Sapoa loses interdict to stop eThekwini municipality doubling rates on vacant land

The South African Property Owners Association (Sapoa) has failed in a bid to interdict the eThekwini Municipality from doubling rates on vacant land, and from taking action against ratepayers who refused to pay the increased amount.

Pietermaritzburg high court judge Rob Mossop said the case was “tenuous” and while other cities might charge much less than eThekwini, there were numerous other variables that may have contributed to the setting of the value of the rates by the municipalities. 

“Whether the rate randage charged in respect of vacant land is excessively and unnaturally high can only be determined by reference to the provisions of the whole budget in its entirety,” he said.

Sapoa sought the interdict ahead of a planned review of the city’s decision to increase the rate randage in respect of vacant land from 5.8966 cents in the rand to 11.793 and declaring it unconstitutional and invalid.

The review, which is the second part of the application, is still to be set down and argued.

In the interdict application, Sapoa said the city, in its 2021/2022 budget had fixed the rates on vacant land at 5.8966 in the rand.

Its medium-term revenue and expenditure framework document, projected anticipated increases for three successive financial years as increasing to 6.1915 cents in the rand and then to 6.501 in the 2023/2024 financial year.

“However the sequence of prophesied increases did not eventuate. In 2022/2023, the decision was taken to increase it by 100%, effective from July 1 2022.”

Sapoa, the judge said, argued that this would dampen property values and curtail development and growth because investors would be less likely to generate acceptable returns on investments in the city.

It had also argued that there had been no proper consultation with landowners about this.

Assuming a property value of R1m, Sapoa said, eThekwini would now charge rates of about R118,000 a year on the land, while in Tshwane the rates would be R39,000 and Cape Town R13,000.

The city argued that the rate increase formed part of its annual budget. A portion of this could not simply be set aside.

Mossop said Sapoa had said “very little” about the principle of legality. It had claimed that the doubling of rates had not been referenced in the city’s integrated development plan and that the draft budgets were “not transparent”. It said the substantial increases “were not easily apparent, that there had been a failure to consult with landowners and they were unable to object to the budget.

He said, however, that documents showed Sapoa was aware of the proposed increase and had addressed concerns to the municipality.

That the municipality did not accept those submissions, did not mean it acted unlawfully.

The judge also pointed out that the challenge brought in the interim application was against the rate randage applicable to the 2023/2024 financial year, premised on the alleged “knock-on effect” of the “excessively high” rate randage decreed for the past financial year.

“The applicant (Sapoa), is thus trying to unscramble an already scrambled egg.

“The budget for 2023/2024 had already become effective. Ultimately the budget for two financial years will have to be challenged and reversed. This will be difficult to achieve.”

Mossop said while it was undeniable that other cities charged much lower rates for vacant land and that this initially, may generate a feeling of shock, such comparisons were not helpful.

“I do not know how much vacant land exists in any of the cities. Some cities may have an abundance of vacant land and therefore need to maximise revenue that they can generate from that land. There are numerous other variables that may have contributed. 

“In those comparisons, the rate randage is viewed in isolation and not in the overall context of a much bigger budget.”

He said, for example, that rates might be lower on vacant land but higher on other properties.

“This can only be determined by reference to the provisions of the whole budget in its entirety. I do not have that information before me.”

Mossop said he was not persuaded that Sapoa had established a right to the interdict and it seemed likely that Sapoa would have difficulty in succeeding in its review application.

Further, he said, if the interdict were granted, it would limit the municipality’s ability to recover amounts not paid to it, which would have a significant effect on its revenue stream and ability to function.

Another action is pending before the court in the matter of JSE-listed property developer Calgro M3 in which it is seeking a constitutional review of the increase.

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