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Can new owners be held liable for historic municipal debt on their property?

 

In the case of Jordaan v Tshwane municipality, the Constitutional court handed down a judgment on 29 August 2017, dealing with the constitutional validity of S118(3) of the Local Government Municipal Systems Act, which provided that “an amount due for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties is a charge upon the property in connection with which the amount is owing and enjoys preference over any mortgage bond registered against the property”.

The Constitutional Court had to decide if this provision allows a municipality to claim the debts of a former owner from the new owner, and if so, whether this provision was constitutional.

In this case, the applicants approached the High Court (and won) by alleging that it was unlawful for a municipality to suspend municipal services or refuse to conclude a consumer services agreement for municipal services until the historical debts relating to the property had been cleared.

The municipality appealed to the Constitutional Court and lost. The court found that:

  • while a municipality has the constitutional obligation to collect revenue and pursue debtors, it can only claim the money from the actual debtor (previous owner) and cannot claim the historic debt from the new owners;
  • holding the new owners liable for the debt was an arbitrary deprivation of property.

Presumably, this outcome will open the floodgates to many actions against the municipalities that recovered historic debt from the new owners.

 

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