Why is there a need for the Property Rates Bill?
This Bill is needed in order to:

• Regulate property rates in accordance with section 229(2) of the Constitution and
• Provide a uniform framework for regulating the rating of property

What are property rates?
Property rates are a rate in the Rand levied on the market value of property, that is land and buildings.

Are property rates new?
Municipalities have a long history of rating property, especially in the formerly white urban areas. In addition, the Constitution gives municipalities the power to value and rate property in their area of jurisdiction. National legislation does not give municipalities the original power to rate property; it merely seeks to regulate an original power protected in the Constitution.

Who is liable for the payment of rates?
All property owners, including real property, rights of way, easements and servitudes are liable for the payment of rates. Therefore, all property owners, including commercial, residential, agriculture, government and public service infrastructure are included in the definition of property.

How are property rates determined?
Property rates are the product of a rates base and the cent amount in the Rand. The Bill requires that the rates base is the market value of land plus buildings and these have to be rated together at the same cent amount in the Rand (which is decided by the municipal council).

For example, if the cent amount in the Rand is one or 1%, and the rateable value of a property (land plus buildings) is R 100 000, the property rates levied on that property would be R 1 000 per year.

The valuation of property is the process of determining the value of the property as at a specific date. Professional, independent valuers, whose job is to ensure that all properties are valued fairly and objectively, conduct valuations.

How is the market value of the property determined?
The market value of the property is the amount the property would have realised if sold on the date of valuation in the open market by a willing seller to a willing buyer.

In determining the market value of a property the following are disregarded for the purposes of valuing the property:

• The value of any annual crops or growing timber on the property that have not yet been harvested as at the date of valuation.
• The value of any building or other immovable structure under the surface of the property, which is the subject matter of any mining authorisation or mining right, defined in the Minerals Act (1991).
• The value of any equipment or machinery, which in relation to the property concerned is immovable property.
• Any unregistered lease in respect of the property.

Does the Property Rates Bill require that land and buildings both be rated?
Yes, the Bill mandates that both land and buildings be valued for the purposes of rating property. The practice of some municipalities of valuing and rating land only will no longer be applicable. This is important to ensure equitable treatment of property owners, and the total value of a property is a better measure of ability to pay.

How will the Property Rates Bill affect property owners?
Rating both land and buildings will not have any immediate effect on property owners. All that will happen is that the actual cent amount in the Rand will be reduced as the rate base would be broadened. The Bill 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.

What is property rates revenue used for?
Municipalities need a reliable source of revenue to provide basic services and perform their functions. Property rates are the most important source of general revenue for municipalities, especially in developed areas. Revenue from property rates is used to fund services that benefit the community as a whole as opposed to individual households. These include installing and maintaining streets, sidewalks, lighting, and storm drainage facilities; and building and operating clinics, parks, and recreational facilities. Property rates revenue is also used to fund municipal administration, such as computer equipment and stationery, and costs of governance, such as community and council meetings.

Property rates are set, collected, and used locally. National and provincial governments do not have the power to levy rates, nor do they share in the revenue collected. Revenue from property rates is spent within a municipality, where the citizens and voters have a voice in decisions on how the revenue is spent as part of the budget process.

Does the Property Rates Bill provide for any exclusions from rating?
Section 229(2) of the Constitution provides for national legislation to regulate the municipal power to levy rates. By way of regulation, certain kinds of properties have been excluded from the municipal power to rate. These include:

• The first R 15 000 of the market value of residential property
• Land reform beneficiaries' property, for 10 years, provided that the property does not change hands
• The first 30% of the market value of publicly controlled service infrastructure as defined in the Bill
• The right to prospect for minerals
• Property registered in the name of and used primarily as a place of public worship by a religious community, including the associated official residence occupied by an office-bearer of that community who officiate at services at that place of worship
• On parts of special nature reserve, national park, nature reserve or botanical garden within the meaning of the relevant legislation, except for commercial activities within them.

Does the Property Rates Bill provide for exemptions, rebates and reductions?
The Bill does not mandate any other exclusions other than those mentioned above. Municipalities may provide for exemptions, rebates, and reductions in their rates policy based on local conditions and circumstances. The cost of such locally determined exemptions, rebates, and reductions must be considered by the municipal council in relation to the benefit received by the local community from such a rates preference.

How does the Property Rates Bill treat newly rateable property?
The Bill requires that the rating of newly rateable property be phased in over a period of three financial years.

Newly rateable property is defined in the Bill as any rateable property on which property rates were not levied before 1 July 2004, excluding property that was incorrectly omitted from a valuation roll and for that reason was not rated before that date.

When will the Property Rates Bill become effective?
The Property Rates Bill would govern property rates beginning with the local government financial year that starts 1 July 2004.

What must municipalities do to implement the Property Rates Bill?
The Bill requires that similar properties be treated similarly. In cases where property valuations have not been kept current, the Bill requires that municipalities bring their valuation records up to date. This has to be done within four years of the effective date of the legislation.

Municipalities must ensure that unit owners in clusters are registered with them because they will no longer be able to rate the body corporate.

Municipalities must develop a local rates policy in consultation with the community - in accordance with Chapter 4 of the Municipal Systems Act - before they can levy rates on property.

Where can you get more information on the Property Rates Bill?
Click here for a copy [in Adobe Acrobat format] or go to www.dplg.gov.za

For more information on the Bill, please contact Mr. Mizilikazi Manyike at tel: 012 334 0695, email: This email address is being protected from spambots. You need JavaScript enabled to view it.