Bringing an urgent application to the Western Cape High Court, the South African Property Owners Association (Sapoa) is taking a stand against what it views as an unfair burden on ratepayers, challenging three property-linked tariffs recently introduced by the City of Cape Town in its 2025/26 budget.
These include a new cleaning levy and fixed charges for water and sanitation services, all calculated based on the value of a property rather than actual usage. Sapoa argues this approach disproportionately affects certain property owners as well as the public at large and could set a troubling precedent. In approaching the court, the organisation is encouraging other concerned parties to join the case as friends of the court.
Sapoa has requested an early court date to ensure clarity before the City begins preparing its 2026/27 budget on 1 September. The case is backed by some of its most influential members that own various properties within Cape Town that include, among others, Tyger Valley, CapeGate and Canal Walk shopping centres, as well as Table Bay Mall and V&A Waterfront. Furthermore, a number of the non-profit’s members consist of smaller businesses with only a handful of properties in their portfolio.
Property rights ‘infringed’
In its supporting affidavit, the non-profit contends its members’ property rights are being infringed upon under Section 25 of the Constitution. The organisation is bringing the challenge on behalf of its members, as well as in the public interest.
“It would not be reasonable and effective for affected ratepayers to bring the challenge on their own. The City has vast resources to defend the three items of their budget, something that is far beyond the financial capabilities of the thousands of ratepayers who objected to the budget to bring multiple legal challenges,” states Nilesh Ambaram Gopal of Sapoa in the said affidavit.
“Some of the persons affected by the three items are vulnerable, in the sense that the effect of the budget may be that they may have to sell their properties as they cannot afford to pay the three items.”
The first draft budget was published for comment on 27 March, introducing the three fixed charges, which caused a public outcry. Sapoa objected on several grounds, along with a protesting petition of more than 10 000 signatures that was submitted to the City. No fewer than 14 000 comments were made during the public participation period. Virtually all commentators strongly objected to the first draft budget, mostly against the fixed charges.
Changes were made to the first draft budget in May by the City, resulting in the publication for comment on the revised draft budget. In the revised draft budget that was passed on 26 June, the City stated that it sought to alleviate the impact on lower and middle-income households by the introduction of rebates.
However, Sapoa holds that these reductions and rebates do not detract from the fact that the fixed charges are unlawful and should not have been introduced in the first place.
Sapoa says a continued rise in municipal costs has a significant detrimental effect on the costs of occupancy faced by tenants in commercial retail properties. If municipal costs push charges past a certain limit, tenants struggle and landlords must help, but their options are limited. Leases can become unaffordable, leading tenants not to renew. According to its Operating Costs Report, by June last year, electricity made up 29% of total operating costs, while municipal charges accounted for a staggering 60%.
According to Sapoa, the tariffs linked to property values do not comply with the Property Rates Act. It points out that the three tariffs are not based on consumption. It is not a surcharge based on a basic charge nor a municipal tax. Sapoa considers the tariffs a form of property rates as they are linked to property value, but points out that they do not comply with the Property Rates Act.
Sapoa challenges legality of value-based cleaning tariff
The cleaning tariff will be funding general cleaning on council property, litter picking and providing other services like illegal dumping removal and informal settlements.
“The question to be answered is whether it is legally permissible to levy tariffs against property owners for cleaning services based on the value of their properties, regardless of whether the property owner actually receives such services at the property or in the area of his property,” states Gopal.
He points out that section 229(1) of the Constitution states that a municipality may impose rates on property and surcharges on fees for services provided by the municipality, and submits that the cleaning tariff has not been adopted as a property rate in terms of applicable rates legislation.
“The cleaning tariff is not a consumption-based charge for a service nor can it be any other type of charge levied in exchange for a service as it is linked to property value.”
Furthermore, Sapoa states it cannot be a surcharge on fees charged for services because a surcharge is an additional percentage “profit” on the consumption tariff and not a tariff linked to property value. It also cannot be another permissible tax because such tax must be approved in terms of national legislation, which has not happened.
Water and sanitation
The organisation further holds that fixed water charges are also irrational, arbitrary and contrary to the rule of law as entrenched in the Constitution. The organisation also notes that, until now, the fixed water charge was based on the pipe-connection diameter, and the fixed sanitation charge was tied to water usage. The new system breaks this link to actual consumption.
Thus, they argue that property owners who invested in alternative water systems to reduce consumption after the Day Zero crisis are now being penalised. These improvements raise property values, which under the new tariff system, results in higher water charges, a move Sapoa calls irrational.
“Traditionally, due to the fact that sanitation output from a specific property cannot be measured, these charges were calculated as a percentage of the relevant property’s water consumption charges. This meant there was some correlation between the property’s water use and its sanitation use. There is however no rational connection between the cost of delivering sanitation services to residents and property value. This offends against the user pays principle and is in contravention of the Systems Act, nor is it authorised by the Constitution, and other relevant legislation.”
Whilst Sapoa regularly engages on property issues and seeks cooperation with municipalities, it says repeated attempts to address members’ concerns with the City of Cape Town were unsuccessful. As a last resort before litigation, Sapoa requested a legal opinion justifying the link between tariffs and property value, but the City declined.
Mayor: ‘Sapoa protects profits over people’
In response to Sapoa’s High Court Application, Cape Town Mayor Geordin Hill-Lewis says Sapoa’s attempt to stop Cape Town’s pro-poor budget is to protect their own vested interests, and puts their profits ahead of the people of Cape Town.
“Sapoa represents the country’s wealthiest and largest property owners – mainly shopping mall owners – who have benefited significantly over the years from Cape Town’s functionality and success. However, they now argue that the City should charge the biggest property owners the same as individual low-income families,” he stated.
“The City simply 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.”
He holds that the City’s budget protects homes under R2.5 million and extends rates relief to many more middle-class homes, all whilst 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.
The Mayor said that if Sapoa were to succeed in their argument, the effect would be “to have ordinary families effectively subsidising the wealthiest property owners”.
The City scrapped the old “pipe levy” charge because it was unsustainable for R50 million and R500 000 homes to make equal contributions to Cape Town’s infrastructure and fixed service costs.
Fair step toward cross-subsidising
“Fixed charges linked to property value is a lawful, more fair, 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,” he said.
The Mayor added that the City had engaged extensively with Sapoa, who had accepted the necessity of Cape Town’s R40 billion infrastructure budget over three years, a South African record, but that Sapoa had offered no workable alternative means of distributing fixed infrastructure and service costs among ratepayers.
“The only alternative to fixed charges linked to property value, is for everyone to pay a flat charge regardless of whether you are low-income or affluent. This is not a sustainable nor fair way to fund infrastructure investment and the fixed costs of service delivery. If a flat charge of say R500 is billed, and one household earns R20 000 whilst the other earns R100 000 a month, this charge represents 2.5% and 0.5% of their monthly income respectively. This means the impact on the lower-income household is actually five times more than on the higher-income household, which is regressive and inequitable,” said Hill-Lewis.
The Mayor further said that fixed charges are necessary because all ratepayers need to make a contribution to municipal infrastructure and not only those who can’t afford to invest in alternative water and electricity sources.
“Cape Town would not have a working electricity or water service to speak of if the City only charged people for consumption. Many costs are fixed in nature – pipelines, trucks, cables, staff to service it all. These costs remain no matter how much people consume, and so fixed costs must be met with a portion of fixed revenue. Infrastructure must be available for all and must always work. To achieve this, costs must be borne by all ratepayers,” said Hill-Lewis.
