A ground-breaking ruling was made this week (29 August 2017), where the Constitutional Court ruled that new owners of homes were not to be found liable for any historical municipal charges inherited from the previous owners, that their services could not be cut off as a result, nor could their properties be attached and sold in execution to cover the debt.
According to Section 118(1) of the Municipal Systems Act, the processes are that conveyancers obtain clearance certificates before properties can be transferred to new owners in order to ensure that any rates and utility charges to the local authority by the property seller have been paid up to date. The problem lies in the fact that the Act only stipulates that the certificate goes back two years prior to the sale. Any historical debt was meant to remain the responsibility of the seller.
Unfortunately, Section 118(3) of the Act stipulates that all municipal debt, including the historical debt, is actually “a charge upon the property”, rather than on a person, which led to a court ruling that municipalities would have a lien over that property for the pay of the outstanding historical amounts, and that this lien would not be cancelled when the property ownership was transferred, if they chose to interpret this section of the Act that way.
In the past certain municipalities had disconnected electricity and other services because the debts from the previous owners of those properties had not been settled. It will now be illegal for them to do so, as any costs still outstanding no longer survives the transfer of the property from one owner to another.
The unanimous judgment, handed down by Justice Edwin Cameron on the 29th, is that Section 118(3) of the Municipal Systems Act can be interpreted to mean that the ‘charge upon the property’ does not survive transfer of that property to a new owner.