Commercial property owners to challenge municipalities on high rates increases.

Simultaneous increases in the rates factor and property valuations resulted in municipal rates levied on commercial property owner’s to rocket in July this year. Members have seen rates increase on average 23% for

the year. Further, over the past 5 years members have complained about total rates

increases of raging between 43% and 500% for the period

“Not only is this unsustainable, but property owners pass these increases through to

tenants, which has a material impact on the health of businesses in the economy,” says

SAPOA President Estienne de Klerk. “Further, property owners are providing various

’undelivered’ municipal services for themselves and their tenants via City Improvement

Districts, at extra expense to the sector. The ongoing rates increases for commercial

property simply make no sense.”

SAPOA represents around 1,200 companies and organisations. Its members control

about 90% of all commercial, retail, office and industrial properties in SA to the value of

approximately R300 billion. It is one of the largest group of ratepayers in South Africa,

made up of many of the country’s largest ratepaying businesses.

It plans to consult municipalities on their basis of levying rates. It aims to gain insight

into each municipality’s commercial property valuation basis, rates ratio level, budget

approval process and confirm that rates are being reset annually. And, if any of this

doesn’t comply with regulations, to help set it right.

According to the Constitution, municipalities cannot levy rates on property in a way that

materially or unreasonably prejudices national economic policies, economic activities

across its boundaries or the national mobility of goods, service, capital or labour.

SAPOA is alarmed that this is exactly what will happen if the unduly high rates increases

continue for the commercial property sector.

It isn’t only property owners that find themselves in difficulty because their properties

are becoming financially unsustainable as a result of these soaring costs. Rates are

passed on to tenants of commercial properties, placing even more pressure on

businesses which are becoming unsustainable and not renewing their lease agreements

because they are forced to shut shop.

And SAPOA isn’t the only business organisation distressed about the impact of municipal

rates increases. De Klerk reports that SAPOA has received letters of support from

various other representative organisations across the economy. “These businesses have

felt the brunt of the municipal rates increases over the past five years, in difficult trading

conditions.” And these tough conditions are set to continue, exerting strain on business

and the economy.