THE PORTFOLIO COMMITTEE ON PROVINCIAL AND LOCAL GOVERNMENT SUBCOMMITTEE MEETING WITH VALUERS ON NOVEMBER 18, 2003 (ROOM E443, PARLIAMENT)

Part A of comments as requested by the chairperson, Mr Y Carrim

Herewith the joint comments by the South African Council for the Property Valuers Profession and The South African Institute of Valuers (hereafter collectively referred to as the Property Valuers Profession) on the Local Government: Municipal Property Rates Bill, 2003.

The decisions taken at the subcommittee meeting of 18 November are agreed to, except where we have additional comments or where we are in disagreement.

DEFINITIONS:

Existing rateable property: Taken out of Bill since it does not appear in any of the clauses.

Newly rateable property: Definition needs to be amended. There are two main issues:

  1. The wording needs to be changed to reflect the fact that the intention is not to include property that has incorrectly been omitted from a valuation roll. Suggested wording from valuers: "….but excludes property that had incorrectly been omitted from a valuation roll."
  2. Date needs to be changed. Portfolio Committee still to decide on whether or not properties that were outside municipal boundaries prior to 5 December 2000 will be considered newly rateable property.

 

Many properties that were outside municipal boundaries have been included in valuation rolls and are currently rated. If the date is changed to 5 December 2000 the rating of these properties will have to be phased in after it was already subject to rating.

The City of Tshwane Metropolitan Municipality did offer some relieve to owners of property that were not rated before 5 December 2000.

Some of the newly created municipalities have already compiled and implemented valuation rolls. Eg Moses Kotane Municipality has rated property since 1 July 2002. It is therefore suggested that the original wording be retained.

 

 

Improved value: Will be deleted from definition. Will be replaced by market value wherever it appears in the Bill.

 

The value of a property determined in terms of section 39 will differ from the accepted definition of market value, because section 39(2) creates special conditions.

It is therefore recommended that market value be defined.

"market value", in relation to a property, means the value of the property determined in accordance with section 39"

 

 

 

Improvements: Will be deleted from definition.

Owner: Definition amended. Three issues:

    1. Item (vi) in definition: Wording changed to reflect concern of valuers but wording different from that suggested by valuers.

Usufruct is a personal servitude and if the wording is changed to include personal servitude, the word usufruct can be deleted.

 
  1. Concern of valuers around time taken to register property acknowledged and Item (viii) added to definition of owner. Wording different from that suggested by valuers.
    2.

    It must be limited to properties sold by municipalities 

      

  2. Reference to sectional title will be removed.

Prescribe: The use of the words "in terms of" will be retained

Property: Definition needs to be amended to provide that a sectional title unit is included. Also, consideration needs to be given to whether parts (b) and (c) of the definition of property are inconsistent with clause 39 (2) since the definition of market value in clause 39 (2) will be amended to reflect that encumbrances on the property will be excluded when determining market value.

This amendment will only be necessary if clause 39(2) is changed. See comments at clause 39

  

Public service infrastructure: The definition has been amended to reflect that only publicly controlled infrastructure will be considered. The Portfolio Committee still needs to make a final decision around how public service infrastructure will be treated.

Register: The definition will not be changed. A clause has been added to say that a word or expression derived from a word or expression in the definitions section has a corresponding meaning unless the context indicates that another meaning is intended.

This Act: Definition will not be changed.

Clause 6 (2) (a): Valuers comments will be disregarded since 16 (2) (a) does not deal with an exhaustive list of categories.

Clause 7 (2) (a) (i): Policy decision to be taken as to whether or not municipalities should be obliged to levy a rate on property owned by themselves.

The Profession is of the opinion that in the interest of sound financial governance it is necessary to value and rate all municipal property. In the City of Tshwane Metro Municipality it is currently done.

  

Clause 8 (3) (c): Agreement reached that wording be changed to "business and commercial".

