eThekwini’s 100% increase in vacant land tariff challenged

The SA Property Owners Association (Sapoa) and JSE-listed property and private memorial parks developer Calgro M3 have independently hauled the eThekwini Metropolitan Municipality to court to challenge a 100% increase in the rand rate charged on vacant land.

Sapoa has claimed the rate charged on vacant land is significantly higher than the rates charged by other metropolitan municipalities.

The High Court in Pietermaritzburg heard that, assuming a property value of R1 million and after the eThekwini municipality rate increase, it would now charge rates of approximately R118 000 a year on vacant land compared to only R39 000 by the Tshwane Metro and R13 000 by the City of Cape Town.

Sapoa claimed this obvious disparity is prejudicial to its members in eThekwini and is unsustainable.

Impact

Sapoa said such a decision also dampens property values and curtails development and growth because investors will regard the eThekwini area as being less likely to generate acceptable returns on investment.

It further claimed the decision taken by the eThekwini municipality to increase the rate on vacant land from 5.8966 cents in the rand to 11.7932 cents is unlawful and unconstitutional.

It said the municipality must take cognisance of the contents of the annual Municipal Budget Circular issued by National Treasury when considering an increase in the rate randage and referred to the circular issued on 6 December 2021, which advised: “The Consumer Price Index (CPI) inflation is forecast to be within the lower limit of the 2.6 percent target band; therefore municipalities are required to justify all increases in excess of the projected inflation target for 2022/23 in their budget narratives and pay careful attention to tariff increases across all consumer groups.”

Sapoa added that the municipality’s medium-term revenue and expenditure framework document projected that, for the 2022/2023 financial year, the rate randage in respect of vacant land would increase from 5.8966 cents to 6.1915 cents in the rand and then to 6.501 cents in the rand during the 2023/2024 financial year.

It said the doubling of the rates on vacant land had also not been referenced in the 2022/2023 Integrated Development Plan.

Sapoa applied for an interim interdict against the municipality over the increase in vacant land rate charge, pending the relief it is seeking in Part B of its application for a review and the setting aside of the increase.

In Part A of the application, Sapoa applied for the municipality to be interdicted and restrained from:

• Implementing its decision to fix the rate randage payable in respect of vacant land for the 2023/2024 financial year; and
• Enforcement action and/or collection of unpaid rates on vacant land within the jurisdiction of the eThekwini municipality on any rates exceeding the rates amount that was in place on 30 June 2022 in respect of any land.

The municipality denied that its rate decision on vacant land is unlawful or unconstitutional, and opposed Sapoa’s application for an interim interdict.

Interdict application dismissed 

Judge Rob Mossop on Friday dismissed Part A of Sapoa’s application.

He said Sapoa stated the decision by the municipality to adopt a budget and to take the vacant land rate decision is an administrative action and may thus be reviewed in terms of the Promotion of Administrative Justice Act 3 of 2000, or alternatively that these decisions are reviewable in terms of the principle of legality.

However, Mossop said legal counsel for the parties had agreed in argument that this decision was not ‘administrative action’ and the relief sought in Part B of Sapoa’s application could only be challenged on the principle of legality.

The judge said Sapoa says very little in regard to the way in which the principle of legality has been offended by the municipality.

He said Sapoa claims:

• The doubling of the rates had not been referenced in the municipality’s Integrated Development Plan;
• The draft budgets made available for public comment were not transparent and the substantial increases ‘were not easily apparent’; and
• There had been a failure to properly consult landowners and consequently they were unable to object to the decision or the budget.

“It does not seem to me that these complaints demonstrate a perversion of the principle of legality,” he said.

Judge Mossop said the municipality indicated that it has complied with National Treasury’s circular, which did not prohibit above-inflation increases but, where they did occur, would have to be justified.

He said the municipality states that National Treasury has endorsed its budgets for the 2022/2023 and 2023/2024 financial years as being “balanced and fully funded”.

Mossop said Sapoa wishes to prevent the implementation of a decision regarding the rate randage for the forthcoming financial year because the rate randage for a past financial year was, in its opinion, excessively high and is thereby “trying to unscramble the already scrambled egg” because by the time this matter was argued, the budget for the 2023/2024 financial year had become effective.

“To challenge the impugned decision, ultimately the budget for two financial years will have to be challenged and reversed. This will be a difficult thing to achieve,” he said.

‘Feeling of shock’ understandable

Mossop said it is undeniable the figures in the comparative analysis of the rate randage charged by certain municipalities vary greatly between municipalities and may initially generate a feeling of shock, particularly among owners of vacant land in eThekwini.

However, he said he is not entirely certain that these comparisons are helpful because they do not indicate how much vacant land exists in any of the cities used in the comparison, nor how much vacant land exists in eThekwini, adding that many other variables may have contributed to this.

In dismissing Sapoa’s interim interdict application,  Mossop said he is unpersuaded that Sapoa has established a prima facie right and it seems likely to him that Sapoa will have difficulty in succeeding in the forthcoming review proceedings.

Sapoa CEO Neil Gopal said the association has noted the judgment with regret and that its legal team is in the process of studying it to advise Sapoa on the best way forward.

Gopal said that while Sapoa respects the court and its judgment, it respectfully disagrees with the learned judge’s views on the probabilities of success on the review of eThekwini’s decision.

“At this stage, Sapoa intends proceeding with the review of what it believes to be an unlawful decision by eThekwini Municipality, and it will seek to have the review finalised before the end of the current budget cycle, so as to provide guidance to the municipality for its future budgets,” he said.

“We remain committed to engag[ing] with government at all levels, and to act in our members’ best interests on the rates issue, which is placing an ever-increasing burden on property owners.”

Calgro M3

Calgro M3’s head of town planning and legislative regulations Alwyn Nortje said Calgro M3’s matter is a bit different to Sapoa’s application in that it is only reviewing the decision by the eThekwini municipality to impose a 100% increase in the “vacant land” tariff, and did not apply for an interim interdict.

Nortje said Calgro M3 also did not bring its review under the auspices of the Promotion of Administrative Justice Act, but it is applying for a constitutional review of the increase.

Calgro M3’s application is scheduled to be heard later this month.

Read: Unused land is main target of SA’s expropriation plan [Mar 2018]