The Municipal Rates Act of 2004, which was implemented in Johannesburg in July 2008 and in Cape Town a year earlier, was introduced in an effort to regulate the rating of properties across the country.

In spite of initial negativity around its implementation, experts say there could be benefits for home owners in the long term.

"In the past, property was rated according to the value of the land, and as ratings were not done regularly the values in many cases were out of date," says Mike Bester, CEO of Realty 1 International Property Group.

"The new Act introduced a policy to guide municipalities in determining property rates that will take account of the value of both the land and the buildings, and will introduce substantially more properties into the rating fold."

The point of the new Act, says Bester, is really to try and ensure that rates are levied according to the current value of the property, and not the existing outdated valuation. The re-valuation exercise that has taken place has also served the purpose of bringing the property valuation database up to date, and this will vastly increase the amount of revenue collected as a result of rates.

Rates are levied according to a ratio expressed as a cent amount in the Rand, levied on the market value of immovable property, says Michelle du Plessis, a director at Denys Reitz attorneys. "Property rates are set, collected and utilised locally. National and provincial government do not have the power to levy rates, nor do they share in revenue collected," she says.

"Rates revenue is spent strictly within the municipal area from which it is collected, and is disbursed in participation with local communities. For interest's sake, the property rates revenue for the 2003/2004 fiscal year amounted to R14,4bn."

Bester says this can only benefit homeowners in the long term. "There are several other positive aspects to the new rating system," says Bester.

"As the number and value of properties rated increases, municipal income from rates will also increase and this could result in property owners paying less in some cases as the base will be more widely spread."

There are also interesting provisions in the act, he says, that could affect the sectional title and rental sectors of the market. "If a landlord fails to pay his rates, the municipality can claim the outstanding amount from the tenant. The tenant or letting agent will then be obliged to pay up to the value of the rental price to the municipality instead of to the owner. In this way the landlord will be forced to keep his rates payments up to date."

In the sectional title arena, says Bester, it's now common knowledge that individual owners will be liable for their own rates as opposed to the body corporate which traditionally paid rates for the whole complex. "What isn't quite as well known is that a body corporate that is in arrears with payments can now cause a delay in the sale of an individual unit, as that unit is effectively in arrears with an amount that covers the whole complex."

Bester says that in spite of the initial flood of complaints about the valuations which in many cases were reported by home owners to be unrealistic, the fuss around the process seems to have largely died down. He believes that as with any new policy there will be some teething problems but these can be sorted out, and generally the new rates will not have much effect on the property market.

Du Plessis agrees. "The most beneficial approach which can be embarked upon by all landowners is one of direct interest and participation in the rating process," she says.

"The Act also provides for rates policies to be reviewed regularly and, if necessary, amended, and government has given its undertaking that the rating process will be fluid and ongoing."

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Our local municipality do not care about improving Deneysville. They do nothing. They use our rates money to sponsor soccer games and for trips to other countries for conferences, etc. We get nothing for our money. Now they have more money to waste. - Anonymous

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