It's property tax season - Ignore at your peril

At least 21 municipalities, including five metropolitan councils, will publish new property valuation rolls in the next month or two. Ignoring these could cost property owners dearly, says Ben Espach, director of valuations at property rates consultancy Rates Watch.

This means that such municipalities will attach new property values to all fixed properties within their borders and reconsider the categorisation of each property. This data will form the basis for calculating the property tax levied against property owners for the life of the valuation roll, which may be at least four or five years.

Unless owners object within the limited period allowed for objections to valuations that are higher than market value on the valuation date, they will be bound to pay inflated property tax bills until a new valuation roll is adopted four or five years later.

As an example Espach says property tax on a residential property valued at R1 million in the City of Tshwane would amount to R858.71 per month. If the same property was valued at R1.2 million, the owner would have to pay R1044.38 per month.

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If the valuation roll is valid for four years, the owner would be paying almost R9 000 more over the period.

The categorisation of the property on the valuation roll can also have a dramatic effect on the amount payable, Epach says. The owner of the same R1 million residential property in Tshwane who would have to pay R858.71 per month, would be confronted with a monthly property rates bill of R2801.67 if the property were categoried as “business” and R6025.00 if it were categorised as “vacant”.

Espach says the valuation rolls of 83 municipalities will lapse at the end of June. Under certain circumstances the rolls can be extended. Rates Watch has confirmed that at least 21 municipalities will adopt new rolls this year, including the City of Tshwane, Ekurhuleni, eThekwini, Mangaung and Nelson Mandela Bay Metro.

Such municipalities are required by law to inform each affected owner of the new valuation and property tax category that would apply to his or her property and to publicly advertise where the new valuation roll will be available for inspection.

Espach says postal notices often don’t reach owners and he advises property owners to inspect the rolls on the municipal websites. While the Local Government Property Rates Act requires the rolls to be open for inspection for at least 30 days, some municipalities provide for longer periods of 60 or 90 days.

The new values take effect in the new financial year, starting on July 1.

“Property tax season will be at its height in March and April this hear,” Espach says.

The valuation roll would stipulate the valuation date. That is important, since the valuation should reflect the market value of the property on that date – probably June 2016, says Espach.

Valuation are never exact and property owners would be well advised as a general rule to submit objections where the valuations deviate by more than 10% on residential property and 5% on income generating property Espach says.

Rates Watch has since July 2013 submitted 1 374 such objections on behalf of clients, the majority of which in Ekurhuleni, Johannesburg, Tshwane and Cape Town. The aggregate result was a reduction in value on the affected properties of R4.7 billion and monthly savings on the rates bills of more than R10.6 million.

Espach says it is very important to submit the objection on the prescribed form within the allowed period, as late objections are not accepted.

The burden is on the objector to prove that the valuation is wrong and that is done by providing market data, including comparative sales in the area.

The municipality or for that matter any third party, may also object if it considers the valuation to be too low in which case the owner has to be informed of such objection and be offered an opportunity to make a submission.

The objections are only considered at a later stage and owners are bound to the valuation as published in the meantime. That means that they have to pay property rates accordingly. If the objection is successful, the account will be adjusted and debited or credited retrospectively where necessary, Espach says.

He advises property owners who are notified of the outcome of their objections to check whether the necessary adjustments are made on their rates accounts and if so, whether it has been done correctly, he says. “Mistakes often occur and are not necessarily in favour of the municipality,” he says.

If property owners are notified that their objections were rejected, they can appeal within 30 days to an independent appeals panel. This is again done on a prescribed form and the appellant has to provide supporting market data during a hearing scheduled for this purpose.

Espach says the process can take a considerable amount of time. The appeals to valuations in Johannesburg’s 2013 valuation were only dealt with in 2016 and the credits are still outstanding,” he says.

Sectional title units are individually valued. The valuation takes into consideration the value of the specific unit as well as its undivided portion of the communal property. Complexes with better communal amenities should therefore be given higher valuations, he says.