Clause 8 (3) (e): Unused farm farm property needs to be read with clause 8 (3) (d). The clause will be changed to read "farm property not used for any purpose"

It is suggested that the sub-categories for farm property sec 8 (3)(d) and smallholdings ( sec 8(3)(e) be the same and that "commercial" be changed to "business and commercial".

  

Clause 8 (3) (f): Smallholdings are interpreted in ordinary parlance (the ordinary grammatical meaning). Will be retained.

 

If different rates are levied on farm land and smallholdings, the distinction between the two categories must be clear, when is a smallholding not a farm and vice a versa?

  

Clause 9: Sectional Titles Act will be amended.

Clause 10: Has been changed – wording different from that suggested by valuers.

Clause 13 (2) (b) (i): Valuers comments not accepted. No change. Legal drafting.

Clause 15 (2) (h): The words used exclusively for residential purposes will not be used. Policy decision needs to be taken in this regard. There are practical problems with implementing the clause as it stands. As it stands, the definition causes problems with valuation. Residential property may need to be defined.

At the meeting it became clear that the intension is that the R15 000 exclusion should be applied to each unit used for residential purposes on a property. It is suggested that a residential unit should be defined as follows: "residential unit" means a room or a suite of rooms forming a complete living unit and used as a residence.

Suggested wording for 15A(1)(h) is: "on R15 000 for each residential unit of the market value of the property, or such higher ...... "

To give effect to this clause it is suggested that the valuer should indicate the number of residential units on each property in the valuation roll and it should be part of the calculation as contemplated in clause 24(1)(c).

Is it the intention to include rooms in a residential hotel, rooms in a university hostel, etc?

  

Clause 15 (3): No sliding scale for agriculture.

Clause 18 (1): Valuers comments on owned and occupied will be disregarded. Will remain owned.

Clause 20 (1): Heading changed for consistency. But definition of register will remain.

Clause 21 (2): Changed as proposed.

Clause 22 (1): Will be retained for greater clarity.

Clause 24 (1) (c): Change wording to "how the amount was calculated".

Clause 25 (3): Will cross reference to Municipal Systems Act.

Clause 26 (1): Agreement to leave the term as is in the Bill – absent is interpreted in ordinary parlance.

Clause 28 (1): Changed as proposed. Also 9 months will be changed to 12 months.

Clause 29 (1) (a): Valuers comments not accepted.

Clause 30 (1): Changed as proposed.

Clause 31 (1) (c): Valuers comments not accepted.

Clause 33 (1) (a) and 33 (2) (a): Changed. Wording different from that suggested by valuers.

Clause 36 (1): Valuers comments not accepted. No change but redrafted. See 36 (6).

For the reasons hereunder, we are still of the opinion that it is not necessary and costly for the municipal manager to appoint a "special valuer" where a municipal valuer has an interest in a property.

  • Valuations for rating purposes are performed by determining bases for different geographical areas and different categories of properties and all properties are valued according to the said bases. It is, therefore, a transparent process, especially after the valuer has declared his interest in a property, and it would be a very unwise valuer who deviates from the basis determined for the area/category in which the property in question is situated.

  • In terms of clause 34 the valuer must make a prescribed declaration before a commissioner of oaths and the prescribed declaration will, no doubt, include, inter alia, that the valuer will act impartially in the performance of his duties.

  • Any person is free to lodge an objection in respect of the valuation of any property.

  • It would be a cumbersome, unsatisfactory and costly process for any valuer to perform a valuation of one property to tie in with the valuations based on the determined basis for an area or category in a municipality.

Consequently, it is sufficient for the municipal valuer to declare his/her interest in a property and it is very strongly recommended by the Property Valuers Profession that clause 36(6) be deleted.

It is further recommended that in prescribing particulars to be reflected in the valuation roll, provision be made for the valuer to declare, in the roll, any personal interest in a property.

If clause 36(6) is retained , the "special valuer" should meet all the requirements of clause 33(1).

