A municipality account’s billing tariff is, to a great degree, determined by the zoning of the land on which that property is located. It is therefore important that property owners regularly scrutinise their municipality accounts to respond timeously should incorrect billing be picked up or adjustments be required.
There are four types of zonings: industrial, business, residential, and vacant. Rates charged on vacant land are the most expensive. Biza Bonke, a consultancy firm that deals with municipal queries on your behalf, explains that the home owner should be aware of two things in particular.
When purchasing a home (sectional title or freehold property) the new owner should use the municipal account to make sure of the billing structure used, explaining that the company have had cases where sectional title units are billed according to the business tariff.
Alternatively when building, the land will be purchased as vacant land and the owner will initially pay rates based on this zoning. However, as the home is completed and ready for occupation the owner should immediately apply for the rates to be changed to residential. It is important that home owners lodge the application as soon as the home is completed. Biza Bonke advises that changing the zoning of a land is a relatively lengthy process; accounts will only be adjusted from the day of the application.
Buy to let investors especially need to check their municipal accounts to ensure that consumables (electricity, water, sewerage, and refuse) are billed correctly. In cases were land zoned as business use are used for residential, or when an owner converted an office block for residential purposes, the owner risks losing money due to under-recoveries from tenants.
Biza Bonke reports that they have assisted many clients where the billing of consumables is based on the zoning instead of the land use, for example basing the calculation on the business tariff where the land is used for residential purposes. This is incorrect, and could end up being a costly oversight for the owner. The electricity, water, sewerage, and refuse removal should be billed according to the use of the property, not the zoning of the land.