PROPOSED AMENDMENT OF SECTION 46 AS PROVIDED FOR IN SECTION 33

(B) OF THE BILL.

 

The deletion of the words “the value of” may have the effect that a structure in the nature of the Koeberg Nuclear Power Station is reduced to Rnil. This inference is made with reference to the Blue Circle Ltd v Valuation Appeal Board, Lichtenburg and Another 1991(2) SA 772(A) judgement.

 

In the context of market value as the legislation now stands, the value of (emphasis on the word value) machinery or equipment will merely be discarded. In other words it is merely an arithmetic calculation to exclude the value of machinery and equipment However, in terms of the proposed change the actual equipment and machinery must be discarded, which, if one looks at the Blue Circle Judgement could have the effect that the notional empty shell may be useless for any alternative purpose. In the Blue Circle case, when considering the situation in which after the exclusion from the structure of the machinery contained within it an empty shell would result, the court accepted that the notionally resultant empty shell could have a nil market value because it would have no value to a notional willing seller.

 

“The greater the quantity of machinery and the more integral a part of the buildings and structures it is, the more effect will it have in reducing the improved value of the land. In a given case, it may be that an ‘empty shell’ (having a nil value) remains after the intellectual exercise (of assuming the absence of the machinery) has been performed.”

 

Therefore, in the case of a highly specialised building or structure, which has been constructed solely to contain machinery of a specific nature and which cannot be used for anything other than the containing and housing of those specific machines, the intellectual exercise of assuming the absence of the machinery will have the effect of reducing that which remains to a useless empty shell having a nil value

 

It is not understood how this amendment will “ensure uniform application of this provision”

 

Senior Counsel’s opinions can be made available in support of the above concern which goes hand in glove with the additional issue raised under the heading Market Value, below.

 

The proposed amendment is therefore not supported.

 

The following proposals are not part of the amendments proposed in the bill but the City urges the portfolio Committee to give urgent attention to these matters as the legislation as it currently stands is problematic

 

REVIEW OF MUNICIPAL VALUERS DECISION.

 

The City of Cape Town has received in excess of 40 000 objections to valuations appearing on the 2006 general valuation roll. Processing these objections has highlighted the excessiveness of section 52 of the Act.  Section 52 requires that the municipal valuer must provide written reasons for every decision and the Appeal Board must then review  all decisions where the change is more than 10%

 

Each objection will be considered by the municipal valuer and a decision made on the question of value. Written reasons will be provided for each decision.

 

It is quite obvious in processing the objections received that the majority will require an adjustment upwards or downwards in excess of 10%. Generally speaking, objections are not raised if the requested revised figure lies within 10% of the value on the roll. The implication is that the appeal board will, in the case of Cape Town, have to review well in excess of 30 000 objections. The logic of this exercise is not understood. The review of the municipal valuer’s decisions make his initial consideration of objections pointless / of very little effect or force. Every objector has the right to obtain a copy of the valuer’s decision and can appeal the decision to the appeal board. This provides ample recourse.

 

 

MARKET VALUE

 

From a valuation perspective the fundamental requirement of the Act is to determine the market value of property.

Market value infers that the property will or can be traded in the market, i.e., what a willing seller will pay a willing buyer. However many types of property do not as a matter of course trade and there is consequently no market evidence to substantiate an assessment. See Jonker: Property Valuation in South Africa paragraph 5.8 – “It is submitted, therefore, that there can be no market value of some special properties….”

 

Both the Expropriation Act and the now repealed Property Valuation Ordinance of the Western Cape have provided an alternative method to deal with properties which are of “such a nature that there is no market therefore”:-

 

On the basis of the amount it would cost to replace the improvements on the property, having regard to the depreciation thereof for any reason, as determined on the date of valuation.

 

Section 45(3)(a) of the Act attempts to provide a remedy but does not overcome the obstacle that market value must still be assessed. Besides, it appears to deal only with property that can be dealt with in terms a mass appraisal technique or system.

 

 

DEFINITION OF PROPERTY

 

The definition of property is too narrow and does not take account of customary ways in which property is dealt with. . Approximately 75 000 improved properties exist in the Cape Town Municipal area which are either owned in terms of lease agreements or deferred transfer. In other words, they are not registered entities but are physically occupied and in terms of the definition of property cannot be valued separately which is absurd.

 

Furthermore, values of properties cannot always be reflected separately on the roll. For instance where buildings straddle boundaries two or more properties may form one economic entity.

 

The following amendments are proposed – add to definition of property:

Provided that::-

 

If the Surveyor General has approved a general plan or diagram of subdivision in respect of any property, and any land unit forming part of the subdivision has been improved such land unit may be valued separately,

 

If, in the opinion of the municipal valuer two or more adjacent properties form one economic entity they may be valued as one property..