Property buyers beware!

It seems that the strict credit control measures introduced by government is not the only hurdle facing property buyers, historical municipal debt is another curve ball thrown at home owners. Simply put, historical municipal debt is the previous property owner’s unpaid municipal bill, which is forced onto new homeowners.
Following a recent court battle between the City of Tshwane Metropolitan Municipality vs Mathabathe (22 May 2013), it has become obvious that a matter that should deemed plainly speaking – unconstitutional and illegal – has become a major cause of concern for prospective property buyers.
Municipalities have tried to exploit a loophole in the law with regards to Section 118 (1) and (3) of the Municipal Systems Act – they aim to force a previous property owner’s unpaid municipal bill onto the new homeowner. On Sunday night, the programme Carte Blanche, took a closer look at this issue after several home owners had been slapped with huge bills under the Act.
The problem is that municipalities first cut the power and refuse to reconnect services until the unpaid bills are cleared. This means that you could take ownership of your property, but may be refused basic services by the relevant municipality if there are historical municipal debts against the property. Municipalities generally have a ‘pay first and sort out problems later’ attitude making it difficult for individuals to make a stand against the policy.
At present the only options available to potential buyers is to request (usually by the conveyance attorneys) an unabridged rates clearance certificate before signing any contracts. However, what many buyers do not know is that this certificate is only relevant for municipal service fees, property rates and other municipal taxes for a period of the last two years. Any amounts due on the property prior to that two year period are still technically the responsibility of the relevant owner (source: www.livewired.co.za).
“It is simply ridiculous,” says Karen Stadler, a commercial estate agent from Yvette Malan Properties in Lephalale. “It’s like saying I have to pay the grocery bill for the person queuing behind me.”
“Municipalities are trying to use this Act to dig themselves out of bad debt,” she says.
The Livanos Group has successfully been fighting historical municipal debt cases for the past few years. During a recent interview with CNBC News, Peter Livanos said that home owners must ensure that all previous debts are settled in full and not just rely on the clearance certificate. “If all arrears are properly extinguished before transfer, there should be no problems.
“That’s what municipalities are trying to achieve, but sometimes they go about it the wrong way – legally they have had years to sort out problems, get money and do what they had to do in terms of the law, but they failed to do so,” he explained.
Livinos is testing the matter in court at the moment and they are confident that a favourable ruling will be binding to ensure that this does not keep happening and that home owners are protected. “A lot of people cannot afford to fight and just pay.”
Northern News approached both Lephalale Municipality and Mogalakwena Municipality to request their official position with regard to historical municipal debt. Neither Donald Langa, nor Charles Lekaka (CFO) was available for comment. Acting municipal manager advocate M.B. Makgato was out of office this week. The Mogalakwena Municipality confirmed receipt of the queries, but failed to respond prior to print.

Rental market
Another headache seems to be the rental property market where the municipalities of both Lephalale and Mogalakwena are refusing to reconnect services to rental properties where rates are still outstanding.
“This is a major problem,” says Sue van der Merwe of Sue Pro-perties in Mokopane. “Estate agents have been forced to employ people to deal with account problems at the municipality on a full-time basis. “Even if the utility bill is in another person’s name, the municipality is holding the property owner responsible for the costs.”
Frans van der Merwe, who owns several properties in Mokopane, agrees. “What recourse is there for an owner to ensure that bills don’t mount up if the municipality refuses to cut off due to non-payment or to collect the outstanding debt from the relevant tenant in whose name the utility account has been opened?”
Arona Rossouw from @Sold Properties in Lephalale says that the only recourse property agents is are adding a clause to the rental agreement stating that no deposits will be paid back unless there is proof that all municipal accounts have been settled in full. “It becomes the estate agent's problem to trace the previous tenant and demand payment to allow a new tenant to take occupation.”
“Ultimately, the home owner remains responsible for the account, however, this means that the owner has a lawful right to access all information relating to an account at the municipality,” says Gys
Grieshaber of Just Properties and Grieshaber Attorneys.
He explains that the main recourse would be to counter sue the
relevant municipality for not taking the necessary steps to collect the previous tenant’s debts.