CONSEQUENCES OF NON-COMPLIANCE WITH PROPERTY RATES LEGISLATION

By Laila Cassim : Conveyancing Supervisor

Taybah Taupas : Legal Officer

Non-compliance with property rates legislation can lead to a range of significant consequences that impact property owners, municipalities, and the community at large. The reality is not all property owners comply with their obligation to pay rates and utilities in respect of their properties. This article outlines the various repercussions associated with failing to adhere to property rates regulations, shedding light on the legal and financial implications of such non-compliance.

WHAT ARE MUNICIPAL PROPERTY RATES?

Property rates are often referred to as municipal property rates/taxes and are a source of revenue for municipalities in South Africa, which enable them to provide basic services and infrastructure to the communities they serve. Property rates are levied on the market value of immovable properties, such as land and buildings, within the boundaries of municipalities. The Constitution of the Republic of South Africa gives municipalities the power to value and rate property in their area of jurisdiction. The Municipal Property Rates Act (MPRA) is a national law that regulates the power of municipalities to impose rates on property and provides for certain exemptions, rebates, and reductions.

 

SOME LEGISLATURE THAT GOVERNS PROPERTY RATES?

  1. The Constitution of the Republic of South Africa states that in terms of Section 229 (1) the Municipality has the power to levy a rate on property in its area.
  1. The Local Government: Municipal Property Rates Act, 2004 (MPRA): The MPRA is the primary piece of legislation that governs property rates in South Africa. It establishes the framework for property rates, valuation, and the roles and responsibilities of municipalities and property owners. The Act provides guidelines on how property rates should be calculated and collected.
  1. The Municipal Finance Management Act, 2003 (MFMA): The MFMA supports the financial management of municipalities, including the collection and utilization of property rates revenue. It ensures that municipalities use these funds effectively and transparently for service delivery and local development.
  1. National and Provincial Legislation: While the MPRA is a national law, property rates implementation can vary at the provincial and municipal levels. Provinces and municipalities may have their own by-laws and regulations related to property rates, which property owners must adhere to.

CONSEQUENCES FOR NON-COMPLIANCE WITH PROPERTY RATES LEGISLATION?

  1. FINANCIAL PENALTIES: Non-compliance with the property rates legislation can result in in significant financial penalties. Property owners who do not pay their rates and taxes on time or fail to accurately declare the value of their properties, the municipality may charge interest and penalties on the outstanding amount, which can accumulate over time and increase the debt.
  1. LEGAL ACTION: Municipalities in South Africa have the authority to take legal action against non-compliant property owners. This may include obtaining court orders to force payment or even the sale of the property to recover outstanding rates and taxes. If a property owner fails to pay rates and utilities, the municipality may apply to the court for an order to sell the property in execution to satisfy the debt.
  1. REDUCED SERVICE DELIVERY: Property rates are primary source of revenue for municipalities. When property owners do not pay their rates and taxes, it can directly impact service delivery. Essential services such as waste removal, road maintenance, and infrastructure development can suffer due to a lack of funding. Non-compliance, therefore, affects not only the property owner but the entire community’s well-being.
  1. DIFFICULTY IN SELLING PROPERTY: Failure to comply with property rates legislation can lead to a difficulty in selling of property. Buyers and investors are often wary of purchasing properties with outstanding rates and taxes, leading to decreased demand. This can be a significant financial setback for property owners looking to sell their properties.
  1. STRAINED MUNICIPAL FINANCES: As municipalities struggle to collect the necessary revenue, they may then be forced to cut back on community programs and services, affecting the overall quality of life in these areas.

IMPLICATION OF RATES PAYMENTS BEING MADE TO OTHER ORGANISATIONS AND NOT THE MUNICIPALITY?

Where payments are made to a private organization, the property owner’s obligations to the Municipality are not discharged, with the property owner remaining liable for the payment and settlement of any outstanding amounts due to the Municipality.

The non-payment will result in issues being experienced when applying for rates clearance certificates in the event of a transfer of a property for which amounts have not being paid to the Municipality, this may result in the property owner needing to pay an exorbitant amount to obtain the certificate which would include outstanding amounts, penalties and interest levied thereon.

Non-payment where the subject property is mortgaged will result in a breach of the property owner’s contractual obligations to the financial institution which could result in a pre-mature termination of the contract. 

KEY LEARNINGS

The payment of municipal rates and taxes in South Africa is regulated.

Therefore, non-compliance with property rate legislation can have far-reaching consequences that go beyond financial penalties. It affects the well-being of the entire community, property values, and even personal livelihoods.

To avoid these negative outcomes, property owners should make it a priority to understand and adhere to their local property rates legislation, ensuring they pay their dues promptly and accurately.

For further details or advice in this regard, it is best that you consult with a Legal Practitioner.