Durban Corporation and Another v Lincoln

• Jurisdiction: South Africa
• Judge: De Wet CJ, Watermeyer JA, Tindall JA, Centlivres JA and Feetham JA
• Judgment Date: 13 October 1939
• Citation: 1940 AD 36
• Court: Appellate Division

Watermeyer, J.A.:

The subject of controversy in this appeal is the correct basis upon which valuations of immovable property within the Borough of Durban, for rating purposes, should be made

Watermeyer, J.A.

The respondent Lincoln is the lessee from the Durban City Council of two plots of ground on the beach front, on which has been erected a three-storey block of flats known as Hampton Court, and the lease has a period of about 80 years still to run Though he is only a lessee it is admitted that nothing turns upon that fact in this case, and for the purposes of the appeal be will be treated as the owner of the land The municipal valuator valued Hampton Court at £29,410, divided into £12,780 for the land and £16,630 for the building The respondent Lincoln objected, and the valuation was reconsidered by the Valuation Appeal Board which by a majority reduced the valuation of the whole property to £25,850, being £11,180 for land and £14,670 for the building These figures were not the actual values decided upon by the board The members of the board all gave reasons for their decision, and judging from those reasons, which are not very clear, it would seem that the majority of the board fixed the value of the property at £22,000 and the land at £11,180 The building should therefore have been valued at £10,820, but because there had been a compromise as to its value between the valuator and the respondent, the value was fixed at £14,670, the agreed figure, and that of the whole property raised accordingly to £25,850 There is no dispute in principle about the building The appellants are prepared to reduce it to the figure of £10,820, and the respondent's counsel has agreed, if that reduction is made, that it will not affect the question of costs in either Court.

The dispute turns upon the method adopted by the Valuation Board in arriving at the value of the land They valued it as a vacant site, and the respondent contended that such a basis of valuation was not authorised by the relevant legislation In pursuance of his contention he applied to the Natal Provincial Division for an order setting aside the valuation made by the board and directing a valuation to be made de novo The Court upheld the respondent's contention, viz that the valuation had been made on a wrong basis, set aside the valuation and ordered the Durban Corporation to have a new valuation made of the property Against that order the Corporation appeals.

The relevant statutory provisions are contained in Ordinance 19 of 1924 (Natal) Secs 88 and 90, (1), (2) and (3) are important: they are as follows:

"88 (1) 'Rateable property' means any immovable property

Watermeyer, J.A.

within a Borough, subject to the special provisions and exemptions hereinafter mentioned.

"(2) Rates may be assessed on immovable property as a whole, or the land and buildings may be treated as separate rateable properties, in which case the rates may be diversely assessed on each, or the land alone may be treated as rateable property.

"(3) Any part of a building or other rateable property if separately let or occupied and under the control of the lessee or occupier, may be treated as a separate rateable property.

"(4) 'Rateable property' shall also include any property purchased from the Council and held by the purchaser on certificate of sale and purchase or other similar title and of which registration of transfer has not been passed by the Registrar of Deeds, and any property held under lease from the Council.

"90 (1) For the purpose of assessing the rates the Council shall, as often as may be deemed necessary, cause a valuation to be made of all the rateable property within the Borough, by one or more competent persons, as valuers, and shall cause a valuation roll to be prepared.

"(2) The value of buildings and improvements shall be stated separately from the value of the land, and the valuation roll shall also show whether such buildings are used as dwellings or otherwise.

"(3) The basis of valuation shall be the fair market value of the property at the time of valuation."

It is important to notice that rates may be levied on the whole property, or the land alone, or diversely on the land and buildings but not on the buildings alone An examination of sub-sees (2) and (3) of sec 90 will show immediately that the making of a valuation presents an intricate problem to the valuator The basis of his valuation must be the fair market value of the property at the time of valuation To arrive at the fair market value of the property as a whole does not present any insuperable difficulties The principles which should guide the valuator are well recognised and have been discussed in several cases, e.g., Pietermaritzburg Corporation v South African Breweries Ltd. (1911, A.D 501) But when the next step has to be taken and the total market value of the whole property has to be divided into two and allocated in part to the land and in part to the buildings upon the land, a very much more difficult problem arises The Ordinance is silent as to

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the basis upon which this allocation must be made, and apart from sec 90 (2) quoted above and the form of oath provided for the valuer, in which he undertakes to value property "at and for the full and fair value thereof according to the intent and requirement of the law," there is nothing in the Ordinance to indicate to the valuer the lines upon which he must proceed in dividing up the total valuation between land and buildings Prima facie the Ordinance seems to regard the property as made up of two separate component parts, land and buildings, and that the two separate market values of the component parts will total up to the market value of the whole But that view is clearly fallacious A building standing upon a piece of land is like a picture painted upon a piece of canvas; and just as it is impossible to sell the picture apart from the canvas on which it is painted, so it is equally impossible to sell a building apart from the land It is possible to scrape the paint from the canvas, and it is possible to pull the building down and sell the material, but then the work has been destroyed and what is sold is not the building but building material In law a building accedes to the land; it is not separate property and cannot be owned as a thing separated or disconnected from the land on which it stands It is, therefore, idle to attempt to find the market value of a building separated from the] and on which it stands, and any valuator attempting to do so is pursuing a will of the wisp The value, therefore, which has to be assigned to buildings under sec 90 (2) of Ordinance 19, 1924, is not market value but value determined in some other way.

If the position of the other component part, the land, be examined, it will be seen that, though there are difficulties with regard to its valuation, they are nothing like so formidable as those connected with the building, and it is not necessary to abandon entirely the idea of market value It is necessary however to keep clearly in mind that the word "land" is used in contrast to the word "buildings", and one must not allow the legal notion of a building forming part of the land to cause confusion If that be borne in mind, then it will be seen that "land" can only be sold as "land" if it is regarded a& free and unencumbered by a building The legal incubus of the building must be removed from the land and the "land", if sold as "land" only, must not be regarded as having any of its value diminished or increased by the presence on it of a building If land with a building on it be

Watermeyer, J.A.

sold subject to a condition that the purchaser must pay the cost of removal of the building, or to any similar condition which recognises something in the nature of a right in the owner of the building to stand the building on the land, then, in truth, it is not land only which is being sold but either land plus building or land burdened with some right which would be a right in the nature of a servitude if it were legally possible to separate the ownership of land from the ownership of a building standing on it.

The market value of land, separated from the building which stands upon it, is not an incomprehensible idea The seller of the property can remove the building and consequently he can sell the land upon which it stands free from the burden or the benefit of the building standing on it The market value, therefore, of land separated from the building which stands upon it, when determined in the only way in which it is possible to determine it, is seen to be equivalent to the market value of the land regarded as a vacant site The valuation board followed this course They determined the market value of the property, they then determined the market value of the land, and in the course of doing so, in order to arrive at an attainable result, they regarded the land as a vacant site They then deducted the value of the land, so arrived it, from the, value of the property and allocated the balance as the value of the building.

The Natal Provincial Division decided that in so doing they were not following out the course prescribed by law The reasons for that decision are stated by the Presiding Judge in the following terms: -

"The crux of the case, however, lies in the meaning and application of sec 90 (2) As normally land is not sold without the buildings on it nor the buildings without the land, the idea conveyed by sec 90 (2) that the buildings and improvements are to be given a market value separately from the land and the land is to be given a market value separately from the buildings is notional or imaginary But there is nothing new in this Valuations for rating purposes are frequently made on notional or imaginary bases That is often the case in England It is also the case in the Transvaal where site rating has been introduced Even...