Rates and taxes are a fee that is charged by the local municipality for the services that are given in connection to the property. Examples of these services include garbage collection. The total amount due is calculated as a percentage of the property’s current market value. Before a property may be transferred, the current owner must first get a rate clearance certificate from the municipality where the property is located. This step is required by law.
The numbers that are provided by the municipality include all sums that are overdue in regard to rates and taxes for the two-year period that precedes the date of application in addition to the projected amount that is due in advance for municipal services.
On the other hand, homeowners of sectional title units or homeowners who normally dwell inside an estate are the ones who are responsible for paying the levies. Each participant in the programme or estate will be charged levies, which will be collected by the management agents.
What are Rates and Taxes?
The rates are the same for both free-standing residences and properties that are sectionally titled. They are to be paid on a monthly basis directly to the local government. They pay for land taxes as well as services that are the responsibility of the municipality, such as sewage, water, the upkeep of roads, electrical infrastructure, the maintenance of streetlights, and garbage collection. The rates are determined by the market value of the property, which takes into account any structures that are located on the land as well as any modifications that have been done. The Constitution of South Africa provides municipalities the right to value and rate property within their jurisdiction. The Constitution also makes it mandatory for rate payments to be made by property owners who possess rateable property. Even if there are no structures on the site, the land itself may be subject to rates. Multiplying the current market value of the property by the percentage that the local council has set for the rate is the formula for computing property taxes.
What are Property Levies?
Property owners in a sectional title establishment, such as a townhouse complex, a cluster development, or a block of flats, are obligated to pay a monthly levy into the bank account of the body corporate, in addition to the property taxes that they are already required to pay. In any sectional title development, all of the owners of the individual units make up the body corporate. However, the trustees are the ones in charge of the day-to-day operations and upkeep of the complex. At the annual general meeting of the body corporate, the members vote for the trustees, and the trustees are expected to operate in a manner that is beneficial to the body corporate as a whole. It is possible for a sectional title development to impose an additional special tax on top of the standard levy in order to gather more funds for significant projects. The levy does not include the proportion of the property taxes that corresponds to your ownership.
How are levies raised?
The outgoing trustees will review and decide on the anticipated expenditures for the next fiscal year, which will then be brought up for consideration during an annual general meeting (Annual General Meeting). After all of the owners within the sectional title scheme have given their approval to the proposed expenditure, the amount that each individual house owner will subsequently be required to pay in accordance with their levy rate is then established. Trustees are responsible for informing all homeowners of this amount, and it is then each homeowner’s obligation to pay this amount, which is often done in instalments on a monthly basis.
On occasion, the trustees may propose that each homeowner make a contribution toward the creation of a special levy in order to pay extra costs that were not previously included in the budget. The payment for these special levies may either be made in one large amount or in instalments, depending on the agreement made by the trustees.
What is the difference between taxes and levies?
The primary distinction between the taxes and the levies is in the things that they do not cover and that, as a result, are your obligation. After you have paid your monthly levy, the only aspect of the property that you are responsible for maintaining and repairing is the inside of your individual unit if you have purchased a sectional title property. The trustees are responsible for everything from building insurance to repairs, maintenance, upkeep, and cleaning of the common spaces, as well as landscape services and security, and they use the money collected through levies to pay for these things. In a house that stands on its own, you are responsible for paying such fees directly. If you acquire a house that is not attached to any other structures within the estate, you are responsible for all of the costs, including the insurance. In this particular scenario, it is in your best interest to confirm what aspects of the estate are and are not covered by the charge.
What’s the difference between rates and levies? | Nedbank. (2022, June 14). What’s the Difference Between Rates and Levies? | Nedbank. Retrieved November 4, 2022, from https://personal.nedbank.co.za/learn/blog/the-difference-between-rates-and-levies.html
What is the difference between rates and taxes, and levies? | MyProperty. (2022, October 17). MyProperty South Africa. Retrieved November 4, 2022, from https://www.myproperty.co.za/faq/financial/difference-between-rates-and-levies