Buyers Liable for Old Municipal Debt

Home buyers often assume that once they have taken transfer of their property, all municipal debt has been paid in full and that the municipality cannot hold them liable for any further debt.

Founder and Director of AMC Hunter Inc, Karien Hunter, says sadly, this is not the case. She explains that in terms of Section 118 of the Municipal Systems Act 32 of 2000, a ‘rates clearance certificate’ merely certifies that all amounts that became due in connection with that property for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties during the two years preceding the date of application for the certificate, have been fully paid.

She says this means that any debt older than two years would not be covered by the certificate and, in instances where the municipality failed to collect old debt, they can claim payment of such debt from the new owner as the debt attaches to the property and not the person who owns the property.

“In circumstances where transfer has already taken place, the buyer will have a right of recourse against the seller, but may find it prohibitively expensive and in some instances futile to pursue such claims against the seller.”

By way of example, the Ethekwini Municipality is now calling for three months’ utilities (electricity, water, refuse and sewerage) as well as three months' rates, in the rates assessment, in addition to the rates outstanding.

The conveyancers, in their final accounts, allocate the provision for utilities to the seller as he will get a credit from the Municipality in due course for any amounts paid for the period after date of registration of transfer.

But buyers beware, if the municipality has slipped up and omitted a debt older than two years, they can and will hold the new owner liable, she says.

The tenant’s obligation to pay for the water and lights consumed by him and his family is an obligation arising from his lease agreement with the landlord. The lease agreement does not bind the municipality, that is obviously not a party to the agreement, and the owner of the property remains liable for any unpaid bills, regardless of whether or not the tenant is in breach of the lease agreement. The owner of the property is saddled with this expense when the tenant moves out. If at all possible, it would be a good idea to work with a pre-paid meter, which results in no pay, no power. Otherwise, landlords are advised to keep close tabs on their tenant’s water and electricity bills and make sure that the deposit is adequate enough to cover these often unforeseen costs.

Written by Karien Hunter, AMC Hunter Inc.

05 Aug 2015
Author AMC Hunter Inc

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