 

Clause 38 (2) (b): Will be retained for clarity purposes. Wording to be changed to say something like "Bearing in mind changes in technology and valuation techniques"

Clause 38 (3): Clause will be changed to say something like "….by the municipality concerned upon considering recommendations by municipal valuer…"

 

With regard to clauses 38(2)(b) and 38(3) the profession still maintains that the legislation should not be prescriptive and our comments on this matters are repeated.

1. It must be emphasised that valuers are trained to perform valuations of all types of properties under all conditions and in all circumstances and to employ any suitable aid, including the items mentioned in clause 38(2)(b). Valuers performing valuations for rating purposes have been employing the said items and various other valuation aids for decades and it is totally unnecessary and unacceptable to single out and mention certain valuation aids in the Bill. It is the same as providing in legislation that a surgeon may use a scalpel to perform operations.

2. The provisions of clause 38(3) cause major concern to the Property Valuers Profession. In terms of clause 39(1) the basis of valuation is market value, which is a well known concept and which has been the subject of and developed in numerous high court cases, including the Supreme Court of Appeal. The valuer has been trained to determine market value, bearing the authorities in the form of the case law referred to in mind, and it is not necessary to prescribe to him/her how te determine same.

In the interest of ratepayers, who will be directly affected by the valuations performed by the valuer in terms of the Bill when it becomes law, the valuer must be seen to be objective, impartial and independent and under no circumstances must the application of a method of valuation by the valuer be subject to the approval of the municipality. Even the establishment of "bands of property value" would, under certain conditions, which the valuer would be able to identify, be an acceptable method of performing mass valuations and one that the valuer will be able to justify and defend before a valuation appeal board. Consequently it is unnecessary to single out and mention that method in the Bill.

Furthermore, with the greatest respect, the municipality is the body least qualified to decide on a method of valuation to be adopted.

Section 15(g) of the Property Valuers Profession Act, 2000, provides, inter alia, that the SA Council for the Property Valuers Profession, established by section 2 of that Act, may "take any steps it considers necessary for the protection of the public in their dealings with registered persons, for the maintenance of the integrity, and the enhancement of the status of the property valuation profession;"

To protect ratepayers and the integrity, dignity and status of the Property Valuers Profession, the Profession must therefore insist that clause 38(2)(b) and (3) be deleted entirely.

 

 

Clause 39 (1): Changed but wording different from that suggested by valuers.

 

The Profession has different views with regard to the exclusion of registered personal rights in the determination of the market value of a property. In this regard please see the attached comments and suggestions by Mr. P G R de Sylva of the exclusion of registered personal rights.

It is agreed that exclusion of registered personal rights will make the valuation of property less cumbersome for the valuer but it will not reflect the market value of the property.

A second concern is that the registered landowner who granted the right over his property may in terms of the right not be in the position to recover the rates from the holder of the right.

Thirdly it is possible to register a personal right as a real right. If only real rights are taken into consideration it will lead to unequal treatment of ratepayers.

It is therefore suggested that clause 39(1) should not be changed except if the state legal advisors are convinced that holders of registered rights will not be prejudiced.

 

 

Clause 39 (2): Section reworked to reflect concerns by valuers.

With regard to clause 39(2)(a) it is important that the following must be added to the sentence "...... but must not reflect the effect of any lease which is not a right as referred to in paragraph (b) of the definition of "property"; "

  

Clause 41 (2) (b): Valuers comments not accepted. Categories of property will be retained.

Clause 41 (2) (g): Postal address not an essential component of valuation roll. Will be deleted.

Clause 42 (b): Section reworked to reflect concerns by valuers.

Clause 43 (1) (b): Changed as proposed.

Clause 44 (a): Valuers comments not accepted.

Clause 44 (b): Valuers comments not accepted.

Clause 44 (c): Valuers comments not accepted. Superfluous.

