SA Property Legislation - New Municipal Property Rates Amendment Bill

The Municipal Property Rates Amendment Bill - currently before Parliment - sets out to charge people who own more than one residential property commercial rates on the additional homes.

People who own more than one residential property will be forced to pay commercial rates on the homes in terms of the Property Rates Amendment Bill. This means that anyone with a holiday home or who owns an investment property that is being rented would see property rates on those properties double and they would also lose any municipal rebates on those properties as well.

In terms of the new Bill, the definition of "residential property" has been changed, and now only the home that the owner is living in is deemed residential and classified as the "primary property". The other properties are defined as commercial properties in terms of the Bill.

Moreover, local residents' associations, estate agents and other investors have just one week to lodge their objections to the proposed national legislation that will affect rates levied by all municipalities throughout the country.

Lilian Develing, chairman of the Combined Ratepayers' Association in Durban says that the legislation will have a serious impact on the property market and that the letting business wil be severely impacted because rentals will rise sharply. She says that at the moment the residential rate is 0.907% while the commercial property rate is more than double at 2.057%. This means that for properties that are not deemed to be the "primary property" the rates would more than double.

The Democratic Alliance's councillor and eThekwini caucus chief whip Dean Macpherson warns that the bill will lead to a collapse in property investments. According to attorney Maria Davey from Meumann White, owners of investment properties were already forced to pay additional capital gains tax and also had to pay income tax on the rental received. Now they will have to also pay higher rates bills.

She says that many people had provided for their retirement by buying a second property that was initially rented to tenants but in later years, would be used by them as a retirement home. Davey says that if the legislation is passed in its current form then it may prevent people from making these sorts of provisions.

The DA has attacked another change contained in the Bill that would see the current valuations by municipalities being extended from five to seven years. In practice this means that if property values decline, rates would remain unchanged at the higher level until another valuation was done, even though the value of the home had fallen.

Comment from AFriForum

"It appears that the redefinition of residential rental property as commercial property will amount to a form of income tax, which will be a violation of...the Constitution," says AfriForum head of community affairs Cornelius Jansen Van Rensburg. The Municipal Property Rates Amendment Bill proposes that people who own more than one residential property will be forced to pay more expensive commercial rates on additional properties. Up until now, property tax has been based on the status of a proprty under municipal zoning. "If the amendments are approved, the focus will shift to whether or not income is generated from a proeprty," says Jansen Van Rensburg.

The Constitution calls for the state to create an environment in which property is accessible to all inhabitants of the country and enshrines the right of access to housing, AfriForum said. "Given the economic impact the proposed amendments, only the super-rich and the state will be able to enter the property market due to higher administrative costs of property ownership," said Jansen Van Rensburg. "Rental properties will become unaffordable for people who do not qualify for mortgages, thereby increasing people's reliance on the state for housing." he said "the proposals appear to come down to another form of nationalisation through taxation".

"The proposed amendments are likely to drastically limit property ownership among the middle class." The deadline for public submissions on the bill is Friday, July 22.

Source: Timeslive & Property 24

Courtesy: The EAAB - Estate Agency Affairs Board

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