SAPOA: Unconstitutional Municipal Rates Challenge Targets New Metro

• The South African Property Owners Association (SAPOA) is preparing new legal action against an unnamed metro for planning to implement property value-linked municipal rates, which it deems unconstitutional.
• This follows SAPOA's successful challenge against the City of Cape Town, where similar tariffs were ruled unlawful for bypassing the Municipal Property Rates Act and violating Section 74 of the Municipal Systems Act.
• SAPOA President Itumeleng Mothibeli confirmed the organization's commitment to challenging such practices, citing the Cape Town judgment as proof of their unconstitutionality.
• The ongoing legal efforts are set against a backdrop of widespread municipal decline, which property sector leaders identify as a significant deterrent to investment and a threat to social stability.
• Mothibeli highlighted risks including reduced property asset competitiveness and social instability due to inadequate infrastructure spending if municipal issues persist.

The South African Property Owners Association is preparing to launch new legal action against a major metropolitan municipality over its intention to implement property value-linked tariffs for municipal services, deeming such a move unconstitutional.

The South African Property Owners Association (SAPOA), which represents the commercial and industrial real estate sector, is preparing to initiate legal proceedings against a prominent metropolitan municipality. The impending legal action targets the metro's plans to base municipal rates and taxes on property values, a practice SAPOA considers unconstitutional. While the specific municipality remains unnamed as legal documents are still being drafted, this move signals a renewed focus by SAPOA on challenging what it perceives as unlawful municipal tariff structures.

This development follows a previous successful challenge by SAPOA against the City of Cape Town, which had also introduced property value-linked levies and fixed charges. The organization's president, Itumeleng Mothibeli, confirmed that a second round of legal battles is imminent, emphasizing that the unconstitutionality of such practices was established in the Cape Town judgment. Mothibeli, speaking at SAPOA's three-day annual convention in Sun City, North West, where the organization celebrated its 60th anniversary, reiterated SAPOA's commitment to opposing municipalities that adopt these tariff models.

Beyond the current unnamed metro, SAPOA has previously cautioned the Mangaung Metropolitan Municipality in the Free State regarding its intentions to link waste removal tariffs for non-residential customers to their property values. The SAPOA board is scheduled to convene soon to finalize strategies concerning these ongoing challenges. Mothibeli also indicated a willingness to collaborate with municipalities, offering guidance on implementing legal and compliant rate structures, despite the firm stance against unconstitutional practices.

SAPOA's legal position is firmly rooted in the precedent set by the City of Cape Town case. In that instance, the organization successfully argued that tying service tariffs to property values functions as an illegal, disguised property tax. This approach, according to SAPOA, circumvents the provisions of the Municipal Property Rates Act and contravenes Section 74 of the Municipal Systems Act. The City of Cape Town subsequently repealed its decision to implement these value-based tariffs after the court ruling.

The core of SAPOA's argument is that such property value-linked tariffs are fundamentally unconstitutional. The judgment against the City of Cape Town validated this perspective, providing a strong legal foundation for SAPOA's continued pushback against similar municipal policies. This legal framework underscores the importance of adhering to established legislative guidelines for municipal revenue generation, particularly concerning property-related charges.

SAPOA's intensified focus on municipal rates structures occurs within a broader context of significant challenges facing South African municipalities. Industry leaders in the property sector view the deteriorating state of local government as a major impediment to property owners, developers, and investors. Issues such as collapsing infrastructure, inadequate service delivery, weak governance, poor financial management, and growing public distrust are prevalent across many of the country's key municipalities, including Johannesburg.

Despite a partial recovery in the property sector in 2025 from losses experienced at the start of 2020, the ongoing decline at the local government level threatens to undermine these gains. Itumeleng Mothibeli, who also serves as the Managing Director of Vukile Property Fund, highlighted critical risks for the property sector if municipal deterioration continues unchecked. These include a decline in the competitiveness of property as an asset class, where increasing cost bases outpace revenue growth, rendering investments less attractive.

Furthermore, Mothibeli warned of the potential for social instability stemming from insufficient capital expenditure on infrastructure. He emphasized that a lack of essential services, such as water, can severely impact communities, leading to social fabric breakdown and significant crises. The outcome of the upcoming November 4 local government elections is anticipated to serve as a crucial indicator of the political will available to address these multifaceted challenges.

Lawyers advising property owners or municipalities must be aware of SAPOA's successful legal precedent against property value-linked tariffs, as similar municipal rate structures are likely to face constitutional challenges. This necessitates a review of tariff-setting compliance and potential litigation strategies.

Source: Original reporting via Moneyweb