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Homeowners Renting Out Rooms Without Municipality Permission Is Liable To Pay Higher Property Rates

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Homeowners Renting Out Rooms Without Municipality Permission Is Liable To Pay Higher Property Rates

Category Home Owners

Residential homeowners must be aware of the judgment handed down by the Supreme Court of Appeal (SCA) in the case of the City of Johannesburg Metropolitan Municipality v Zibi (234/2020) [2021] ZASCA 97 (9 July 2021). The outcome of this case carries significant implications for residential homeowners who utilise their homes for commercial purposes without the necessary authorisation from the municipality.

Rates payable by residential landowners are governed by the Municipal Property Rates Act 6 of 2004 (the MPR Act). This legislation confers and regulates the local municipality's power to value property and levy rates accordingly. Section 8 (1) of the MPR Act allows municipalities to levy different property rates for different categories of ratable property, which may include categories determined according to the use of the property, the permitted use of the property or the geographical area in which the property is situated. The zoning of property is determined by various categories created by the Act, such as residential, commercial, or agricultural.

As appears from the Zibi case, for the 2015/2016 financial year, the City of Johannesburg Metropolitan Municipality ("the municipality") had determined twenty-three different categories for the purpose of property rates, including categories for residential use, business and commercial use, and illegal use.

One category for homeowners to be aware of, and which is discussed in detail in this judgment, is that of unauthorised or illegal use. When landowners use their property in an unauthorised manner, this category becomes applicable.

Central to the Zibi case was the question whether the municipality was authorized to impose a penalty rate on residential property for illegal or unauthorized use, without first changing the property category on its valuation roll or supplementary roll, from "residential" to "illegal" or "unauthorized" use.

In the Zibi case the respondents (Mr and Mrs Zibi and their two children) owned and resided in a residential home consisting of five bedrooms and two bathrooms. They decided to rent out two of their unused bedrooms as accommodation to students and young professionals, thus using the home for commercial purposes. The respondents did this without prior authorisation from the municipality.

Several inspections were completed at the property, and the municipality discovered that it was being used as a commune (a commercial concern). In response, the municipality issued several notices to the respondents to terminate the unauthorised use of the property and further imposed a penalty rate per the rate category for unauthorised or illegal use; however, the property was not rezoned and remained "residential" on the municipality's valuation roll, from 2013 to 2018.

Due to further non-compliance with the notices, the municipality obtained in October 2018 a High Court order interdicting the respondents from continuing to use the property in an unauthorised manner. The matter escalated when the respondents launched an application in the High Court challenging the validity of the municipality imposing a penalty rate. The High Court found in favour of the respondents, and this matter was finally taken to the SCA.

The ultimate finding of the SCA was that where property is used in an unauthorised or illegal manner, it is within the municipality's powers to impose penalties on homeowners. As a result, homeowners currently renting out space in their residential properties or intending to carry on a commercial concern in property zoned for residential use must obtain authorisation from the municipality to do so.

Without such authorisation, property owners run a high risk of being penalised with higher penalty rate without first rezoning the property.

The majority of the SCA found that the municipality did not need to first put a property onto the property roll and recategorize it into the illegal use category before levying penalty charges. The majority of the SCA reasoned that to require publication of a supplementary valuation roll for every unlawful use of property would place an unreasonable administrative burden on the municipality if.

Author Victoria Matthews (Miller Bosman Le Roux Attorneys) / Cluver Markotter Attorneys
Published 22 Feb 2024 / Views -
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