Debt victory for metro households
Thousands of property owners and tenants, burdened with crippling municipal services debt incurred by previous title holders, have been thrown a lifeline.
The Pretoria High Court yesterday declared a section of the Local Government Municipal Systems Act constitutionally invalid.
The section allowed municipalities to hold property owners and tenants responsible for previous owners’ municipal debts. Refusal to pay the inherited debt led to municipalities either refusing to connect new homeowners and businesses, or to cut off their services.
The law has had dire consequences for many, say debt specialists who challenged the act.
The lawyers fighting the case in the Pretoria High Court believe that those who have fallen foul of the law might be able to claim back the money they paid to clear a previous title holder’s municipal debt.
Although property owners and rights groups welcomed the ruling, the SA Local Government Association has warned that it could result in ruin for some municipalities, which are already grappling with debts running into more than R100-billion.
Salga spokesman Sivuyile Mbambato said the ruling would worsen the financial situation of already struggling municipalities.
The court action was brought by five Gauteng home and business owners. The respondents were the Tshwane and Ekurhuleni metros.
Judge Dawie Fourie said it was unlawful for municipalities to hold property owners liable for the payment of debts of previous owners or tenants.
The debt with which some title holders were saddled was 30 years old.
Fourie asked why a municipality was entitled to “visit the sins of a predecessor in title upon innocent third parties when there is no relationship or connection between that party and the debts in question.
“A new owner, who has no connection to the historical debts, is in no position to prevent or minimise any delinquency on the part of the former owners or tenants who incurred these debts.
“This deprivation is not reasonable and justifiable in an open and democratic society. Municipalities have a constitutional duty to ensure the provision of services.
“The alleged entitlement to claim payment of historical debts is bad in law.”
Tshwane metro lawyer Thekiso Moadi and Ekurhuleni spokesman Themba Gadeba said the judgment would be studied before a decision to challenge it was taken.
Germiston factory owner Gail Livanos, on whose property previous owners incurred R1.2-million in municipal debt, said she hoped her three-year nightmare was over.
“I have lost four tenants. My tenants have been forced to retrench because of the forced electricity cuts by the municipality. I have lost count of the number of court orders I obtained to stop them, which the municipality ignored. I just hope this one works.”
Centurion homeowner Chantelle Jordaan said she discovered the previous owners owed R60000 to Tshwane municipality only after buying her home.
“It has taken three years of blood, sweat and tears. We were unable to move in because our electricity was cut off. We had to rent another home while at the same time paying off a bond for a house we couldn’t live in. We have lost so much.”
Peter Livanos, of New Ventures, municipal debt specialists, who helped the property owners challenge the Local Government Municipal Systems Act, said millions of people had been financially crippled by debt that was not their own.
“We have been dealing with such court cases, which go back 15 years. It’s systemic.”
He said it was ridiculous that the cities of Tshwane and Ekurhuleni had contested the court action, “given that municipalities have the necessary laws to collect rates and taxes.
“We now hope the cities comply because it’s the ratepayers who ultimately paid the legal costs of this challenge.”
Attorney Gary Ross, who represented the residents and business owners in the case, said if debts were paid under protest people should be able to claim their money back.
According to latest Treasury figures, municipal consumer debt had risen to R113.5-billion by June.
Metro municipalities are owed most of the money, with R56.7-billion outstanding.
Johannesburg is owed the largest amount, R16.1-billion, followed by Ekurhuleni (R11.7-billion), Tshwane (R7.6-billion) and Cape Town (R7.3-billion).
Households account for R35.6-billion owed to metros, businesses and the government for R17.7-billion and R1.7-billion respectively.
The Treasury acknowledges that much of this cannot be recovered.