rates Amendment Bill (B33-2013)

1. Local Government:Municipal Property Rates Amendment Bill (B33-2013) Public Hearings Portfolio Committee on Co-operative Governance and Traditional affairs 29thJanuary 2014

2. 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

3. RATES WATCH ACHIEVEMENTS1ST JULY 2009 – 30TH JUNE 2013 • Values reduced • Objections - 1.7 Billion Rand • Appeals - 740 Million Rand • Queries - 1.4 Billion Rand • Total Valuation Reductions • 3.8 BILLION RAND !!! • 96% success rate at Valuation Appeal Board Hearings

4. 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.

5. 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.

6. 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.”

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

12. 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.

13. 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.

14. 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.

15. 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.

16. 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.

17. 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.

18. 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.

19. 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.

20. 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).

21. 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.

22. 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.

23. 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.

24. 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.

25. 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%.

26. 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.

27. 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.

28. 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.

29. CATEGORY CHANGE: SOLUTION • Expand section 78(1) (h) to include: • “The value and categoryof 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.

30. 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.

31. 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.

32. 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.