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By Peter Murray and Alexandra Botha

Municipalities essentially have one source of income: Property taxes (also known as ‘rates’). From the perspective of the payers of rates, the budget of a property owner can be made or broken by the monthly rates bill. This tension between municipal maximisation of income, and the finite ability of property owners to pay tax on their properties, should find fair and transparent resolution in the applicable legislation, namely the Local Government: Municipal Property Rates Act 6 of 2004 (the Act).

The preamble to the Act enjoins municipalities to exercise their power to impose rates within a framework that enhances certainty, uniformity, and simplicity.

Foundational to the Act is the fact that property taxes are calculated on property value, and it is the process of attributing value to property that provides fertile ground for legal and valuation disputes. Since the inception of the Act in 2004, these value disputes have been raised and resolved in terms of a process which, as the preamble requires, was generally clear and well understood.

In July 2015, however, the legislature amended the way supplementary valuations are carried out, and the amendment has in its implementation caused considerable confusion. The interpretative difficulties that the amendment presents hold the potential for harm and injustice, especially to property owners who may not have access to expert legal and valuation services, and who look to municipal officials for guidance and fair treatment.

This article highlights vague and unclear aspects of the amended section. It will also be explained how these difficulties of interpretation have led to municipal implementation measures which are legally incorrect, as they have no foundation in the text of the amended section. A more textually accurate paradigm will be suggested, as will proposals for further change.

Pre-amendment position

A municipality intending to levy a rate on property must in terms of s 30(1)(a) cause a general valuation to be made by the municipal valuer of all properties in the municipality. The valuer then prepares a general valuation roll in terms of s 30(1)(b) reflecting all properties so valued. Colloquially speaking, the valued properties are taken up into the roll.

The municipal valuer certifies the valuation roll and submits it to the municipal manager. The municipal manager publishes the roll in the Government Gazette, in the media, and by service of notice on each person who is the owner of property reflected in the general valuation roll (the dreaded s 49 notice).

The publishing of the general valuation roll triggers the following legal rights in the hands of an owner –

• to inspect the roll (s 50(1)(a));
• to object to any roll entry (s 50(1)(c));
• to receive a decision on one’s objection (s 51); and
• to appeal any decision so received.

Objections are decided by the municipal valuer and appeals against such decisions are decided by the valuation appeal board (s 54).

General valuation rolls have a lifespan of four or five years – the additional year requires the consent of the member of the Executive Council.

Section 78 of the Act and its amendment in 2015

Section 78 has – since the inception of the Act – provided a mechanism for property values to be increased or decreased during the currency of a general valuation roll. The procedure is a salutary one: Property owners should not be obliged to pay higher property taxes for five years where the value of their property has reduced due to legal or physical alteration since the general valuation; it would similarly be unfair if the municipality, faced with a property that has increased in value, has to wait for five years to re-value the property and receive its increased taxes.

Before the amendment of the section, supplementary valuations were carried out in terms of a procedure that did not differ materially from the one in terms of which general valuations were carried out.

Wide-ranging changes were brought about to s 78 in terms of the Local Government: Municipal Property Rates Amendment Act 29 of 2014 (effective date 1 July 2015). The amended s 78 obliges a municipality to cause a supplementary valuation to be carried out of any property that falls within the categories mentioned in s 78(1)(a) to (h), such as property incorrectly omitted from the general valuation roll; and property of which the market value has substantially increased or decreased for any reason.

Crucially, where s 30 provides that during the general valuation process property is simultaneously valued and entered in the general valuation roll, supplementary valuation rolls are now not created simultaneously with the supplementary valuation process, and there are various intervening steps between the supplementary valuation of the property and the time when it is taken up into the supplementary roll:

• The first step is the supplemental valuation of the property if the municipality is of the view that any of the eight categories mentioned in s 78(1) have triggered the duty to carry out a supplementary valuation.
• In terms of s 78(5)(a) the municipal valuer must, on completion of the supplementary valuation (and not on the certification of the roll as in the case of the general valuation) give notice of the supplementary valuation to the property owner. Together with such notice, the municipal valuer must, in terms of s 78(5)(b), notify the property owner that they are entitled, within 30 days, to lodge a request for a review with the municipal manager. This is the innovative heart of the amendment: Section 78 in its unamended form did not provide for a review of a supplementary valuation.
• If a review is received, the municipal valuer, in terms of s 78(5)(c), ‘may adjust the valuation on consideration of the request for review.’ Note that the municipal valuer may only adjust the value: The municipal valuer has no power in law to amend categories, or any other roll particulars.
• The penultimate step is contained in s 78(6), in terms of which the municipality must, at least once a year, compile and publish a supplementary valuation roll of all the properties on which a supplementary valuation was made, and such roll must contain details of any decision taken by the municipal valuer after receipt of a request for a review.
• Any person who is dissatisfied with any supplementary roll entry may object and may ultimately also appeal a decision on the objection.

