South African Property Owners Face Automatic Debt Dilemma

VAN DEN BERG STR 027Individuals who own property in South Africa can find themselves indebted automatically to municipalities because of unpaid municipal accounts that were not settled by previous property owners. A recent court judgment ruled in support of this factor.

According to the Supreme Court of Appeal (SCA), property owners can be liable for previous debts that date back up to 30 years. The previous law stated that a seller would only be held liable for incurred debts over the prior 2 years and these debts include water, electricity, rates and taxes and other services.

A court case that involved Peregrine Joseph Mitchell and the City of Tshwane required Peregrine to pay R232 828 in order to obtain a clearance certificate. However he refused and explained that in terms of section 118 of the Local Government Municipal Systems Act, he had to pay the debt for past two years only that amounted to R126 600.

He got the clearance certificate and then proceeded to sell the property but the City of Tshwane did not reconnect the services for the owner who bought the property because of the historical debt of R106 200.

The Gauteng Division of the High Court ruled that the new property owner was not liable for the historic debt. However, the Supreme Court of Appeal court ruled in favour of the municipality for services and rates amounts owed.

A local property attorney noted that this judgement could have massive implication for property owners. “This case has shown that a municipality can take some legal action against property owners for amounts owned by a previous owner who was failing to settle all his or her bills” she said.

This can be the worst nightmare for new property owners who cannot prove any form of historical evidence to fight back for instance if the municipalities had faulty meters. She also explained that no property owner can claim to be safe as someone else’s debt can just show up at random.

Tenants can also be affected because a majority of municipalities have by-laws that give them the power to hold tenants responsible for charges. A property agent added, “People who buy property or own properties should conduct investigations, to avoid any previous debt from randomly popping up. Rather take out an insurance plan to cover this probably risk.