The Constitutional Court ruling on Tuesday, 29 August 2017, favours all property owners! The ruling stated that municipalities cannot hold a new property owner liable for a previous owner’s historical municipal debt.
What does this ruling mean for Business and Property Owners? The precedent-setting ruling will provide relief to owners, who have been struggling with this burden for years and have been denied municipal services until the debt had been paid. According to Justice Edwin Cameron, “…the court found that upon transfer of a property, a new owner is not liable for old municipal deb.” The historical debt includes water, electricity, rates, and taxes charges associated with a property.
When a property is sold, municipalities would be the first to claim the debt from the proceeds of a property sale. But if the previous owner still owed the municipality debt spanning over 2 years, the property was not allowed to be transferred to the new owner, according to section 118 (1) of the Municipal Systems Act. Judge Dawie Fourie declared Section 118 (1) and (3) of the Municipal Systems Act unconstitutional, as these sections “…unjustifiably limited the property rights of new owners under the Constitution.” Arguments against Section 118 included that making a new owner liable for historical debt could promote the deprivation of property, in line with the prescripts of the Bill of Rights.
What does this mean for the Municipalities? According to the ruling by the Constitutional Court, municipalities may not attach and sell the property to settle the debt of the previous owner. Furthermore, municipalities may not refuse to supply municipal services because of outstanding historical debts. Property owners can now breathe a sigh of relief knowing that they will not be charged with others debt!