Commercial property owners to challenge municipalities on high rates increases.
Category Industrial Property News
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.
Author: SAPOA
