The City of Johannesburg unlawfully increased rates on businesses, commercial and industrial properties in 2009/2010, the Supreme Court of Appeal held on Thursday.

It delivered judgment in an appeal by the SA Property Owners' Association (Sapoa) against an earlier finding for the municipality.

The SCA found the Johannesburg council and mayor had not complied with relevant provisions of:

- the Local Government: Municipal Systems Act;

- the Local Government: Municipal Finance Management Act;

- and the Local Government: Municipal Property Rates Act.

All three acts make provision for community participation.

At the time, the municipality decided to increase the rates on business, commercial and industrial properties by 28 percent. This came after the budget providing for an increase of 10 percent had been tabled and advertised for public comment.

The High Court in Johannesburg found for the city, and held the levying of property rates was not an integral part of the budget process.

The lower court found granting the relief sought by Sapoa was not in the public interest, because it would probably bankrupt the city, leaving it unable to perform its constitutional duties. The association’s application was dismissed with costs.

The SCA held the decision to impose the additional 18 percent was irrational and unfairly discriminated against the owners of such properties. The SCA upheld the association's appeal against the High Court order.

However, a majority judgment of the SCA decided the problem created by the rates unlawfully levied could not be solved by a court order. This decision was in terms of the Constitution, which requires that the SCA make a just and equitable order.

The SCA therefore declared the council had acted unlawfully in imposing the contentious rate, and stated how such a problem had to be dealt with in future.

The judgment declared the relevant provisions of the acts should be complied with when the council wished to adopt a budget with rates which were materially different from those in the tabled budget. - Sapa