Municipal Property Rates Bill: deliberations

Meeting report

LOCAL GOVERNMENT SELECT COMMITTEE
25 February 2004
MUNICIPAL PROPERTY RATES BILL: DELIBERATIONS

Chairperson: Mr B J Mkhalipi (ANC)

Relevant Documents
Municipal Property Rates Bill [B19B-2003]

Department of Provincial and Local Government delegation: Ms Jackie Manche - Deputy Director General Institutional Reform and Support, Mr Mzilikazi Manyike - Chief Director Municipal Finance Policy, Mr Peter Vaz - Department resident advisor, Dr. Petra Bouwer - Department legal advisor. Mr Ben Dorfling represented the South African Local Government Association (SALGA).

SUMMARY
The briefing on the first final six chapters of the Bill was concluded. Clause 24 dealing with liability for rates by joint owners was a point of concern for the Committee for failing to capture the diversity of cultural dynamics in the country. It noted that in the African setting, a father bequeathed land to all his children and they owned it jointly and that it was not customary to hold one family member responsible for rates and expect them to recoup the expense from the other family members. The Department assured the Committee that the provision on joint ownership targets mainly white farm ownership in Western Cape to the exclusion of the former homelands, which are governed by the Communal Land Rights Bill. Nevertheless, the Committee directed the Department to take a fresh look at Clause 24 with a view to addressing the pressing issue of cultural dynamics.

Clause 28 dealing with recovery of rates in arrears from tenants and occupiers also provided much concern. The tenant was seen as the soft target being drawn into an issue affecting the council and the landlord only. The Committee was concerned that the clause did not sufficiently protect the tenant against eviction by a landlord if the tenant attempted to offset the rates paid against the rent.


MINUTES
Chapter by chapter briefing on the Bill: Chapters 4 to 8
Mr Mzilikazi Manyike continued the Department's briefing on the Bill it had started the previous day. He noted that Chapter 4 makes provision for the appointment of assistant municipal valuers, the conduct of municipal valuers, their powers and the protection of confidential information.
Chapter 5 provides for the criteria in terms of which property must be valued. The general principle is that property must be valued according to its market value, that is, the amount the property would realise if sold on the open market by a willing seller to a willing buyer. The techniques that may be used must accord with generally recognised valuation practices, methods and standards, and also the provisions of the Bill. These include aerial photography and computer-assisted mass appraisal systems.

Chapter 6 regulates the contents and processing of valuation rolls. It requires all rateable properties to be listed on the roll, together with relevant details about each property and the owner.

Chapter 7 provides for the establishment of valuation appeal boards by the MEC for local government in a province. The MEC may establish as many boards as may be needed but at least one in each metropolitan municipality and one in each district municipality.

Chapter 8 makes provision for supplementary valuations of properties where this is applicable.

Chapter 9 deals with miscellaneous matters pertaining to the Bill, such as the monitoring of municipal valuations, the promulgation of regulations in order to enhance the effectiveness of the Bill and the rendering of certain actions as criminally punishable. It also contains transition arrangements that will, for instance, enable municipalities to use existing valuation rolls for up to four years from the date when the Bill is promulgated.

Discussion
Ms Botha (DA) asked whose responsibility it was to pay rates in a situation where one was a usufruct.

Mr Manyike responded that the concept of the Bill is that the person responsible for rates is the registered owner of the property.

Dr Bouwer noted that the position of a usufruct falls under the definition of "owner" in Clause 1.

Mr Mokoena (ANC) referred to Clause 24(2)(b) where the municipality would hold one of the joint owners responsible for rates and asked for the criteria that would be used in making a decision either way.

Dr Bouwer pointed out that the initial tabled Bill had only one section that held parties jointly liable but that the farming community felt that the one who pays should be able to recoup from the other joint owners and that submission had given birth to the second provision in the clause. He said the long-term plan is to start consolidating all these undivided shares in order to enable the municipality to recoup its rates smoothly.

Ms Kgoali (ANC) noted that South Africa is a country rich in cultural diversity. In the African culture, where a father bequeathed land to all his children, they owned it jointly and it was not customary to hold one family member responsible for rates and expect them to recoup the expense from the other family members. She asked the Department to give an indication on how they propose to deal with such a matter.

Mr Manyike explained that the clause on joint ownership targets mainly white farm ownership in Western Cape to the exclusion of the former homelands, which are governed by the Communal Land Rights Bill.

Ms Kgoali reminded the Department that the Bill is a Section 75 legislation that has a national application and hence talk of application in the Western Cape was unconvincing.

Mr Mokoena agreed with Ms Kgoali and pointed out that indeed the Bill says that the municipality would make a determination as to who is responsible for rates in this instance. The concept of pooling resources to service a rates obligation was alien to the African culture.

