City of Tshwane Metropolitan Municipality v PJ Mitchell
All you need to know…
The Supreme Court of Appeal (SCA) held that a municipality may in terms of Section 118(3) of the Local Government: Municipal Systems Act 32 of 2000 hold a present owner of a property liable for amounts owing incurred by a previous owner of the property.
What does this mean for property owners?
- The municipality can take legal action against you as the current owner of a property for the other amounts owing by a previous owner on condition that such amounts claimed have not prescribed (prescription in respect of rates, refuse and sewer is 30 years and electricity and water is 3 years);
- The municipality, if they elect to take action against you as the current owner, may attach and sell the property since it stands as security for the debts owed to them – regardless of who incurred such debt;
- You may also be held liable for debts levied after the date of transfer i.e. if the municipality later discovers an error in that the previous owner was not billed properly for whatever reasons prior to the transfer, they may correct the bill and hold you, as the present owner, liable.
How does this affect me obtaining a loan from a bank?
The municipality’s claim trumps that of the bank’s, which obviously possess a greater risk to the bank. This might lead to stricter control measures being implemented by banks and less home loans being granted.
What can I, as a new property owner, do?
Unfortunately your hands are somewhat tied. You may try contact the old owner if the municipality comes knocking at your door but, there is no way you can disprove the municipality’s claim.
Luckily, this is not the last nail in the coffin as the court case that came to the above is apparently being referred to the Constitutional Court.
Until then, we advise that you do a thorough investigation before purchasing a property and possibly take out insurance to cover such risk if there is a reasonable possibility, considering the history of the property, that some previous owner’s account might come back to haunt you.