How will the Municipal Property Rates Act affect property owners?

The critical determinant of how much property owners will pay is the amount in the Rand each municipal council will determine for the various property categories.

The Act does not change the total revenue needs of municipalities, nor does it set the Cent amount in the Rand. Each municipality will continue to set and collect property rates in an amount sufficient to meet its needs, taking into account the likely impact of rates on local economic development, ratepayers and their ability to pay such rates.

Each municipality will have to properly manage the transition from its old rating practice to the new system based on the Act. All things being equal, municipalities that have not been rating on the market value of land and buildings combined, should consider reducing the Cent amount in the Rand drastically to ensure that there are no major shocks to ratepayers and economic sectors given that in terms of the Act, they will be raising revenue from an expanded rates base than before. Also, for all municipalities, when new valuations are done, from time to time, the Cent amount in the Rand should be reviewed, and if necessary reduced drastically to avoid creating major shocks to ratepayers.

For example, if the municipality was raising total rates income of R1 650 295 from residential/commercial property category based on rating land, whose rates base was worth R56 204 500 (total market value of all individual properties within the residential/commercial property category), and the new rates base, which is land and buildings, is worth R273 204 500 in market value, the municipality would have to drastically reduce the cent amount in the Rand, from about R0.029 to about R0.006.