Mr Dorfling intervened to clarify that indeed the Bill applies countrywide but that the practice of joint ownership is mainly confined to the Western Cape region. He explained that the municipality is empowered to do one or two things but that where one person out of the group makes use of the entire land parcel, that person should take the sole responsibility to pay the due rates. Where, however, several of them are making use of the parcel of land then the municipality would rate them jointly. The problem stems from the fact that the undivided share makes it difficult for the municipality to determine the specifics of shareholding.

Dr Bouwer offered that the general principle in a joint ownership is to rate the one making use of the property who would in turn would recoup the rate expense from the rest of the group. The second option was created to alleviate the difficulty of holding people jointly when others are not making use of the property.

Mr Matthee (NNP) expressed the view that the term "appropriate" was problematic. The term lacked the element of objectivity. Since the matter had been left to the discretion of the municipality, it would be better to instead apply the principle of equitable share in this case.

Dr Bouwer replied that the original idea was to build in the principle of equitable share but it was thought to be impracticable. It would be better for the municipality to determine the circumstance of each case and what is the appropriate course of action. One tried to strike a balance between shifting responsibility in a joint ownership.

Mr Mokoena insisted that it was clear Clause 24 did not envision circumstances where poor black communities live. He expressed fear that the blunt application of the law as it was, would divide families and unnecessarily milk the poor.

Ms Botha agreed that it would be unfair to load the rate burden solely on the one person utilising the property and shift the responsibility to this person of tracing others for purposes of recouping this expense from them.

Dr Bouwer clarified that Clause (24)(b) did not deal with communal land but rather targets the old farm lands that have been passed to a number of people in undivided shares. Mr Dorfling agreed that the clause excludes areas formerly falling under former homelands and targets only white areas where the practice of joint ownership is rampant.

Ms Kgoali pointed out that the assertion by the Department and SALGA that the clause did not apply to areas where black communities live is fallacious since the Bill does not reflect that position at all.

Mr Mokoena noted that many black people have since 1995 bought land in former white areas and that therefore the explanation being touted was clearly misplaced.

Ms Manche made the point that black people were governed by a different regime of law called the Land Act and that this clause did not apply to this category of property owners.

The Chair noted, in frustration, that no progress has been made in trying to understand the factors underlying Clause 24. He suggested that the matter should be flagged for the present.

Mr Mokoena agreed with the Chair and noted that it was important for the Department and SALGA to reflect and think through the implications of the clause before further deliberations on it.

Ms Botha referred to Clause 25 and commended the Department for what she termed " a good measure" that separates the responsibility of paying rates and service charges between the owner and tenant respectively. She, however, sought clarity on the rate treatment for communally owned areas within the property.

Mr Dhorfling clarified that the body corporate would be rated for the communal areas within the property.

Mr Mokoena referred to Clause 26(b) and wondered why simple operational matters to do with instalment payment are included in this legislation. Such matters should be relegated to the by-laws.

Mr Manyike pointed out that the provision only guides municipalities. These matters are already happening in practice.

Ms Kgoali noted that Clause 26(a) and (b) talks about an agreement between two parties and wondered why only the municipality determines when payment should be made. She agreed with Mr Mokoena that matters to do with instalments were better suited for the by-laws.

Ms Ngondo (ANC) said that her understanding was that the issue of an agreement only arose when the ratepayer deviates from the general rule. She noted that in practice it important for the municipality to determine when rates should be paid in order to facilitate and sustain a smooth service delivery regime.

Mr Dorfling explained that an agreement would only be reached where the rate is payable annually. It is otherwise impossible for each ratepayer to decide when it is appropriate to pay rates. The provision on instalments is a good measure that would guide municipalities since there are many of them out there that are ignorant of this fact.

Ms Botha referred to Clause 27(2) "A person is liable for payment of a rate whether or not that person has received a written account in terms of subsection (1). If a person has not received a written account, that person must make the necessary inquiries from the municipality." She pointed out that it is common knowledge that most municipalities are at odds with their accounts and yet the law does not state what rights an aggrieved party has against the council.

Mr Dorfling said municipalities use one accounts distributor to deliver accounts to ratepayers. It is important that where a ratepayer does not receive accounts, the ratepayer should seek clarification from the council instead of simply sitting back while rates accumulate into arrears.

Ms Ngondo faulted Clause 27(2) and (3) which she said clearly sanctions incidences of mal-administration on the part of the council.

Ms Kgoali noted that it is the responsibility of the municipality to ensure that accounts are expeditiously sent to ratepayers. It is unfair to blame ratepayers for council inefficiencies.

Mr Manyike explained that Clause 27 focused on the ratepayer not the municipality. He said that it was difficult for council to render accounts to people who had changed their address without informing the council. The Municipal Finance Management Act (MFMA) specifically deals with council inefficiencies.

Mr Mokoena agreed with other members that Clause 27 would encourage councils to be lazy. He suggested that the clause be removed. The Chair wondered whether an improvement rather than removal would redeem the clause.

