A city of unhappy homeowners

2009-04-03 00:00

When the Municipal Property Rates Bill was going through its tortuous and controversial passage to enactment, the opposition foretold of unreasonable rates in order to swell municipal coffers at the expense of property owners. Yet there was little in the substance of the bill itself which substantiated this fear. It now appears that the Democratic Alliance understood municipal leaders rather better than their own parties did, for the implementation of the act has been accompanied by unhappiness among ratepayers and some rank stupidity on the part of municipal councils. Here, we have as much controversy as anywhere, even though our rates have not yet been set.

Short-sightedly, in my view, the blame for the upheavals has been placed on the legislation itself. In KwaZulu-Natal, where the system of valuation differed from that of most other provinces, we have forgotten how unsatisfactory the former system was and how much tension it caused every time properties were revalued.

A reminder: there were two components to the valuation — one was the market value of the land (without any building improvement) and the second was the estimated replacement cost of the building. Land in built-up areas was very seldom sold without any buildings, so where an index came from is anyone’s guess and as for the replacement cost, it was not much more than an estimation, surely. It seems quite simple to analyse the record of property sales at a given time to find realistic indices and to estimate on this basis what the market is likely to pay for a particular property. Estate agents do this as a matter of course and, for the most part, pretty accurately.

But for the professional valuators engaged to do this ground work, the task seems anything but simple. With reason, their valuations have come under severe fire almost everywhere. Valuation rolls have been littered with careless errors which could have been identified by the application of a software programme that identifies outriders. Had all these technical errors been corrected before delivery, many of the tensions would have been avoided. It is unreasonable that property owners should have to identify these mistakes themselves and engage the appeals process in order to get them rectified.

This type of error aside, some property owners (in truth it is a minority) believe that the valuators are dealing in a different market altogether. Considering the movements in the property market over the past year, that is roughly the time between the first valuation and the second (occasioned because the delay in implementation of the act had rendered the first obsolete), owners would have expected that their properties would have lost some market value. In some cases, however, the values have increased, defying logic. Comparisons also reveal wide discrepancies. I suspect that much of the data supplied to the professionals was inaccurate or incomplete and that this might be at the root of the problems. However, if the mandatory revaluation had been done to support the previous legislation, inspections of properties would also have been part of the process in order to estimate replacement costs. I remember how many complaints there were when the city’s properties were revalued some years ago. As a result of changes in the market, some values increased by 30% or 40%, while others, which we didn’t hear much about, went down. The whole issue is pervaded by the nature of property owners who want the lowest values for rating purposes, but the highest when they put their properties on the market.

The intention of the legislators was that the new system would standardise the rating procedures across the country, create mechanisms of implementation more appropriate to the time and maintain rate obligations at reasonable levels. The legislation contains controls to prevent municipalities from adopting “cash cow” policies. Unfortunately, the transition from the old to the new was not governed by similar restrictions and this loophole has been cynically exploited by too many municipalities. We have been assured that ours is not one of them. Let’s hope that the assurance is justified.

• Andrew Layman is a former headmaster and now the CEO of the Pietermaritzburg Chamber of Business.

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