High Court Ruling re Historical Debt

ACDP WELCOMES HIGH COURT RULING RE HISTORICAL DEBT:
* “Municipalities must get their billing and collection processes in order – bill the right land owner accurately and improve collection and debt management processes.”

Municipalities may not hold a property owner liable for a previous owner’s historical municipal debts, the Gauteng High Court (Pretoria) ruled yesterday, notes Business Day.

The judgment will give relief to home and business owners who have been saddled with years of historical municipal debt, and who have been refused municipal services until the debt had been settled.

A seller may not transfer a property unless he has a municipal clearance certificate for the last two years of bills. But older debts – those that arose before the two-year cut-off – became the liability of the new owner.

Failure to pay entitled a municipality to attach and sell the property to satisfy the debt. However, this section of the Local Government: Municipal Systems Act was declared unconstitutional by the High Court.

Judge Dawie Fourie said the section unjustifiably limited the new owner’s property rights under the Constitution. ‘Why should a municipality be entitled to visit the sins of a predecessor in title upon innocent third parties,’ he asked.

“In reaction, Grant Haskin ACDP Councillor welcomed the ruling, confirming it is the municipalities job to bill the correct owner and not the new owner; and to improve its collection and debt management processes.”

The judge said new owners had no connection to the historical debt. New owners ‘were in no position whatsoever’ to control the indebtedness of their predecessors in title – but municipalities were.

The ruling will have far-reaching consequences for millions of residential and business property owners, the property industry as well as municipalities themselves, notes a report in The Mercury.

Attorney Gary Ross said the judgment would not only save unknowing property buyers from being forced to pay former owners’ old debts to have services reconnected. It would also force the municipalities themselves to start collecting debt.

Article here

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