Impact of new city-wide cleaning tariff on rentals

The City of Cape Town's new "City-wide Cleaning Sundry Tariff" has introduced a significant new variable into the local property market, creating confusion and concern for both landlords and tenants.

While the levy is currently subject to a legal challenge, it is important for landlords and property owners to understand how this new fixed fee could impact their rental income and lease agreements.

What Is the New Tariff?

This new fixed cleaning fee is a monthly charge for all residential properties, sectional title units, and vacant land. Unlike utility charges which are linked to consumption, this tariff is calculated based on the property's municipal valuation, similar to how property rates are determined.

It would appear as a separate line item on the property owner's municipal account, directly increasing the overall cost of owning a rental property. This then raises questions about who is responsible for payment.

As the fee is billed directly to the owner, the responsibility to pay the municipality lies with the landlord. However, the ability to pass this cost on to a tenant depends entirely on the lease agreement.

Impact on Landlords and Tenants

Most well-drafted lease agreements, including those from major rental agencies such as Seeff, contain clauses which permit a landlord to adjust the rental amount to accommodate an increase in municipal rates, levies, and taxes.

Since this new cleaning fee falls into that category, landlords are within their rights to pass it on to their tenants. Landlords must, however, ensure that a minimum of two calendar months' notice is provided to their tenants. This is a key requirement under the Unfair Practice Regulations to the Rental Housing Act. Failure to provide adequate notice could lead to disputes and legal complications.

The Legal Challenge and Its Implications

The legality of this new fee is currently being challenged in court by civil rights groups such as AfriForum and the South African Property Owners Association (SAPOA). They argue that a cleaning service for public spaces should be funded through general property rates, and not as a separate, fixed tariff. The outcome of this legal action will determine the future of the fee.

Should the legal challenge succeed, and the fee overturned, landlords who have already passed the cost on to their tenants would need to refund these, assuming the municipality issues a credit to the property owner. For now, however, landlords and tenants must operate under the assumption that this fee is a valid charge that needs to be factored into their financial planning.

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