Double rates trouble for City of Tshwane

A consortium of agricultural landowners from the former Kungwini municipality plans to claim huge rates refunds from the City of Tshwane on the basis of the judgment handed down by the Supreme Court of Appeal (SCA) in the Lombardy Development case.

Moneyweb earlier reported that the SCA set aside the City of Tshwane’s 2012 supplementary valuation roll as well as the 2013 general valuation roll with regard to properties that were re-categorised from residential to vacant land, without the prescribed prior consultation with owners.

Read: Pretoria East property owners want huge rates refund

This occurred when the ANC-administration was still in office.

The city, now under DA rule, will seemingly have to refund these owners the amounts they paid in terms of the re-categorisation, which resulted in increases of around 700% in rates bills dating back to July 1, 2011, when Kungwini was first integrated into the City of Tshwane.

The city had earlier indicated that this could have huge financial implications.

Former DA councillor Lex Middelberg, who drove the DA’s initial support for the landowners’ court action and has since left the party, estimates the claims from the two groups of landowners could jointly amount to several billion rand. “Even if it is only R1 billion, it is going to be devastating to the city’s finances,” he says.

The City of Tshwane has been identified as a financially distressed municipality and its financial vulnerability is widely recognised.

Middelberg says large portions of land in the East of Pretoria, formerly Kungwini, have been subdivided into smallholdings. The result is thousands of smallholdings in high-end lifestyle developments that were zoned as agricultural land. Owners don’t farm, but live on the properties where they are, for example, allowed to keep horses.

As in the case of the vacant land, the City of Tshwane in the 2012 Supplementary Valuation Roll and the subsequent 2013 General Valuation Roll re-categorised these properties from agricultural to residential, which means that the rates tariff increased fourfold, Middelberg says.

“We were just waiting for the Lombardy appeal to be finalised, since the facts in our matter are exactly the same,” he says. “We will now use this judgment to claim refunds of payments owners made in terms of the unlawful increases.”

He adds that about 20% of the affected agricultural landowners did not pay the increased rates, because they simply couldn’t afford it. Since they are in Eskom supply areas, the City of Tshwane could not cut their electricity supply, but it did in some cases restrict water supply to owners in an effort to force payment.

Middelberg says that, in response, many such owners sunk boreholes or started using water from neighbouring properties’ boreholes.

In the meantime attorney Victor Maartens from Maartens Commercial Attorneys expressed his concern about affected Tshwane customers being bullied into signing debt arrangements.

He cites the example of one of his clients who out of the blue received an “arrears” rates bill for R75 443.11 for two vacant properties in the former Kungwini municipality. The client was under the impression his bill was up to date and tried to get information about the arrears bill from the City of Tshwane.

“The client only received the answer that the cities’ official does not know what these charges are for or where they occurred from, but since the system show the arrears, the client has no other alternative than to go to the credit control department at the City of Tshwane BKS Building in Pretoria street, in order to make an arrangement to pay,” says Maartens.

He adds that the City of Tshwane’s attorneys typically demand immediate payment and threaten legal action. Maartens cautions landowners against signing an acknowledgment of debt and binding themselves to payment arrangements without first getting legal advice.

The City of Tshwane is still studying the Lombardy ruling and time will tell whether it will take the matter to the Constitutional Court on appeal.

In an earlier press release, the city indicated that it had “cured” the unlawfulness related to the vacant land in the former Kungwini municipality. In terms of the SCA ruling, however, the unlawfulness seems to be ongoing.

If the city decides not to appeal, it seems the only way it could address the ongoing unlawfulness would be to publish a new supplementary valuation roll for the affected properties, and follow the procedures as prescribed in the Local Government: Municipal Property Rates Act closely.