City of Tshwane v Marius Blom & GC Germishuizen Incorporated and Kawari Beleggings CC

The second respondent, Kawari Beleggings CC, owned Portion 1 of Erf 91, Brooklyn, Pretoria (the property), which was zoned for residential purposes in terms of the City of Tshwane's Town Planning Scheme. The first respondent, a firm of attorneys (Marius Blom & GC Germishuizen Incorporated), leased the property and used it for business purposes as attorneys' offices, contrary to the permitted residential zoning. The lease required the first respondent to pay rates and taxes. The City of Tshwane, acting under its rates policy adopted on 1 July 2008 pursuant to the Local Government: Municipal Property Rates Act 6 of 2004, categorised the property as 'non-permitted use' and levied a higher rate than the rate applicable to residential properties. The respondents received a rates invoice for approximately R171,000 and challenged the municipality's power to create a 'non-permitted use' or 'illegal use' category and levy differential rates accordingly.

• Whether section 8(1) and (2) of the Local Government: Municipal Property Rates Act 6 of 2004 empowers a municipality to add categories to the list of rateable property categories set out in section 8(2)
• Whether the list of categories of rateable property in section 8(2) is exhaustive or merely illustrative
• Whether it is competent for a municipality to create a 'non-permitted use' or 'illegal use' category of rateable property for purposes of levying differential rates
• Whether the levying of a higher rate on property used for non-permitted purposes constitutes an improper penalty without due process
• Whether the municipality breached the audi alteram partem principle by categorising the property without prior reference to the property owners

The appeal was upheld with costs including the costs of two counsel. The order of the High Court was set aside and replaced with an order dismissing the application with costs.

The binding legal principles established are: (1) The list of categories of rateable property in section 8(2) of the Local Government: Municipal Property Rates Act 6 of 2004 is not exhaustive - the use of the word 'include' signifies that municipalities may add categories beyond those specifically listed; (2) It is competent for a municipality to create a 'non-permitted use' category in its rates policy and levy differential rates accordingly, as 'use' in section 8(1) is wide enough to include 'non-permitted use' as a form of use contrasted with permitted use; (3) The power to impose rates is a legislative act stemming from section 229(1)(a) of the Constitution, not an administrative action, and therefore the setting of rates and determination of categories is not subject to ordinary administrative law requirements such as audi alteram partem; (4) Municipalities have policy choices that lie at the core of municipal autonomy in determining differential rates, provided the rates policy treats ratepayers equitably and is consistent with the Constitution and the Rates Act.

The court observed that property owners who are aggrieved by rates levied on their property are not without remedy, as the Rates Act contains built-in mechanisms for dispute resolution through objections to the valuation roll and appeals to valuation appeal boards. The court also noted that it was not appropriate to award punitive costs in this case, even though the respondents were aware their use of the property contravened the town-planning scheme, because the dispute was essentially about the interpretation of section 8 of the Rates Act, the provisions of which are susceptible to different interpretations, and the respondents were entitled to challenge the municipality's construction of the section in court. The court also commented that the property's use should have been termed 'non-permitted use' rather than 'illegal use' in the valuation roll.

This case is significant in South African local government law as it establishes important principles regarding the interpretation of the Local Government: Municipal Property Rates Act 6 of 2004. It confirms that municipalities have broad discretion to determine categories of rateable property beyond those specifically listed in section 8(2), provided the categorisation is consistent with the Constitution and the Act. The judgment affirms municipal autonomy in making policy choices regarding differential rating, subject to the requirement of treating ratepayers equitably. It clarifies that the setting of rates and determination of categories is a legislative act, not administrative action, and therefore not subject to ordinary administrative law principles such as audi alteram partem in the categorisation process itself. The case also provides guidance on the proper use of the objection and appeal mechanisms built into the Rates Act for challenging property valuations and categorisations.