By Jacques Blaauw
More and more municipalities are moving to differentiate between agricultural property rates and “game farm rates,” also categorized as agricultural properties used for eco-tourism and hunting / trading and rearing of game, or something to that effect.
This originates from the definition of an agricultural property in the Municipal Property Rates Act (MPRA), Act 6 of 2004 that reads:
“Agricultural property means a property that is used primarily for agricultural purposes but, without derogating from section 9, excludes any portion thereof that is used commercially for the hospitality of guests, and excludes the use of the property for the purpose of ecotourism or for the trading in or hunting of game (Amended by s1 of Act 29 of 2014)”
Therefore, any farm property that is used for anything other than agricultural activity, for example trading in and or the hunting of game or eco-tourism among other, are not covered by the agricultural property category and such properties should be rated according to the municipality’s rates policy according to the actual use.
This is where municipalities are now introducing a separate property rate category, specifically catering for properties used for eco-tourism and hunting / trading and rearing of game, and then taxing such properties at the commercial or business tariff which is often double the residential tariff and between 8-15 times higher than agricultural tariffs.
There are different laws, policies, and procedures at play, so completely covering all scenarios or facets landowners might face is not possible in a ‘short’ article. So, the approach is to share what to look out for and explain why it is important to act when you spot any of these issues.
There are two factors at play: Property Value and Property Categories / Rates. These two factors result in property tax that is due by landowners to their local municipalities.
Property Value
This is defined by the municipal valuation roll. Section 46 of the Municipal Property Rates Act states that the general basis of valuation is the market value of a property, which being 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.
A common misconception is that if a property is valued lower than what it is worth in the open market, such landowners should just consider themselves ‘lucky’ and leave it as is, since they will pay less property tax. This might come to bite landowners later, for example, the tax man might in future use the valuation roll a part of the assessment when calculating capital gains tax once a property is sold, or compensation for land claims might be calculated using the values captured in the valuation roll, etc. So, if your property value is too high or too low, lodge a formal objection in terms of Section 78 of the Act if it is a municipal valuation roll update (a valuation roll update should happen at a minimum every five years). If your Section 78 application was unsuccessful, or you missed the advertised deadline, note that Section 78 (6) of the Act requires from the municipality to at least once a year publish a supplementary roll. This gives landowners the opportunity to lodge formal objections in terms of section 49 of the Act.
The municipality’s actions to rectify mistakes made and or changes to property categories and or values since the previous valuation roll was implemented, is a requirement of the Act and these actions are deemed necessary as per the Act – it is a must! If not done by the municipality, the landowner would have strong legal recourse against incorrect property values being used to calculate property tax due. However, if a municipality adhered to the requirements of the Act and have given landowners the opportunity to object, but the landowners did not act, the municipality would have the right to back date property tax due.
Property Category & Property Rate / Tariff
Three things must be in place for a municipality to give effect to property rates based on listed property categories.
- Section 6 of the MPRA states that a By-law must give effect to the rates policy. (1) A municipality must adopt and publish by-laws, in terms of section 12 and 13 of the Municipal Systems Act, to give effect to the implementation of its rates policy. (Amended by s4 of Act 29 of 2014)
- A municipal council must annually review, and if necessary, amend its rates policy. Any amendments to a rates policy must accompany the municipality’s annual budget when it is tabled in the council in terms of section 16 (2) of the Municipal Finance Management Act. Community participation in amendments to a rate policy must be affected through the municipality’s annual budget process in terms of sections 22 and 23 of the Municipal Finance Management Act.
- In terms of Section 14 of the MPRA, a resolution levying rates in a municipality must be annually promulgated within 60 days from the date of the council resolution, by publishing the resolution in the Provincial Gazette. The resolution must
- contain the date on which the resolution levying rates was passed by Council;
- differentiate between categories of properties; and
- reflect the cent amount in the Rand rate for each category of property.
It is also important that all three the above-mentioned documents speak to each other, in other words are aligned in terms of the applicable property categories and categories of owners for the specific municipality. A category of property as per section 8 (2) is for the purpose of levying rates and categories of owners, or categories of properties is for the granting of exemptions, rebates, and reductions.
Once again, if these documents are not in place or not aligned in a municipality, it becomes strong grounds for objection against any proposed property policy / rates changes and would lack enforcement if challenged legally. Furthermore, it could delay the implementation of “new” categories such as “game farms” in municipalities, allowing more time for stakeholder engagement at national government level, but also force a municipality to re-enter community participation on such categories so that they can better understand the impact if such categories are not correctly levied. This would also allow the community to share reasons why exemptions, rebates or reductions should be considered and implemented by Council.
In short…
- Take note of how your property is categorised.
- Take note of the rate levied against your property.
- Take note if the rate policy makes mention of a property category such as “game farms” or “agricultural properties used for eco-tourism and hunting / trading and rearing of game”
- Take note if there is a by-law giving effect to the rate policy.
- Take note if there was a call for public / community participation; and
- Assess if what you see on the account is a true reflection of the use of your property.
If any of the above is not in place, or not correct, lodge a formal objection as an individual landowner at your municipality and notify the stakeholder organization you might be part of, like WRSA, of such an objection. Only individual landowner objections are recognised, but it makes the lobbying of issues so much more impactful if one can refer to thousands of individual objections.
Common misconceptions
“My property is not listed on the valuation roll and / or I have not received an account from the municipality, so I don’t have to pay”
Section 27 of the MPRA states that (1) A municipality must furnish each person liable for the payment of a rate with a written account. But (1A) A person liable for a rate must furnish the municipality with an address where correspondence can be directed to. (Added by s17 of Act29 of 2014) and (2) A person is liable for payment of a rate whether or not that person has received a written account in terms of subsection (1). If a person has not received a written account, that person must make the necessary inquiries from the municipality.
In short, the obligation to correct such shortcomings remains with the landowner!
“At least the WRSA is my voice and will sort this issue out for me”
Stakeholders may lobby and argue changes to the rates policy or address shortcomings in municipal processes that were not followed, but only an individual landowner can object against the categorisation and levying of rates against a specific property. The onus is also on the individual landowner to come forward with proof to show why the objection should be considered. Like a municipal administrator remarked: “Why do you (read ‘stakeholder’) make such a fuss about the issue if we did not receive any objections from landowners?”
“My farm does not receive any services from the municipality, so why must I pay for services I do not receive?”
Farm owners must understand that “property rates” is a tax and is not in relation to any specific service to be rendered. Property rates are used to fund services that benefit the general community, as opposed to individual metered and or individual households. It is a fact that the residential owners / business owners / industrial owners on farm property and small holdings dispose of their own waste / refuse, operate their own sewage systems, and provide their own water etc., but they also do not pay the municipality for these services. Likewise, the owners of corresponding categories of property in town pays for electricity, pays for water, and pays for sewage and refuse removal. Over and above the mentioned service payments they then also pay property rates.
In conclusion
The dilemma of “game farm” rates is as much an individual landowner issue as it is a stakeholder issue. Your individual objection to property category / rate issues affecting you is worth as much as any stakeholder lobbying effort. Be aware of your rights as a landowner and understand that it requires your individual action to mitigate the financial implication that the proposed rates changes will bring. Act individually to stand together!
