Council as far back as 1998 resolved vide Resolution No. 13/02/03/98 that the subdivision of private property, for example, any proclaimed erven, is by enactment subject to the payment of an endowment.
1. What is an endowment payment?
An endowment payment is an amount of money (usually 7,5%) payable to a local authority following approval of subdivision. The endowment must be paid on registration and sale of the new erven resulting from the subdivision.
2. Why is endowment payable?
Endowment payments are request to cover development costs to the community arising in small increments from each increase in development density. Where a new township is established in a new area, a large endowment of even 30% may be required to cover the greater financial commitment required of a local authority. The endowment could be payable in cash or in land for parks, cemeteries or other local authority purpose. Where a small township is established or subdivision takes place within a proclaimed township, much of the development cost has already been recovered and only a small additional charge is warranted; e.g. 7,5%.
3. Where a subdivision involves no rezoning, no streets or other public reason thereof an endowment of 7,5% of the land value (market value as determined by a Valuer) of the first 10 erven and 1% of the value of additional erven created by the subdivision (but excluding the remainder) shall be payable.
4. Where a subdivision in an existing township involves no rezoning but involves the creation of streets or public places, the necessity for which streets or other public places arises from the subdivision, such streets or public places shall be transferred free of compensation, subdivision costs and transfer fees to the Council and an endowment as provided for in paragraph 3 above shall be payable in respect of the balance of the newly created erven.
5. That upon the establishment of a new township, streets and other public places reserved for municipal purposes, shall be transferred free of any compensation, transfer fees or any other costs whatsoever to the Council and an endowment as provided for in paragraph 3 above shall be payable in respect of the balance of the erven in the township.
6. That where land is extracted on subdivision for street widening purposes not associated with or arising from the subdivision:
6.1 full compensation be payable for any portion, but that such compensation be deducted as far as possible from any endowment payable in respect of the subdivision,
6.2 that endowment be payable on the balance of the newly created erven on the basis as provided for in paragraph 1 above,
6.3 that the Council bears the subdivision and transfer costs in respect of ground extracted in terms of 6.1 and 6.2.
7. That in the case where two or more erven are consolidated into one erf and the consolidated erf is again subdivided into the same number or less erven than it originally consisted of, no endowment is payable.
8. That no endowment or betterment be levied on land transferred to the local authority.
9. That Council reserve the right to amend the endowment percentage required when subdivision of land outside proclaimed township is involved.
10. When is an endowment payable?
Once an application to subdivide is approved by the local authority it is submitted to the Ministry for approval. If an endowment is payable, the approval of the Minister will require that the amount be paid before registration or sale of the new erven. The Registrar of Deeds shall not register the transfer of any portion (erf) which is subject to a condition of endowment, unless the application for such registration is accompanied by a receipt or certificate from the local authority concerned – as proof that the endowment on the portion has been paid.
11. What is the legal basis for endowments?
The Township and Division of Land Ordinance No. 11 of 1963 stipulates as follows:
“19(5)(a) Whenever any application for permission to subdivide…is granted as aforesaid and the owner of such erf or land…whether by sale, exchange, gift or any manner, or is leased by him for a period of ten years or more, the said owner shall pay as an endowment to the local authority…such percentage of the value of the portion as may be fixed by the “Minister” on the recommendation of the Board after the Board has consulted the local authority concerned…”
“ (b) any endowment paid in terms of this subsection shall be used by the local authority… to finance and carry out betterment works or for erecting, constructing or acquiring amenities or public places in the public interest.”
“ (c) Endowments shall be calculated as a percentage of the value of such portion at the time of disposal or lease.”
12. Who should one contact regarding amount payable?
Before registering a new erf subject to an endowment condition, the owner may contact the Council regarding the amount payable. The amount payable may be based on the purchase price (should there be a purchase price) or the value established by a sworn appraiser.
These endowment fees must be placed in a capital fund and used for small scale improvements in Infrastructure such as parks, street widening, etc. Each council must investigate its own needs for the funds and make a recommendation on what percentage it would like to charge, say 5%, 7,5% or 10%. This recommendation should be consistently used thereafter. It must be included in the approval letter given to the private applicant.
A new sub-division (Monitoring, Evaluation and Early Warning) has been created on the establishment of the Ministry. This division is tasked, amongst others, to monitor and analyze actual revenue and expenditure against the budget through quarterly financial management reports and physical assessments and it is also responsible for an early warning system on all financial matters related to your Local Authorities.
All quarterly reports (Operational & Capital) must be submitted to this newly created sub-division, not later that the 15th of the month following the end of each quarter, for analysis and evaluation purposes. The reports must be presented as per the prescribed format.