In a dispute between Illovo Opportunities Partnership (appellant) and Illovo Junction Properties (seller), the appellant sought a declaration that the seller was liable for the payment of approximately R8.8 million to the City of Johannesburg for engineering contribution charges levied by the City to permit the rezoning of the property under a scheme for development. The contribution was meant to fund the cost of engineering services, parks and open spaces on the property.
In September 2009, the appellant and the seller concluded a sale agreement for the property. Earlier that year, the seller had applied to the City for the property to be rezoned to allow for further development, the approval of which was published by the City on 4 November 2009.
On 5 January 2010, before the property was transferred to the appellant, the City informed the seller that an amount of approximately R8.8 million was due for the contribution charges in terms of the Town-Planning and Townships Ordinance.
On 19 January 2010, registration of the transfer took place and the appellant became the legal owner of the property. The appellant then argued that the seller was liable for the payment of the contribution charges, as the contribution was levied against the owner of the property before the appellant took transfer of the property and that the notice delivered by the City to the seller on 5 January 2010 had the effect of imposing an obligation on the seller to pay the contribution.
The question before the SCA was whether or not the City's notice, delivered to the seller on 5 January 2010, had the effect of imposing an obligation on the seller to pay the contribution charges. The SCA held that on a proper interpretation of s 48 and 63 of the Ordinance, the contribution charges only become due and payable once the owner of the property elects to implement the development scheme by applying for the necessary building plans to be approved or uses the land in a manner contemplated in the scheme. Only once the owner exercises its rights to develop the property will the contribution charges become payable. Accordingly, the appeal was dismissed with costs.
In arriving at its decision, the SCA considered the following aspects of the relevant sections of the Ordinance:
- Although s 63(1) requires the owner of the land to pay a contribution, this is not a demand. Its purpose is to merely fix the amount of payment only when the development scheme commences.
- Section 63 does not specify a date on which the contribution charges must be paid;
- No time period is stipulated for the implementation of the development scheme;
- It is not unreasonable for the Ordinance to require the contribution to be payable only if the new use rights are exercised as the City incurs these costs only as a consequence of the implementation of the development scheme
Conclusion
The owner of land that is rezoned under a scheme for development for which the City has levied contribution charges, is only required to pay the amount of the contribution at the time when it exercises the new usage rights envisaged in the scheme, and has no obligation to do so at the time when the City notifies it that the contribution is payable.
