The Rates Panic Is Over For Now

Johannesburg - Government used too broad a brush to describe its proposed amendment to the Municipal Property Rates Act, thus painting itself into a corner.

This was the view of experts as government tried to douse the flames amid an uproar in property circles countrywide about the proposed changes.

The experts further said that government would have to alter the proposed legislation because, in its current form, it includes all rental property.

On Monday Yunus Carrim, Deputy Minister of Cooperative Government and Traditional Affairs, tried to defuse the situation, saying people who own more than one residential property will not be taxed at commercial rates on their additional residences.

The aim of the amendment, he said, was to ensure that guesthouses, bed-and-breakfasts, small hotels and the like paid the commercial tariff.

Ben Espach, an expert in municipal property rates, said that was not what the proposed amendment said and, if that is government’s intention, that’s what it must stipulate.

The definition in the draft amendment reads that a property used to house people who are not the owner for financial benefit will no longer be classed as residential, and will therefore no longer be assessed at the residential rate but rather at the commercial rate.

Espach said if the intention is to target guesthouses, bed-and-breakfast establishments and small hotels for the business tariff, the definition needs to be altered to specify this. At the moment the definition includes all residential property being let.

On Tuesday Carrim said the amendment would be changed to offer greater clarity, if necessary, before the proposed bill was submitted to parliament.

Kokkie Herman, a director at Rates Watch, which specialises in property rates for individual property owners, said the problem was that the legislator wanted to target specific types of property but in the process had included everyone in the net.

He said government would have to change the definition to achieve its aim, after which there should no longer be a problem with its interpretation.

Schalk van der Merwe, a property attorney at VFV Mseleku, said what had been proposed was yet another example of thoughtless alteration to legislation – the consequences of which government said had never been the intention.

He said there were many other examples – such as the new Consumer Protection Act and its impact on the rental market, which is still unresolved. This creates great uncertainty in a property market already under severe pressure.

On Tuesday the DA asked the deputy minister to spell out precisely which properties would be assessed at business tariffs.

The big question remains as to how holiday homes, which are let from time to time, will be affected by the amendment, as well as the status of blocks of flats and townhouse developments owned by individual investors.