The introduction of a ‘review’ into the supplementary valuation process has led to much confusion.

Some incorrect post-amendment responses

The amendment to s 78 was greeted with some fanfare, and without much interrogation of its wording. Currently there is also no judicial interpretation of the amended section. Some municipalities have seized on the amended s 78 as an opportunity to dictate their own procedures once the rigours of the general valuation roll are behind them. Some examples follow.

• ‘You’re late, but I am sure we can squeeze you in.’

In a more generous application of the post-amendment valuation paradigm, some municipalities view the amended section as giving them the right to accept and consider late objections to entries in the general valuation roll. This is a marked departure from the application of the pre-amendment Act, where municipal responses to late objections to the general valuation roll were – almost universally, and correctly so – that their hands were tied, and late objections could not be considered.

• ‘The pervasive enquiry.’

A common practice that has sprung up since the amendment is ‘the section 78 enquiry’. Although the meaning of the phrase seemingly differs from one municipality to another, the general purport appears to be that if property owners are dissatisfied with any aspect of their property as contained in a general valuation roll, then they are welcome to submit an
s 78 enquiry. The municipal valuer will consider the ‘enquiry’ and advise the property owner whether the ‘enquiry’ has resulted in any changes to the valuation.

• ‘Keep ’em in the dark.’

Some commentators have gone so far as to suggest that municipalities may, in terms of the amended s 78, re-value property without giving notice of such an intention to the owner. This is clearly not the case.

• ‘The last chance saloon.’

On the more sinister end of the spectrum of municipal responses, some municipalities advise property owners that an s 78 decision is not subject to appeal, which is an insidious implication given the consequences of an inability to appeal poor or incorrect decisions. Unfortunately, this misconception has gained some traction, and even experienced valuers are prone to tell one that an s 78 decision cannot be appealed.

The correct approach

Municipalities, property owners, valuers, and legal practitioners should approach changes in property particulars strictly in accordance with the wording of the section, no matter how cumbersome the procedure might now appear to be.

Section 78, properly construed, does not authorise municipalities to ‘accept’ late objections, or to treat late objections as ‘section 78 enquiries’. In fact, nowhere does s 78 use the word ‘enquiry’, and any resort to this language or procedure is unhelpful and probably ultra vires.

It is also incorrect to state that the outcome of a request for review cannot be appealed. In fact, it can be the subject of both an objection and an appeal: Section 78(6) provides that the municipal valuer must make the supplementary roll ‘available for inspection in the manner provided for in section 49.’ Section 49 provides that the notification must invite ‘every person who wishes to lodge an objection … to do so.’

It is also incorrect to state that a municipality can re-value property without notice to the owner and without following a procedure: In fact, correctly construed, the procedure for arriving at a supplementary value is more cumbersome than that of the general valuation.

The intention behind the innovative review request procedure is laudable: The request could lead the municipal valuer to amend an obvious error, and this would obviate a cumbersome objection and appeal. This kind of innovation is sorely needed, as many appeal boards are overloaded.

It is difficult, however, to see why the consequence of wishing to unburden the appeal boards has been to add to the administrative burden of municipalities. Whereas the pre-amended s 78 required only one notice to the owner, the municipality must now give the owner two, and potentially three notices – when the valuation has been completed, when a decision is available on the review request, and when the supplementary roll has been created.

Valuation rolls have proven themselves to be inflexible in the amount of data that can be included in them. One need only think of the myriad disputes around hybrid land uses, and the response from some municipalities (generally during litigation) that the roll could not accommodate the extra information. If this is the case, it is not clear how the post-amendment rolls are coping with having to record whether a review request was received, and if so, what the outcome was.

The triple-pronged procedure also places an unfair burden on property owners: in the postlapsarian world of the South African Post Office, and media overload, property owners must be vigilant and ensure that they receive notice of the supplementary valuation, notice of the outcome of their review request, notice of the creation of the supplementary valuation roll, and notices of the decisions on their objection and appeal should they choose to lodge them.

In conclusion, this does not appear to be a sustainable model and the confusion and inability to comply with the amended s 78 procedure is hardly surprising. It is critical that the legislature re-visits s 78. The previous section was workable and clearly understood because it followed a procedure that did not differ significantly or at all from the general valuation procedure. But until such time as s 78 is amended, the procedure set out in the section must be followed: A supplementary valuation, then an invitation to review, followed by the publication of the roll, objections, and appeals, even though the ‘simplicity’ required by the preamble to the Act has not been achieved.

Peter Murray BA LLB (Rhodes) is a legal practitioner and Alexandra Botha BA LLB (Rhodes) is a candidate legal practitioner at Murray Attorneys Inc in Johannesburg.

This article was first published in De Rebus in 2023 (June) DR 16.