Johannesburg has initiated legal action against a judgment by a valuation appeal board (VAB) concerning the categorisation of properties used for residential purposes developed on land where the use zone also allows business and commercial use.
Municipalities may levy different rates for different categories of rateable property in terms of section 8 of the Municipal Property Rates Act 6 of 2004 (MPRA). All rateable property must be categorised and will be rated based on the property category as it appears in the valuation roll. The categories may be based on the “permitted use,” “actual use,” or a combination of the actual use and permitted use. The categories are determined in the rates policy. Categories in Johannesburg are based on the permitted use.
A residential development on a property with use zones Business 1 & 2 (which allows for retail, office, and residential development) will be categorised ‘Business and Commercial’ and rated at the business tariff which is 2,5 times higher than the tariff for residential properties. The owner could apply to the Finance Department for residential property rates to be applied. The challenge is that the change is granted from the date of application and is not backdated. The solution is to submit an objection and thereafter, an appeal to change the category.
Since 2013, Rates Watch and others have successfully challenged the categorisation of these properties, securing backdated residential rates. The City of Johannesburg, in June 2022, submitted an application to the High Court to review and set aside the decision of the VAB dated 9 December 2021 relating to the categorisation of several units in Melrose Square on Oak in the fifth supplementary valuation roll for GV2013 (the supplementary roll was open for objections between 2017/03/15 and 2017/05/19). What was the motivation of the City in lodging this review application? Was it to protect its income or was it the hope that the High Court would confirm its interpretation and application of the rates policy?
If Melrose Square on Oak was developed on a property with a use zone which allows for residential use only, such as Residential 4, there is no doubt that the category would be ‘Sectional Title Residential’.
Is it fair and equitable that identical units would be paying different rates? The units categorised as ‘Sectional Title Business’ will be paying 2.5 times higher rates than those categorised as “Sectional Title Residential’.
All GV2023 appeals on residential developments on properties with use zones allowing for business, commercial and residential use were placed on hold pending the outcome of the review application. It is our information that the matter is set down for the middle of 2025.