Dr Bouwer explained that Clause 27 is about liability for taxes not when such taxes should be paid. It therefore behoved the ratepayer to make the necessary inquiry where in doubt about his/her accounts.

Mr Dorfling agreed that indeed some municipalities are reeling under an inexcusable malaise of inefficiencies. He made the point that this is why Clause 26(i) makes reference to the MFMA, which governs municipal operations. Clause 27 on the other hand spells out the ratepayer's obligation.

The Chair noted that it would not be possible to slot this Bill for debate in the Chamber this week as the Committee was still busy with deliberations on it.

Ms Ngondo referred to Clause 28 dealing with Recovery of rates in arrears from tenants and occupiers, and questioned why the tenant was being drawn into an issue affecting the council and the landlord. She was concerned that such a move would create unnecessary tension between the landlord and the tenant.

Mr Dorfling explained that instead of foreclosing the property through an auction, it was thought better to build in protection for the tenant. The tenant would then offset the rates payment against the monthly rentals.

Mr Ngondo protested the lack of protection for the tenant who is at the mercy of the landlord to be kicked out of the property. The Chair agreed with Ms Ngondo that indeed there appeared to be no protection for the tenant in a situation where a tenant seeks to offset the rate expense against rentals.

Mr Dorfling insisted that the clause protects the tenant against an eviction order by the landlord.

Dr Bouwer explained that Clause 28(3) creates a legal obligation to the effect that the owner cannot evict the tenant in these circumstances.

Ms Ngondo questioned why the owner of the property is not made part of the deal between the council and the tenant. Ms Botha agreed that it was unprocedural to exclude the owner of the property when the effect of this intervention is to interfere with a legally binding tenancy agreement.

Mr Mokoena agreed with the Chair that there is no clear provision protecting the tenant against adverse action by the landlord. It would appear the tenant is at the mercy of the landlord in this particular instance. He added that it would appear the council in this case is intent on hitting the soft target.

Dr Bouwer explained that Clause 28 only deals with arrears not where taxes should be paid in the first instance. It is an extra-ordinary measure of recovery when all other processes have been exhausted. Legally speaking the landlord has no right to institute eviction proceedings against the tenant.

Ms Manche explained that the first port of call in recovery proceedings is the owner. Experience has, however, shown that absentee landlords own many properties in various municipalities.

Ms Kgoali said that councils should desist from going for soft targets when they make no efforts at tracing property owners.

The Chair clarified that the local government structure is such that it never shies away from going for the so called soft target where that is the last resort for rates collection. He however agreed that tenant protection should be clearly stated in the Bill.

Ms Botha made the point that there were heavyweight tenants like Pick n' Pay hence one should not think that all tenants are soft targets. She said that in a situation where a property owner receives monthly/annual rentals then they are clearly traceable.

Mr Dhorfling explained that Clause 28 only kicks in after the process outlined under Clause 24(1) had been exhausted.

Ms Ngondo insisted that it is important to serve the property owner with the notice that is served on the tenant so that the owner is involved in the agreement that is reached between the tenant and the council.

The Chair ruled that the contentious Clause 28 should be flagged for the moment.

Ms Botha referred to Clause 32 and asked which valuation roll applies where land reform beneficiaries sell their property to ordinary farmers.

Dr Bouwer replied that Clauses 77-79 make provision for the updating of the valuation roll and also deal with supplementary valuation.

Mr Mokoena referred to Clause 33 and expressed worry that some syndicates that are hell-bent on ripping off municipalities would use this opportunity to create jobs for their cronies. He wanted to know whether there were built-in checks and balances to guard against such malpractices.

The Chair cautioned members against picking up every imagined situation and seeking a remedy by way of legislation. He asked members to resist the temptation to over-legislate.

Dr Bouwer referred members to Clause 35(1) and (2) and noted that the municipal valuer remains in charge and is mandated to drive the process.

The Chair added that in the matter of delegating, the municipal manager would have made recommendations to that effect.

Mr Dorfling assured members that the days are long gone when certain private valuers held sway by withholding all data and demanding exorbitant fees before releasing this to council. The new dispensation, gives councils the leverage over its own valuation records.

Mr Sulliman (ANC) asked why the municipal valuer sits back and appoints people in private practice to do this job.

Mr Manyike replied that most councils lack capacity to undertake a comprehensive valuation exercise, hence the need for outsourcing the exercise.

Mr Kgoali asked why the power to appoint valuers has been given to the municipal manager and not the council.

Dr Bouwer replied that the municipal manager is the accounting officer in municipalities and is the one who gets involved in the valuation exercise.

Mr Dorfling reminded members that in the Structures Act, the hiring and firing function is the prerogative of the municipal manager.

Ms Manche informed members that the contractual employment of the municipal valuer must be signed by the council for it to take effect. The municipal manager is designated to oversee the process of hiring and deployment.

The Chair noted that the meeting had exceeded its time slot. He suggested that the meeting adjourn until next week when further deliberations would be held.