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The Local Government: Municipal Property Rates Act empowers a local council to levy rates on immovable property within its jurisdiction. This is done by identifying the categories of property that a particular local council wishes to levy, and then selecting which properties should be allowed exemption from rates and taxes and, most importantly, which qualify for rebates. In terms of the Act, this power needs to be exercised on a fair and equitable basis.
The determination of the rates policy of a local council is an annual occurrence and must be approved at a council meeting, subject to a public participation procedure.
Rates and taxes are imposed in order to enable a local council to cover its running costs and achieve its objects. All owners of immovable properties are obliged to pay rates and taxes.
This discussion focuses on the rates and taxes paid by members of residential estates to a local council where the governing bodies of these entities raise, finance and maintain most of the township services. The question is whether the legislation constitutes a fair and equitable legal scenario for owners of immovable property in these estates.
An owner of immovable property in an estate is obliged to become a member of the homeowners’ association (HOA) as the governing body. Members are obliged to pay levies to the HOA for services provided to them by the HOA. These services are similar to those that a local council provides to immovable properties within its jurisdiction, such as security, electricity, water and sewerage, including reticulation.
Nationally, in most instances, a comparison between residential immovable properties in an estate and those in the town area of the local council indicates that the same rates and taxes are payable and therefore the same rebates allowed.
A local council simply applies the category of “residential property”, having taken care to do away with the previous category of “privately owned township” to avoid an argument regarding additional rebates for immovable property within an estate.
As estates already provide for their own services to their members via levies raised, there is apparent discrimination, because the imposition of rates and taxes on a flat basis of “residential properties” by local councils results in an unfair and inequitable legal situation for members of an HOA, especially where local councils do not provide these services to property owners in the estates at all.
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There is a strong argument that this constitutes double taxation of members in estates. Having already paid for the services they use as provided for by the estates, they also have to pay the local council for the same services, which it does not actually provide.
The formulation and imposition of a rates policy is a discretionary exercise by a local council, and courts of law are not readily inclined to interfere with decisions of a local council. Active and collective involvement by HOA members in the public participation process that establishes the rates policy may, however, persuade a court of law to intervene.
To conclude, local council is legally obliged to levy different rates for different categories of property, and this must be done fairly and equitably, taking into account the socio-economic conditions within its jurisdiction and the legislative framework. Estates are advised to be proactive and, where possible, collectively tackle the public participation process in terms of the rates policy procedure, in order to pave the way for a more equitable and fair contribution.
