Property problems: Councils need proof before splitting rates

Q: I am aware there is a big difference in costs for rates and water charges, depending on whether a property is residential or commercial. At present a commercial property I have is partially let as residential and I think the council and Metrowater should reduce their charges accordingly. In fact, given that I advised them of this nearly three years ago, I feel they should backdate the levies and reimburse me. What can I do about this?

A: It is common for councils to have different rates for different categories of land.

Differential categories may be based on a number of factors, including the location of the land, its zoning, the provision or availability of a particular service, or the use made of the land. Probably the most common differentiation, at least in urban areas, is the one you mention - between "residential" and "commercial" properties.

The choice of differentials (if any) and the way they are defined is a matter for each council to decide when it makes its rates each year.

Because you mention Metrowater in your question, I assume that your property is within the Auckland City Council area. In recent years Auckland City has had seven differential groups, which are based on land use and/or location.

Its "Residential" category is defined as all land used exclusively, or almost exclusively, for residential purposes (with exceptions such as hotels and motels). Auckland City does not have a category called "Commercial", but there are "Non-residential" and "CBD non-residential" categories for land not in the "Residential" definition.

Rates are assessed on each "rating unit", which is normally the land in a single certificate of title. Where discrete parts of a rating unit are in different differential categories, councils can split the rating unit into the two or more parts, and treat each separately for rates purposes.

However, the council needs to be satisfied that the rating unit qualifies for the split. I am not sure what form your advice to the council took, but advice without supporting proof would probably not be enough.

A physical inspection may also be necessary. For example, a valuer will need to divide the value of the rating unit between the parts. You should also be aware that splitting the property in this way might have other rates implications. For example, some rates are assessed as a fixed amount per separately used or inhabited part of a rating unit, and if there is now more than one separately used part there will be more than one such charge.

If your property does qualify for a split and you provide sufficient proof, then I would expect the council to action it. If they don't, then there is a more formal step available.

In May of each year the council makes available for public inspection its "rating information database" or RID. This contains all of the information required to determine a rating unit's category for differential rates purposes. If you think your property has been wrongly categorised, then you can object to the information and the council must notify you of its decision on that objection.

If the council accepts your objection then it must correct the RID. If that correction changes the amount of rates then it must issue amended rates assessments going back up to five years, and refund any excess payments.

The Metrowater situation is different because your relationship with Metrowater is based on a customer contract, rather than through rates.

Although Metrowater's contract also distinguishes between residential and non-residential customers, its tariffs are the same for both, so there is no difference in water charges whether the property is commercial or residential. However, there is likely to be a difference in wastewater charges.