You could get a surprise retro rates bill, warns
You could get a surprise retro rates bill, warns Wendy Knowler.
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After Warren and Marilyn Massey sold their La Lucia home in August last year, having got a rates clearance certificate from the eThekwini municipality, the transfer went through to the new owners in August.
A month later, they got a bill for more than R40,000 in rates, with the municipality claiming that the property was undervalued because we got a far higher price than their official rates valuation.
The values were then updated, backdated, and the Masseys billed for the rates difference.
Is the municipality legally entitled to do that?
I emailed the municipality, asking that, among other things, such as - “If a house sells for less than the municipal valuation, would the seller get a refund?”
My questions were ignored, but the municipality’s media office did answer Warren’s query:
“Yes , Section 78 (d) of the Municipal Property Rates Act states that the Municipality must undertake necessary supplementary valuations to reflect the new/adjusted valuation in the roll. The Act indicates further from which date is the rates payable in terms of section 78(4)(d) which stipulates “the date on which the event referred to in subsection (1) (d) has occurred.”
I am reading that verbatim. Clear as mud.
Attorney Chantelle Gladwin-Wood of Joburg-based Schindlers Attorneys, who has posted articles on the Municipal Property Rates Act, said municipalities are indeed entitled to claim rates in arrears.
"I’m afraid that the municipality is lawfully entitled to “backdate” a bill for rates, for up to 30 years.If a property value increases or decreases as a result of an objection/appeal/review to a valuation on the general valuation roll, that valuation is backdated to the commencement date of the roll," said Chantelle.
But a municipality cannot raise penalties (such as interest) on amounts that it bills for the first time. "Interest can only start accruing once the capital charges are raised," said Chantelle.
She said it was very rare for a municipality to increase a property’s value from a general roll and even rarer that this happens after the sale of a property - “That’s why you don’t hear about it.”
When the Masseys’ transferring attorney queried the sudden demand for another R40,000 in rates, he got an email from someone in the Real Estates Dept, stating the property was registered in the name of the Masseys in 2013 and the rates were based on a market value of R3.2million from then until June 2017, when the market value was increased to R3.84 million.
During a rates clearance application, she said, "The Real Estate department noted that this property was sold with a price of R7,5 million, and it was then that the valuation was changed and a “debit rates adjustment” done retrospectively from 2013 to current."
“Please note, ll debit rates adjustment from February 2013 to current will remain on the previous owners account. The new property owner will be liable for rates based on a new valuation of R5,56 million, with effect from November 2018.”
In another email, Chantelle said the Masseys were “billed less rates based on a low market value, because the rates adjustments were not completely billed”.
“The muncipality is saying that the official rates evaluations have been amended because we got a high price for our house,” Warren told Consumerwatch.
So if we got a price lower than their valuation, would they have refunded us? Fair question.
“The fact that someone is prepared to pay a premium as they want that specific property does not mean that that is the true market value of the property,” he said.
I ran the scenario past Nick Kassier, an associate in Shepstone & Wylie’s property department, who said: “We have dealt with a few of these issues in our department, it’s not an uncommon thing, and as you said, is something the municipality is entitled to do.”
Then the story got even more confusing.
I got another response from the municipality’s media department, not addressing the Masseys case specifically but appearing to back track on its earlier response.
“It will be an error to backdate rates due for the seller as the property was not owing, not unless the seller had outstanding rates on the property. Further, the change in rateable value is charged GOING FORWARD meaning any changes will be effective the following month AFTER receiving of a rates clearance by the valuation unit.
"Even section 78(a) of the Municipal Property Rates Act where it says that a valuation can be made if the property has been ‘incorrectly omitted from the valuation roll’ - cannot be used in this instance as the undervaluation is overtaken by the sale of the property. It would have been a different case if this was picked up by the municipality but still that would not have been retrospective but effected going forward.
"Secondly, the change in value in this case will be as a result of the latest sale price and that will have to be compared to recent sales from the market to arrive at the new rateable value, also to be charged going forward. It is the BUYER who can expect a change in rates payable different to the previous owner’s account, anyway he/she has bought the property at supposedly the market value which is different to the original value.”
Now my curiosity is growing. So on the basis of that email, I’d say the Masseys shouldn’t have to pay that R40,000.
To be continued, after I’ve done some more probing, but it’s certainly an issue for sellers and transferring attorneys to be mindful of, especially in areas where property values have increased dramatically in recent years.
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