ISASA has achieved a significant success in setting maximum property rates ratios for public benefit organisations, including many independent schools.

An independent school registered as a public benefit organisation (PBO) qualifies for differential rates treatment in each municipality’s Rates Policy.

Section 19 of the Local Government: Municipal Property Rates Act No. 6 of 2004 provides that a municipality must not charge a rate on PBO property that exceeds a specific ratio to its rate on residential property. This ratio is set by the Minister.

In 2009 Draft National Regulations came out specifying that the rates charged on certain categories of non-residential property, including PBO property, should not exceed 25 per cent of the rates charged on residential property. However, when the final regulations came out a number of these categories were omitted, including PBO property.

This has very negative consequences for our schools all over South Africa, especially with a number of municipalities levying commercial rates on our schools. ISASA thus instituted legal action against the national departments of Finance and Co-operative Governance and Traditional Affairs, and their Ministers. We are delighted to report that that the Ministers agreed to our demands that:

• They would publish regulations in the Government Gazette prescribing an upper limit rate ratio of 1:0.25 for properties owned by Public Benefit Organisations as contemplated in section 8(2)(q) of the Rates Act. 
• The Regulations would be published by an agreed date in March 2010. 
• They would pay our costs on the making of this settlement agreement an order of court.

Implications for independent schools

The Regulations, which have now been published, carry huge positive implications for schools that are PBOs.

Where municipalities charge our schools rates, they cannot charge those that are PBOs more than 25 per cent of the residential rate in that area before the phasing-in reductions and before deductions for rebates and exemptions. 

In the meantime, the phasing-in process of the rates where schools have never been rated before will continue as required by law, and where municipalities have not abided by this they must be reminded of the legislation. 

Where municipalities have exempted independent schools from property rates, the Regulations will have no immediate bearing.  

However, as municipalities have the right to change their rates policies annually, even where they do not currently charge rates to independent schools, they may decide to do so in the future, and then the Regulations will set the upper limit of what they can charge.

R E L A T E D   D O C U M E N T S :
	ISASA Legal Successes April 2010