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The 2004 Municipal Rates Bill
International Property Solutions
13 June 2007
The 2004 Municipal Property Rates Bill (which starts coming into effect from 1 July 2007) was introduced in order to regulate the rating of properties. One of the effects is that it will mean Sectional Title properties no longer pay rates through the Body Corporates / Managing Agents; going forward, these properties will need to be valued every 4 years, and the monthly rate payment will be calculated according to the valuation the property receives. Owners will then have to pay the rates directly to the municipality.
Sectional Title schemes will still have to pay rates for the common property areas, so the owners will get billed for the rates for the communal property areas separately.
Depending on the valuation that the property receives, this could mean that rates will either go up or down from the amounts that owners are currently paying. Obviously, this incentivises owners to get as low a valuation as possible. However, the valuation is not directly under the owners’ control. Municipalities will conduct valuations either through direct property inspections as well as through the use of analytical & comparative systems. Owners should be notified in writing of the valuation that their property receives, and have 30 days to contest the valuation should they wish.
One extremely positive side to the change in rates for sectional title properties is that a municipality cannot prosecute the entire building or scheme if rates haven’t been paid – they will have to prosecute the individual property owners that have failed to pay their rates. This was previously one of the major concerns for many potential buyers in sectional title properties, as a badly-managed body corporate, or a single defaulting owner in the scheme, could jeopardise every owners’ property in that scheme.
Another positive that some property people are suggesting, is that as managing agents now have less monies to collect on a monthly basis, and as they now have to manage less risk of individual owners defaulting, the rates of managing agents should decrease. Whether this will materialise, remains to be seen.
Sectional Title owners will also have to apply for a rates clearance certificate for the property when selling the unit. The fee payable will be the same as for non-sectional title properties, currently at approximately R90.
The equation for calculating the monthly levy from the valuation price is:
(Valuation Price – R88,000) * 0.0049 / 12
The R88,000 is the exemption amount.
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