While the City of Cape Town (CoCT) is proudly touting its amended Hope Budget for 2025/26, the South African Property Owners Association (SAPOA) is taking legal action over the city’s decision to link certain fixed charges to property values.

Even before being adopted in council, the city’s budget has faced considerable criticism over its fixed charges, over which SAPOA will now be challenging in the Western Cape High Court.

In his founding affidavit, SAPOA CEO Nilesh “Neil” Gopal said that the board resolved to take legal action seeking to challenge three items in the budget, namely the Cleaning Tariff, the Fixed Water Charge, and the Fixed Sanitation Charge.

They are hoping to have the budget declared unconstitutional and invalid.

“They contravene the applicable constitutional and national legislative framework applicable to the imposition of rates and the levying of tariffs for municipal services. Because they are linked to property values, the three items of the budget are in fact property rates imposed outside of the legislation which governs the imposition of such rates,” he said in papers.

Gopal argued that the three items are inconsistent with the Constitution.

SAPOA’s membership currently comprises more than 90% of the country’s commercial and retail property industry, including some of the largest property-owning companies in South Africa.

The properties owned by their membership include the V&A Waterfront (co-owned by Growthpoint), Canal Walk Shopping Centre (owned by Hyprop), Cape Gate Shopping Centre (owned by Hyprop), Table Bay Mall (owned by Hyprop), Tyger Valley Shopping Centre (co-owned by Pareto), Blue Route Mall (owned by Redefine), Gugulethu Square (owned by Vukile), Atlantis City Shopping Centre (owned by Vukile), Sable Square Shopping Centre (owned by Spear), and Cavendish Square (owned by Old Mutual).

In the court papers, they added that litigation was a last resort.

Gopal added that while they acknowledge the city’s rebates that they offer, it mostly is to aid pensioners and isn’t sufficient to offset the impact the tariffs will have on them.

“These reductions and rebates do not detract from the fact that the three items are unlawful and should not have been introduced in the first place: A reduction or a rebate cannot save a charge which was unlawfully imposed,” he said in his founding affidavit.

Gopal added that the continued rise in municipal costs has a significant detrimental effect on the costs of occupancy faced by tenants in commercial/retail properties.

“My point is that the systems of exemptions, reductions, and rebates established by the City under the Cleaning Tariff (as well as the Fixed Water Charge and the Fixed Sanitation Charge) are different from the Rates Act. It relies, however, on the General Valuation Roll (“GV Roll”) established under the Rates Act. It is an impermissible parallel system of rates.

“For all these reasons, the Cleaning Tariff, while purporting to be a service, is a rate, but an unlawful one, because it does not comply, or even follow the scheme let alone the letter of the Rates Act,” he added.

The relief SAPOA is seeking is to have the budget declared invalid.

However, the order of invalidity should be suspended for two months to allow the city to deal with the revenue shortfall that will result from the invalidity of the three items.

Mayor Geordin Hill-Lewis said the city cannot agree that wealthy property owners should be charged the same as lower-income or middle-class households.

“This would be regressive, would place a disproportionate burden on ordinary families, and would be patently unfair.

“The city’s budget protects homes under R2,5m and extends rates relief to many more middle-class homes, all while preserving the city’s critical infrastructure and service investments. In contrast, this court application by the richest of the rich property portfolio holders seeks to go back to a system of regressive taxation which hits ordinary families, and the poor, the hardest,” said Hill-Lewis.

He added that if SAPOA were to succeed in their argument, the effect would be ‘to have ordinary families effectively subsidising the wealthiest property owners’.

“Fixed charges linked to property value are a lawful, fairer, and equitable way for Capetonians to contribute within their means to our city’s infrastructure programme and fixed service costs. Cross-subsidising – where the better off among us help to fund services for the less fortunate – is the only sustainable way to ensure a working city of hope for all,” said Hill-Lewis.

Meanwhile, the Cape Town Collective Ratepayers’ Association (CTCRA), an association with 56 ratepayer associations and civic organisations from across Cape Town, has commended SAPOA.

“This case is not just of importance to the ratepayers of Cape Town. If left unchallenged, there is a realistic possibility that other municipalities in South Africa will adopt CoCT’s methods. It is critical that the rule of law, fairness in service delivery, and constitutional accountability are upheld – not just for our city, but for the nation.”

theolin.tembo@inl.co.za

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