Court ruling favours new property owners
New property owners no longer liable for historic municipal debts
MUNICIPALITIES will no longer be able to hold new property owners over the barrel for payment of previous owners’ debts.
This follows a watershed ruling by Judge Dawie Fourie in the Pretoria High Court on Monday, rubbishing the practice of municipalities to collect outstanding rates and taxes from new owners.
He was ruling on the constitutional validity of section 118(3) of the Local Government Municipal Systems Act, in terms of which municipalities recovered municipal debts, some running into millions, from new business and residential owners, instead of collecting it from the owner who ran up the bill in the first place.
The practice caused astronomical damage for transferees, most of whom only discovered the existence of the debt after the transfer, by which time it was too late to back-peddle.
Prior to the ruling, municipalities were able to recover historic property debts dating as far back as 30 years from new owners.
If they were not able to pay, municipalities refused to connect services and even attached properties for sale in execution to force payment.
Judge Fourie asked why a municipality should be entitled to visit the sins of a predecessor in title upon innocent third parties, as they were not in any position to control the predecessor’s indebtedness.
It is not clear if property owners who have already settled inherited debts will be able to claim back their money.
The ruling is, however, not good news for municipalities and is expected to significantly worsen their financial position, with billions outstanding on unpaid utility bills countrywide.
Municipalities teetering on the bring of financial ruin could now be pushed over the edge.
Judge Fourie said the intention of the law was to ensure the municipality’s economic viability, but that it did not justify forcing the new owner to foot the bill.
He said the two municipalities involved in the case at hand, had no right to refuse municipal services if the historical debt was not paid, as it would be disregarding its constitutional duty to ensure service provision.
The Tshwane and Ekurhuleni metros were accordingly ordered to render municipal services where no debt exists between them and the new owners.
City ward 2 councillor and property specialist Christo Botha welcomed the decision.
‘It has been a historic point of contention, which was not favourable for purchasers. This ruling is fair.
‘Municipalities must use the systems they have in place to collect debt from the sellers.’
HAVE YOUR SAY
Like our Facebook page and follow us on Twitter.
For news straight to your phone invite us:
WhatsApp – 072 069 4169
Instagram – zululand_observer