Clause 44: Agreement reached that no ceiling amount would be legislated

 

It should be clause 46 and not 44

  

Clause 45 (2): Section reworked to reflect concerns by valuers. See 48A.

Clause 47 (1) (b): Will be changed as proposed.

Clause 48 (2) (a) and (b): Period will be changed to 30 days.

Clause 50 (a): Changed as proposed.

Clause 51 (b): Change to "at least one of whom must be a registered valuer….." or words to this effect.

 

Proposed wording: "at least one of whom must be a person registered as a professional valuer or professional associated valuer in terms of the Property Valuers Profession Act, 2000 (Act No. 47 of 2000)"

 

  

Clause 54 (3): Valuers comments not accepted.
The profession is of the opinion that it was agreed that the following should be included in the clause: "A higher fee may only be allowed if it is sanctioned by the said MEC."

  

Clause 57: Matter dealt with in 58 (3)

Clause 58 (3): Wording will be changed to reflect concerns by valuers around legal qualifications for acting chairperson. Quorum provided for in 61.

Clause 62 (1): Wording will be changed to say that the chairperson of the appeal board must ensure that the valuation roll must be adjusted in accordance with the decisions taken by the appeal board.

For clarity, should there not be reference to clause 48A?

 

Clause 62 (3): Moved to 48A2.

Clause 63 (b): Although agreement was reached that the parties would be clarified to reflect municipality and owner, exclusion of valuers would imply that they can act frivolously and in bad faith. So clause will be retained as is.

Clause 65 (1): Clause reworked to reflect concerns by valuers.

Clause 69 (3): Changed as proposed.

 

At the meeting of the sub-committee it was agreed that supplementary valuations are done on an ongoing basis and rating of those properties must be from either the effective date of the valuation roll or the date of the relevant event, as may be applicable. It is strongly recommended that clause 69 in its entirety be substituted by the following clause 69, as previously recommended :

"69. (1) A municipality must cause a supplementary valuation to

be made in respect of any rateable property—

(a) incorrectly omitted from the valuation roll;

(b) included in a municipality after the last general valuation;

(c) subdivided or consolidated after the last general valuation;

(d) of which the market value has substantially increased or decreased for any

reason after the last general valuation; or

(e) substantially incorrectly valued during the last general valuation.

(2) Supplementary valuations must be as at the date of valuation that applied to the last general valuation.

(3) After the conclusion of a financial year, the municipal valuer must prepare a supplementary valuation roll of all rateable property valued in terms of subsection (1).

(4) For the purpose of subsection (1) the provisions of Chapter 3, Part 2 of Chapter 4 and Chapters 5, 6 and 7, read with the necessary changes as the context may require, are applicable, except that -

(a) the amount due for rates in respect of rateable property for which a supplementary valuation has been made in terms of subsection (1), is payable in the case of rateable property referred to in –

  1. subsection (1)(a) or (e), as if such omission or error had not been made; or
  2. subsection (1)(b), (c) or (d), with effect from the date the event referred to therein

occurred,

and is payable for the financial year concerned in the case of paragraph (i), by the person who was the owner on the day contemplated in section 23(2) and, in the case of paragraph (ii), by the person who was the owner on the date referred to therein; and

(b) a municipal valuer who prepared the valuation roll may be appointed for the preparation and completion of the supplementary valuation roll.
  1. Where the municipal valuer, before the provisions of subsection (3) have been complied with, has submitted the particulars referred to in section 41 in respect of any supplementary valuation made in terms of subsection (1) to the municipal manager, the municipality may, from the date of receipt of such particulars by the municipal manager, apply the rate contemplated in section 13 to such valuation for the applicable financial year."

  

Clause 69 (4): Will be changed to effective date of supplementary valuation. Link to 48A.

Clause 71 (2) and (3): Valuers comments not accepted. Common parlance used is "in terms of".

Clause 72 (f): Will change to reflect concerns by valuers.

Clause 75 (2): Clause reworked to reflect concerns of valuers.

 

24 November 2003