|Buying a new home is a momentous occasion and often a hard earned purchase for families and individuals across the globe. In past years new home owners have been forced to settle previous owner’s municipal debt. This naturally was financially burdensome on the new home owners as it was not their debt and they were being denied access to municipal services, namely water and lights, until the said debt was settled.
On Tuesday 29 August 2017 the High Court of Pretoria made a ruling against new homeowners being made responsible for past municipal debt and further declared section 118(3) of the Local Government: Municipal Systems Act of 2000 constitutionally invalid.
The Court declared that new home owners are not responsible for settling historical municipal debt accumulated by previous owners.
The case dealt mainly with the interpretation of the Municipal Systems Act namely Section 118 (3) This section provides that any amount due for municipal services rendered on any given property is a charge upon that property and therefore takes preference over any mortgage bond registrations against the property. Therefore delaying transfers from taking place, municipal clearance certificates not being issued and municipal services being disconnected and so on.
The question that was put to the Constitutional Court was whether this meant that, when a new home owner takes transfer of a property that the historical debt is burdened to that particular property making the new property owner liable for the said historical debt.
The Court said that municipalities had a duty to develop a culture of collecting monies due to themselves, by disconnection of supply in appropriate circumstances and take the necessary action to collect amounts due. In its judgment‚ the Constitutional Court said historical debts existed only because the municipalities had not recovered them.
The Court advised that the Act placed municipalities on notice that a transfer within their jurisdictions was pending. “This gives the municipality the full power‚ and full opportunity to enforce the charge against the existing owner for all recoverable debt‚ even beyond the last two years‚” Justice Edwin Cameron said in a unanimous judgment. He also said, all outstanding debt should be recovered, as a charge against the property before transfer takes place and payable by the seller (old owner).
Property owners who were forced into paying off historical debt are gearing up to get their money back, and collectively the figure could run into billions of Rands owed back to property purchasers.
If you have had to pay such historical debt, contact us today to set up a consultation in order for us to advise you on your rights of recovery.