Why you should challenge council’s undervaluation of your home
In the next few months as many as 21 municipalities, including some major metros, will release a new valuation roll which will impact the tax you pay on your property.
Ben Espach from Rates Watch, municipal property rates practitioners, says that legally you will have 30 days – though this is more often 60 to 90 days in practice – to raise an objection against the new valuation of your property. But first you need to be aware of the new valuation.
“The council will send a letter to your address via our national postal services. As long as they can show that they have done what is legally required of them they have done their job,” says Espach. “The problem comes in with the letter never reaching the homeowner.”
According to him your best bet is to go to your local municipal offices where you will be able to view the valuation roll; alternatively you should be able to access the updated valuation roll via your municipality’s website.
To many of us this subject brings up a musing that is similar to the ultimate question of life, the universe, and everything else: Why is the municipality’s valuation of my property so far off its market value?
Espach says that this is due to a combination of three factors: The date of the valuation is static for five years whereas shifts in the market affects your property’s actual value; the valuation on your property is one of millions of homes that needs to be done in a limited time period and the municipality uses CAMA (Computer Assisted Mass Appraisal) to determine the value, which obviously leaves some room for deviation; and, finally, the municipality simply does not have the information you have: It does not know that you just fixed up your bathroom or remodelled your kitchen which, again, obviously affects their appraisal of your property.
This leaves municipalities with one of two choices: Overshoot or undershoot the valuation. If you knew that you would have to face yourself, and a million more rate payers in a similarly aggravated state of mind, would you knowingly value a property for more than its market value?
This is why, says Espach, valuations are below the true market value of the property more often than not.
“What creates a problem is when a couple of properties are valued at far below the actual valuation, these homeowners are then effectively subsidised by their neighbours, whose properties have been valued at closer to the actual market value,” he says, noting that Pretoria, as an example, is notorious for undervaluing on their rolls. “This means the municipality increases its tariffs, and explains why the metro has one of the highest tariffs in the country. In a perfect world the owners who are aware of the fact that their property is grossly undervalued will come forward and eventually the tariff will be adjusted down, benefiting all rate payers.”
The good news is that the objection process is fairly simple, and can even be done without the assistance of a professional, says Espach. Should you strongly feel that your property has been overvalued by the municipality you can, and should, object to the valuation. You will need a form which you will find at your municipal offices, or alternatively be able to download from the website in some instances.
“A successful objection hinges on three basic principles,” explains Espach. “Once you’ve lodged the objection the responsibility to show that the valuation is wrong lies with you. What’s more, you cannot say that it is wrong because you know a neighbour’s is so much less, or because of its previous level. You need to show what you believe to be the true value as a result of actual market activity (the price generated by willing buyer, willing seller activity).”
Many homeowners think they can handle this objection process themselves, or enlists the services of a lawyer to handle the process for them. Espach says that this may not be the best course of action. If you are unsure of what will be expected to successfully complete the objection, or if you’re not 100% certain that the lawyer you’ve hired has the right skills set, it really is in your best interest to acquire the services of a professional such as Rates Watch.
Should you decide that neighbourliness ranks low on your list of priorities, you could always raise objection against a property you know to be grossly undervalued. You do not need to be the owner, or have any kind of interest in a property to lay an objection, but should realise that you are unlikely to be invited to the next neighbourhood braai should you take this route.
“Ideally, though, we should all be able to raise these issues and speak up or come forward willingly so that the valuations reflected at the municipality are as close to market value as possible,” concludes Espach.