Commercial News

Sapoa puts the spotlight on municipal valuations

By Suren Naidoo

The president of the SA Property Owners Association (Sapoa), Peter Levett, has called for greater consistency from municipalities on commercial property valuations.

Concerns around commercial property rates and taxes emerged as one of the main issues during a media event yesterday in Rosebank, Johannesburg, addressed by Levett and Sapoa CEO, Neil Gopal. Sapoa is body that represents the interests of SA’s commercial property sector.

“There is general consensus that municipalities are performing better with residential than commercial properties. When it comes to commercial properties, there is little consistency and accuracy with regard to the municipal values,” said Levett.

He said that Sapoa did not have an issue with the Municipal Property Rates Act (MPRA) per se, but with inefficiencies at municipal level in dealing with issues around commercial property rates.

“The MPRA allows for a process of objections and appeals to correct certain specified errors in a valuation roll. However, with the current inefficiencies at municipalities, these objections and appeals processes take too long to be finalised and implemented. This results in the property owner having to face the financial burdens in the interim, which is clearly undesirable. It is particularly difficult for commercial property owners who have to adjust and/or pass on rates and taxes to their tenants,” said Levett.

He said the main weaknesses could be attributed to:

  • Inexperienced valuers being appointed to perform valuations;
  • Municipalities not grasping the vital relationship between a complete and accurate valuation roll and tariff setting, i.e. the assessment rates budget; and,
  • The lack of property information that would enable the municipal valuer to perform accurate and consistent valuations.

Coincidentally, just this week SA real estate investment trust, Liberty Two Degrees (L2D), raised the issue of the sudden rise in the municipal valuation of its Eastgate Shopping Centre property. Releasing its 2017 full-year results, L2D said the Ekurhuleni Municipality had more than doubled the valuation of Eastgate, which had a consequential impact on the property’s rates bill and the company’s distribution payout for 2017.

Speaking at a results presentation, L2D Financial Director, José Snyders, said Eastgate’s municipal valuation was hiked from around R3.5 billion in June to R6.5bn in November, and now stood at R8bn. “We are engaging the Ekurhuleni Municipality on the issue with the help of Rates Watch, and expect the valuation to come down to market related levels,” he said.

Meanwhile, Sapoa has re-appointed specialist consultants Rates Watch on a 5-year contract to monitor the municipal rates policies of major municipalities countrywide.

Levett explained: “Rates Watch’s mandate from Sapoa is to focus on unearthing municipal budget information on key property related costs, like rates and taxes, electricity, or water in SA’s eleven largest municipalities. They focus on City of Cape Town, Nelson Mandela Bay Metro (Port Elizabeth), Buffalo City (East London), Mangaung (Bloemfontein), eThekwini Metro (Durban), Msunduzi (Pietermaritzburg), Ekurhuleni (East Rand), City of Johannesburg, City of Tshwane (Pretoria), Polokwane (in Limpopo) and Mbombela (Nelspruit) respectively.”

He added: “Rates Watch will be responsible for identifying, analysing and collecting information on relevant municipal policies and legislation, as well as the municipalities’ Medium-Term Revenue and Expenditure Frameworks, at eleven of the largest municipalities throughout SA.”

Levett said whilst some of Sapoa’s comments to municipalities have been implemented, Sapoa was also finding that some municipalities did not adhere to legislation. “For example, sometimes the draft tariffs are not published on their websites as prescribed by legislation; and, some of the categories in the tariff determination differ from the rates policy wording.”

As part of its continued advocacy for the commercial property sector on municipal rates and taxes issues, Levett said Sapoa would be addressing its concerns with the respective City Managers, as well as the Department of Corporate Governance and Traditional Affairs (COGTA).