- SA's biggest property organisation is taking legal steps against the City of Johannesburg over what it calls an "unlawful" policy which forces developers to pay a once-off fee.
- The fee is payable on all new property developments, and is supposed to go towards the municipality's cost of providing or upgrading infrastructure.
- But SAPOA says it is payable even if no new infrastructure is needed - and the money is then used in other parts of the City.
Commercial property owners are taking legal steps against the City of Johannesburg over what they call an "unlawful" policy which forces developers to pay a once-off fee.
In a statement on Wednesday, the South African Property Owners' Association (SAPOA) said it had launched a court application against the municipality to interdict it from enforcing its Development Contributions Policy, which was put in place in October 2021.
According to the policy, landowners have to pay a once-off fee as a condition of their land development application approval. This fee is supposed to go towards the municipality's costs to install new services infrastructure or upgrading existing infrastructure.
But even if the infrastructure was already in place, developers still need to pay the fee - which SAPOA says is then used to pay for infrastructure in other parts of the city.
SAPOA says the City is wrong in its interpretation of the Spatial Planning and Land Use Management Act (SPLUMA) - it can't impose the charges regardless of whether adequate services are already available.
"In effect, the policy as published would permit the city to cross-subsidise services in other areas via a development contributions regime imposed on specific development applications," SAPOA asserted.
The association is made up of large commercial property investment organisations, whose collective portfolio is valued at more than R500 billion. The members of the association represent about 90% of South Africa's commercial and industrial property.
SAPOA wants the court to declare that the municipality can only charge development charges relating to services related to a specific development.
"SPLUMA does not permit the scheme that the policy envisages. Land developers already carry an enormous financial risk and requiring them to fund infrastructure in other parts of the city is not only unlawful but unfair," Gopal said.
He argued that developers accept the responsibility for external infrastructure which are required by their projects, but not those that are unrelated. The city has other funding mechanisms for that, he said.
"Leaving aside the issue of legality, there is a matter of economic principle. The policy will be disastrous for the prospects of city development, adding a financial burden that is unsustainable in the present economic climate," he said.
Johannesburg mayoral spokesperson Mabine Seabe said SAPOA's legal representatives had informed the city about its legal action. But the municipality will only respond once it has received SAPOA's papers.
Seabe denied SAPOA's claims that the city would use the contributions required by the policy to cross-subsidise services in different areas.
As for the impact of the policy on investment, Seabe said: "The city prioritises encouraging and harnessing investment and development to improve the development position of the city and facilitate economic growth across the city landscape and develops policies and instruments to do so."
SAPOA is not the only organisation that has been at odds with the City of Johannesburg.
L2D's contention came after an independent valuation of the property was about 15% lower than the city's. The city threatened to cut off Sandton City's services, since it has been paying its rates according to the independent valuation.
L2D has since approached the valuation appeal board four times to sort out the problem but the process has been slow.