An assessment rate hike set for January 1 in Kuala Lumpur could face delays if thousands of property owners send in appeals that must be heard individually by the Kuala Lumpur City Hall (DBKL) before the new rate can be implemented, says a lawyer.
Lawyer Derek Fernandez said those who did not file their objections to DBKL by the December 17 deadline would be subject to the new valuation list and percentage rate to be determined by the local council and Federal Territories minister respectively.
"If you don't object then by default, the new annual value of the property will be fixed under the new valuation list for your property," he told The Malaysian Insider.
Fernandez said that the minister would determine the rate as provided for under the Local Government Act 1976, adding that it should reflect the actual amount of money to be raised from the new valuation list required by DBKL to meet its 2014 budget.
The councillor with the Petaling Jaya City Council also stressed that City Hall must hear every individual objection, a clause provided under the same act, and if need be, after the hearing, adjust the rate for that particular owner.
He, however, argued that it was more important for local councils to “try as hard as possible” to increase income through non-rate revenue instead of burdening ratepayers through assessment increases on property, adding that any increase in assessment should be used as a “tool of last resort”.
"The valuation is the annual rental of the property to be multiplied by the percentage rate, in which case, for KL, the FT minister will determine the percentage. At present, for residential properties, it is 6%, and the minister can increase or reduce this," said Fernandez, who is an expert in local government law.
He also pointed out that not everyone rented out his or her property and to these ratepayers, the rental value was irrelevant.
"So it’s best to keep rates low and make up any shortfall by maximising non-rate revenue. Open budgets and proper and prudent spending will reduce the need to increase rates," he added.
Bukit Bandaraya Residents’ Association president Datuk Mumtaz Ali agreed, saying that he welcomed indications from the powers-that-be that they would relook the proposed assessment hike for low- and medium-cost housing as well as for owner-occupiers.
"There can be a different approach and calculations for those getting rental from their properties. Owners who live in their homes should be exempted from the hike because if I'm not getting rent, why slap me with a new valuation based on annual rental rate?
"Any proposed increase in the future should also include proper valuation and prior engagement, not post-engagement.”
Segambut MP Lim Lip Eng also called on the entire valuation exercise to be done by valuation experts instead of City Hall officers.
"When we KL MPs met with the FT minister, we were told that one of the ways they determined the rental rate was to call up real estate agents and pose as potential tenants enquiring about the rental amount.
"This is unprofessional. They should just hire professional valuers so that the public can be more convinced about the valuation amount," he said.
Lim added that this had also caused conflicting valuation amounts on properties, where in one case, the owner of a factory in Kepong Entrepreneurial Park was slapped with two notices for the same property, one valuation at RM48,600 and the other at RM79,800.
"This is a clear-cut case. It is for the same property and this is one of the highest increases. The previous annual value was RM9,000, so this is an almost 900% increase."
One valuer, living in Damansara Heights, also revealed at the dialogue session with Lembah Pantai MP Nurul Izzah Anwar last week that he and his neighbours were subjected to different valuations on similar properties in the same housing estate.
"My property is valued at five times more than my neighbours’ and we are not talking about end or corner lots. This is ridiculous," he had said last Wednesday at the Bukit Bandaraya sports complex.
Mumtaz added that there were also complaints from residents in his Bukit Bandaraya area. In one case that was highlighted to him, two owners of similar single-storey houses were sent notices with different amounts – one was about RM2,000 higher than the other.
Checks, however, revealed that the house with the higher amount had done extensive renovation, which increased the built-up space.
"This could be the reason for the discrepancy, but I am not sure, because there is no information from DBKL how it did the valuation.”
Fernandez said that while it was acceptable for the authorities to carry out a revaluation since the last exercise was 21 years ago, they could maintain the same assessment amount by reducing the percentage rate used, adding that City Hall could decrease it from 6% to 3% for residential properties.
"DBKL is not allowed to spend any money unless budgeted for. It is, therefore, essential that they open their budget to public scrutiny in order to justify the need for this additional funds derived from rate revenue and how it is to be used to provide better services.
"They should explain why the current amount is insufficient to meet their expenses and show why non-rate revenue improvements are insufficient," he said.
The lawyer added that failure to do this would make it difficult for City Hall to justify the need to increase rate revenue by revaluation of the annual rental to derive more assessment income.
He also said that they must also show that the administrative cost of managing local government was fair, in terms of number of employees and wages, among others.
According to Fernandez, non-rate revenue could be obtained through billboards, licences, rentals, better enforcement and better revenue through proper assets utilisation agreements.
Citing the example of Petaling Jaya City Council, he said that it would not be increasing assessment rate for properties in PJ in 2014, as announced in the budget.
He said the council had, through prudent financial management, been able to accumulate about RM300 million in reserves, made up of about RM150 million reserve and RM150 million infrastructure funds.
"We endeavour to improve non-rate revenue by eliminating one-sided privatisation agreements and eliminate costs through better procurement policies, open tenders and getting rid of middlemen."
Fernandez said another issue with KL City Hall was the fact that its budget was not open for scrutiny.
"In order for residents to be able to object to the percentage rate used, they must know the amount needed by the authorities, and what it is to be used for. If the budget is not made public, then they can't object to the rate.”
Businessman Hetesh Kumar Mehta, who owns six properties in Kuala Lumpur, including a six-storey commercial building in Jalan Tuanku Abdul Rahman, which are all being rented out, will be filing objections against assessment rate hikes on all six.
He said he expected City Hall to give him a hearing, failing which he would consult lawyers on the next course of action.
"I am totally against the proposed hike because it is not justified. The prime minister has been saying ‘people first’, but the local authorities are doing something else.
"My properties are being rented out. If they push the increase on us, we would have to pass it on to our tenants, and their businesses will suffer because of the higher operating costs.”
According to Hetesh, the former mayor had indicated that City Hall had enough money to run Kuala Lumpur, but after the new mayor, Datuk Seri Ahmad Phesal Talib, took over about 16 months ago, it needed to raise the assessment rate.
He said the public had a right to know how the money was to be used, agreeing with Fernandez that City Hall should have an open budget.
He called on the Pakatan Rakyat KL MPs to ensure that City Hall's budget was open to public scrutiny.
He said that many projects carried out in KL at present were unnecessary, such as upgrading of concrete pavements, when they city was riddled with potholes. – November 26, 2013.