Call for better communication on rates increases

News > news - 18 Apr 2007

Local authorities should be concentrating on communication to ensure the smooth implementation of the new Municipal Property Rates Act, and minimal impact on their ratepayers.



This is the view of Jan Davel, CEO of the Aida real estate franchise group, who says that the heated debate recently about the higher rates charges that resulted from updated valuations in some areas indicates poor communication that could bedevil a smooth transition to the new system.



The Act took effect in July 2005 and municipalities were given four years from this date to fully implement the legislation, which envisages a single rating system for the whole country, equally applied by all local authorities.



However, only a few have started compiling the new valuation rolls necessary to bring this about, "and judging by the furore about new rates in Cape Town, it seems many homeowners are still very much in the dark about how they will be affected.



"Time is running out and it is vital that municipalities across the board get down to business as soon as possible - and keep ratepayers informed about the process," Davel says.



"The average ratepayer does not necessarily understand the complicated formulas used in calculating updated valuations and rates and it is incumbent upon municipalities to explain the process and its implications in clear terms to give ratepayers as much time as possible to budget for any increases.



"This is especially important in the light of the current dissatisfaction in many areas at the rate at which municipal and other services are being delivered, and of the feeling in some circles that local authorities are deliberately trying to penalize their wealthier ratepayers."



He also says reports that increased municipal rates may force over-extended borrowers over the edge are a matter of serious concern. "Easy credit seduced many borrowers to apply for 100% home loans. Some of them are reportedly finding it increasingly difficult to keep up with bond repayments in the wake of the recent interest rate hikes and they can of course ill afford higher rates bills as well.

"In this respect we believe there is also an obligation on estate agents and lending institutions to caution prospective buyers about the perils of not making provision for unplanned expenses.



"Legislation that will come into effect later this year will protect consumers from over-extending themselves by taking out loans they cannot afford to repay, but the best advice for current homeowners who find themselves in a tight financial corner is to budget for increased rate bills without delay."



Davel recommends that affected homeowners decrease their debt burdens by paying off short-term debt such as clothing and furniture accounts as soon as possible. "And, of course, in a climate of increased interest rates, it is prudent to minimise exposure to debt and expenditure on luxury items as far as possible. It is far better to live more modestly if it enables one to safeguard an investment such as a family home."

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