Vacant unit? You'll still have to pay property rates
Category Advice
The current property market has created the perfect storm for homebuyers. Many renters are taking the leap to ownership, and landlords are feeling the pressure of vacant rental units. As you pay for your property's home loan and general repairs, you may be surprised to find another bill popping up in your mail. Regardless of the occupancy of your rental unit, you will still need to pay your municipal property bill. De Lucia Group uncovers the ins and outs of municipal property rates.
What are municipal property rates?
In order to provide basic services, municipalities require a reliable source of revenue. They charge a monthly amount to owners of freestanding properties to fund these services.
What are municipal property rates used for?
According to the Municipal Property Rates Act No. 6 of 2004, it is used to fund services that benefit the community as a whole as opposed to individual households. This includes installing and maintaining:
- Streets
- Roads
- Sidewalks
- Lighting
- Storm drainage facilities
- Operating parks
- Recreational facilities
- Cemeteries
The revenue received is also used to fund municipal administration, such as computer equipment and stationery, and costs of governance, such as council and community meetings, which facilitate community participation on issues of Integrated Development Plans (IDPs) and municipal budgets.
How are municipal property rates calculated?
To calculate your municipal property rate, multiply the market value of your property by a Cent amount in the Rand rate your local municipal council has determined. The Cent amount in the Rand rate will be applied after deducting the first R15 000 of the market value of your residential property (this is a minimum requirement of the Municipal Property Rates Act).
If you own a residential property in Kempton Park, for example, here's how the Ekurhuleni Metropolitan Municipality would charge you: (Municipal value - R15 000) x Rate in Rand ÷ 12 months = monthly rate payable.
If your property was worth R800 000, it would be: (R800 000 - R15 000) x 0.01052 ÷ 12 months = R688,18.
Why must you still pay for municipal property rates?
Depending on your rental property's value, the amount can be quite sizable. Unfortunately, you are still liable to pay your rates in full regardless of whether you use the municipal services or not. A Supreme Court of Appeal judgement found that even if you use your own basic services, you will not enjoy a lower municipal rate. In his judgement, Judge Azhar Cachalia said:
"Ratepayers who have the means are required to bear an additional burden to subsidise those who cannot afford to pay for their services. Rates also support local social and economic development, unrelated to the provision of services."
These services include indirect benefits like parks, libraries, public health and law enforcement services, which may be referred to as collective goods and services. For the welfare of the community, all ratepayers are liable whether they use these goods and services or not.
Tips to increase your rental property vacancy rates
As a landlord, your municipal rates payment forms part of your monthly expenses. You should always aim to keep your property occupied so you can mitigate the costs of your rental property. Here are tips to attract tenants:
- Adding features like prepaid electricity, gas appliances, and fibre will make your property more appealing. You should also maintain your property regularly.
- Making the property more secure will draw in safety-conscious tenants.
- Reconsider your rental asking price. If it's not market-related, you could be alienating potential tenants from even visiting your property.
- Keep your current tenants happy. By attending to requests timeously and assisting where you can, you will foster a good reputation as a landlord.
- Advertise your property on property portals and social media with a compelling listing description.
Partner with De Lucia Group
As a full-service property company, De Lucia Group takes pride in assisting landlords. We can do a property evaluation to ensure you're paying the correct municipal rate amount. Through our rental services, our experienced team can market your property and profile potential tenants. Our property management services keep tenants signed on, ensuring you enjoy a stable income. Send a message, call Michael De Lucia directly on 082 493 1089, or email michaeldl@delucia.co.za to get started.
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Author: De Lucia Group
