08 Nov

Good news for purchasers of property regarding unpaid rate by previous owner!

We have already in the past published newsflashes and articles reporting on a number of judgments of our courts including our Supreme Court of Appeal, the effect of which is the following:

When a property is sold the municipal authority can only insist upon receiving payment of amounts which  relate to bills which are not older than two years.  If such amounts are paid, rates clearance and thereby permission for the transfer of ownership must be given.  The fact that the older debt remains payable cannot retard the transfer process.

The restriction placed upon the municipal authority as stated above does not mean that it is deprived of the right to pursue recovery of the balance which might be owed (i.e. older debt) by the previous owner.  It is perfectly entitled to take legal action against the previous owner and to try and recover the monies from that owner.  It may not however take action against the new owner for that debt.

When and if the municipal authority obtains the necessary judgment against the previous owner and even though the property might have been transferred to someone else and even though (as stated above) the new owner cannot be held liable for the old debt, the municipal authority is allowed to cause the property to be attached by the Sheriff of the Court and to sell the property at a sale in execution to recover the money due to it.

The effect of paragraph 3 above is to force the new owner to pay the debt and to thereby save his property.

This issue has now been brought squarely before another court in the Pretoria High Court which court found that the portion of the law which allows municipal authorities to attach properties after they have been transferred to new owners is unconstitutional and amounts to an improper and arbitrary depravation of a property right.  Such rights are of course protected in terms of our Constitution.  The matter will no doubt now be carried forward to the Constitutional Court for a final ruling but it is our view that the judgement of the Pretoria High Court will not be overruled as it was very well reasoned.

The result of the judgment is that, for the time being in any event, owners of property need not concern themselves with unpaid municipal debt of previous owners.

As a matter of interest the same court found that municipal authorities are not permitted to refuse to render municipal services (i.e. open accounts) to the new owner of the property simply because the previous owner might still owe money to the municipal authority.

Milton Koumbatis
8 November 2016