High property prices equate to sky-high taxes - or maybe not?
07-03-2007
With property prices having soared over the last few years, it is understandable that home-owners are concerned that municipal property taxes will skyrocket with the next municipal valuation of their home.
However, there is no need to panic, says Llewellyn Louw, valuations manager at property valuers and economists Rode & Associates. Prices of many homes may have tripled even without improvements having been done, but municipalities are not at liberty to introduce excessive increases to council budgets. They have to comply with legislation that prohibits annual budget increases in excess of 10% without special approval from the national Treasury Department.
“It is therefore logical to deduce that the increase in property valuations will be balanced by a corresponding decrease in tax rates.”
Louw says home-owners should make use of the rights they are afforded under the new Local Government: Property Rates Act. One such right is that home-owners must be informed by Council about the process of filing objections to valuations, so that they can know when and how to file for a valuation reduction, should they have grounds to believe their property has been overvalued.
“The Council must ensure that a municipal valuer investigates each complaint about an erroneous valuation within a specified period. Should the mistake be verified — for instance that the specific person's house is valued significantly higher than other properties in the particular area — it must be corrected before the valuation is referred to the valuation board.”
The main changes introduced by the new Act are that a fixed residential property tax rate in the rand will in future be used and that the standard rebate previously used will fall away. The Act also determines that properties have to be re-valued every four years and that the improved value of the property “must be the amount the property would have realised if sold on the date of valuation in the open market by a willing seller to a willing buyer”.
The Act does make provision for a municipality to set out criteria for exemptions, reductions and rebates based on income levels and other relevant criteria in its rates policy, and specifies that such policies must also be made available for public comment and input.
Louw says home-owners should take note that the new Act affords property owners at least 30 days from the time the completed valuation roll for a municipal area is published, to review, and object to, the objective and subjective data on record for their respective properties. The publication and display of the rolls at public venues must be announced in a local newspaper once a week during the two weeks before publication and display.
During the display period of a roll, individual home-owners or municipal councils may lodge objections with the municipal manager of the relevant region by completing and handing in or mailing a specific form for that purpose, explains Louw.
These objections are handed to the municipal valuer involved. If the valuer accepts the objection an adjustment will be made, unless the adjustment is more than 10% down or up, in which case the objection will be referred to an appeal board.
If an objector is not satisfied with the decision of the municipal valuer, the objector may also lodge an appeal with the appeal board. Home-owners with objections will be informed in writing of the date when a formal valuation board (headed by a person such as a retired magistrate and consisting of independent people with property backgrounds) will deal with their objections. The home-owner, or an official representative, will be entitled to appear in person before the board to state his or her case.
At this stage it would be to the advantage of home-owners to get the assistance of a qualified valuer, suggests Louw, as “they are well informed about the criteria, procedures and terminology used at appeal board hearings.”
He says that while a separate objection has to be lodged for each individual home in a sectional title or cluster complex, the owners can contract one valuer to represent them at the board hearing if the grounds for their objection to the valuation are the same or very similar.
Home-owners should also be aware that the Act determines that while their objections or appeals are being considered, objectors must pay the rates due from the implementation of the valuation roll. Should a downward adjustment be granted, they would be refunded the excess amount from the effective date.
Louw says both objective physical data and subjective environmental data is used in the valuations, and appeals for adjustments to valuations could be based on either, or both.
The obvious objective data about your property will include information such as the size of the house, the size of the erf, the number of bedrooms, bathrooms, kitchens, etc; the roof coverings, building materials and finishes; the number and size of the garages; and details about other improvements on the erf such as a swimming pool, or a tennis court.
As far as environmental data is concerned, it includes factors such as typography, the view, security, how busy the street is, and noise levels in the area. Details like finishes and fixtures could also be relevant, i.e. your old home may be surrounded by new, up-market properties with the latest in finishing trends. You should therefore also request the sales data the municipal valuer used for the area and check it against the prices of the last properties sold in the area.
