South African households owes over R 59 billion to municipalities for basic services and property rates. Municipalities are now under pressure to collect the outstanding debt due to their failure to enforce proper credit and debt collection policies, as required by the Municipal Systems Act, 32 of 2002 (“the Act”), from the beginning. The main concern with regards to this debt, according to the South African Chamber of Commerce and Industry, is that consumers may face increasing property rates and taxes to compensate for non-compliant consumers. However, the repercussions may be far more severe…
As a home owner, your property could be repossessed in order to clear any historical municipal debt – a previous owner’s unpaid municipal debt. Alternatively, the local municipality may refuse or suspend the supply of basic services, such as water and electricity, until you pay the debt – debt you did not incur. Although it is not possible, in terms of our law, to hold one person liable for another person’s debt unless the parties have agreed to it, Municipalities are enforcing their debt collection strategy stated above by relying on a misinterpretation of Section 118 of the Act as well as a ruling in the case of the Tshwane Metropolitan Municipality vs. Mathabathe. In this case the court held that the municipal debt on a property doesn’t go away after it’s sold – the debt still exists. Municipalities are, in effect, claiming the right to choose who to execute against and that a debt becomes a “debt on a property and not a debtor”. In terms of s118(1) of the Municipal Systems Act the registrar of deeds or other registration officer of immoveable property may not register the transfer of property unless he is provided with a clearance certificate, issued by the relevant Municipality, certifying that monies owed to it for the previous two years have been settled. Steer clear of making the false assumption that the rates clearance certificate issued by the Municipality confirms that all debt on the property have been paid in full. The rates clearance certificate provides a false sense of security to new home owners.
At this stage there is no legal obligation on Estate Agents, Municipalities or Transfer Attorneys to inform new home owners of historical debt on a property. While the matter is currently being challenged in court and until such time a ruling is made, one should request an unabridged rates clearance certificate before buying a new home. This will ensure that you know whether there is any outstanding debt that you could potentially become liable for.
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