Court clarifies municipal debts

Private Property South Africa
Lea Jacobs

A recent judgment will stop municipalities from demanding that the current homeowner settle any historical debt on a property.

It’s hard to believe that a homeowner could be sued and, in certain circumstances, lose his home because a previous owner hadn’t settled his debt with the municipality. However, until a recent judgment, this is exactly what could have happened.

To the layman, it seems incredible that anyone other than the person who racked up a debt could be held liable to pay. We’re not talking about someone who stood surety for a friend or family member here, we’re talking about being held responsible for what could be a complete stranger’s debt (such as a previous owner twice-removed). Scary stuff indeed, considering that municipalities have been known to be notoriously slack in collecting arrears and that these debts could have been incurred years before.

Certificate

It pays to remember that, by law, a rates clearance certificate has to be supplied before the transfer of a property can take place. This important document confirms that all rates and taxes have been paid for the preceding two years. Unfortunately, there are many homeowners who have found out the hard way that this document did not provide any peace of mind whatsoever.

According to some municipalities, their interpretation of a judgement by the Supreme Court of Appeal allowed them to claim back historical debt (that was older than two years) from the current homeowner.

Thankfully, it looks as if the days of collecting money from people who didn’t have access to the property when the debt was incurred are over, thanks to a judgment handed down in the North Gauteng High Court last week, which properly interpreted the Appeal Court’s decision. The judge found that new owners can not be held liable for debts owed by the previous owners of the property concerned.

What now?

While it has to be said that not all municipalities jumped on the bandwagon and attempted to penalise new homeowners, one has to wonder what will happen in cases where often vast sums of money were handed over in order to get the lights and water turned on. Will that money be returned or are those who were unfairly charged going to have to resort to legal action to have the money refunded?

Time will tell, but what is clear is that the municipalities should never have attempted to charge new owners for debt that was incurred by previous owners years before. The fact that they did is due to someone, in some municipal office misreading a 2013 judgment (City of Tshwane v Mathabathe) incorrectly.

The interpretive judgment states: “The outstanding debt owing by the previous owner, remains owing by that owner. It is unaffected by the transfer of the property to a new owner. So it remains due by the owner that incurred the debt to the municipality.”

Thankfully, the correct ruling will allow South African buyers to have complete peace of mind as to who owes what and a rates clearance certificate will once again be proof that all is well in the rates and taxes department.

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