LEGAL
Historical Municipal
Debt for New Owners
Declared Unconstitutional
BY ABDUL ALLIE
T
he North Gauteng High Court passed
an important judgment on 7 November
2016 holding that a municipality may not
hold a property owner liable for a previous owner’s
historical municipal debts.
There were various similarities between the five
applications heard together in this case, including
the overlap of the relief sought, the outstanding
historical debts in respect of the properties and the
fact that the municipality had certified in terms of
section 118(1), that all debts have been settled for
a period of two years preceding the date of the
applications for the rates clearance certificate.
The main issue before the court related to the
constitutionality of section 118(3) of the Municipal
Systems Act (the “Act”), which section provides a
municipality with security for repayment of debt.
The court noted that the security granted to a
Municipality by section 118(3) of the Act is not
extinguished by the transfer of a property from
one owner to another and enjoys preference over
any mortgage bond registered over the property.
Accordingly, should any debt be owing, nothing
would prevent a municipality from perfecting its
security over the property by obtaining a court order
to sell the property and apply the proceeds thereof to
pay off outstanding historical debt. Section 118(3)
of the Act could therefore result in the subsequent
owner losing the ability to use, enjoy and/or exploit
the property and ultimately cause such owner to lose
ownership thereof.
The court held that the security provision afforded
by section 118(3) of the Act constitutes a severe
limitation of the new owner’s property rights in
terms of section 25(1) of the Constitution. The court
further stated that it is not only possible, but also
desirable for a municipality to prevent accumulation
of historical debts by taking appropriate action before
a transfer of the property has occurred, and that in
terms of section 96 of the Act, the municipality is
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Residential Handbook 2016/17
obliged to collect all money due and payable to it.
The court further stated that a new owner cannot
be held liable for the payment of the historical
debt accumulation by previous owners and the
municipality should not be entitled to refuse
the rendering of services to such person, as this
will result in a disregard of the municipality’s
constitutional duty to ensure the provision of services
to a community member entitled thereto and would
result in the exercise of a public power without any
legal authority.
The court concluded that section 118(3) of the
Act is unconstitutional to the extent that it applies to
new or subsequent owners of a property and that the
practice of holding new owners liable for historical
debts is unconstitutional and invalid. In addition, any
disconnection, suspension, restriction or withdrawal
of municipal services where no debt exists in respect
of municipal services between the municipality
and the said customer constitutes conduct that is
unconstitutional and invalid.
The High Court has clearly ruled on issues which
the Supreme Court of Appeal (“SCA”) in the case
of City of Tshwane v T Mathabathe (2013) had
not been asked to decide upon, namely whether or
not a new owner can be liable for historical debts
or whether a municipality is entitled to terminate
services because of a previous owners debts due to
the Municipality. The SCA judgment does however
still suggest that the municipality can proceed to
obtain an appropriate court order and sell a property
in execution to collect historic debt.
It is therefore important to note that the High Court
judgment is only binding upon the jurisdiction of
North Gauteng High Court and we do await further
cases to be decided. Hopefully the Constitutional
Court will be approached to pronounce judgment to
finally settle these issues.
RESOURCES
Webber Wentzel
www.reimag.co.za