Two interesting recent cases between property owners and municipalities
Nelson Mandela Bay Municipality v Amber Mountain Investments 3 (Pty) Ltd
Municipalities have the right to levy rates on property and surcharges on fees for services provided by or on behalf of the municipality. Before a property can be transferred from the existing owner to a new owner, a certificate in terms of Section 118(1) must be issued by the municipality in respect of municipal debts which have become due. This certificate is a requirement for registration of the transfer in the Deeds Office.
In the Amber Mountain case, there was a dispute as to whether the seller is liable for payment of rates in respect of the property for the full financial year of the municipality or only for the rates up to the date of transfer of the property.
Amber Mountain sold its property to a different company. During the transfer process, clearance figures issued by the municipality requiring Amber Mountain to pay clearance figures for the full financial year of the municipality before the clearance certificate would be issued. These clearance figures amounted to a shocking R 2 281 014,68, whilst Amber Mountain’s indebtedness to the municipality only amounted to R1 214 482,68. Amber Mountain paid the amount under protest in order to be able to proceed with the transfer of the property and then instituted action against the municipality for the R1 066 532 it had overpaid.
The High Court in Port Elizabeth found in favour of Amber Mountain and determined that it was only obliged to pay rates up until the date of transfer of the property where after it was no longer the owner of the property and could not be held liable for such rates.
The municipality appealed to the Supreme Court of Appeal, where it was held that the municipality was not entitled to withhold the clearance certificate until it had received payment of the property rates for the entire financial year of the municipality. This adversely affects the rights of property owners to alienate their property. The court found that such clearance figures should only include existing debts and rates up until date of registration and not also future municipal debts.
This is an important decision to take note of and property owners should keep same in mind when selling their properties. If the municipality cannot require payment of a full year’s estimated debts before issuing a clearance certificate.
Argent Industrial Investments (Pty) Ltd v Ekurhuleni Metropolitan Municipality
In this High Court judgement, the High Court in Johannesburg found in favour of the property owner with regards to a dispute regarding a municipal account. It certainly is a judgment that every property owner should take note of.
September 2009 until March 2015, Argent was charged for its estimated water consumption and duly paid these charges. During this period, no actual meter readings were taken by the Ekurhuleni Municipality. On 13 March 2015, a meter reading was taken and Argent was subsequently billed for the difference between its actual usage and estimated consumption (which it had already paid) amounting to R1 152 666.98. Argent raised a dispute regarding the charges for usage that had occurred more than 3 years before the actual meter reading was taken based on the Prescription Act.
The municipality argued that the obligation to pay had not prescribed and that prescription only started running the moment that Argent was billed with the real consumption. It also argued that Argent, in regularly paying its municipal account, acknowledged the debt, interrupting the prescription period.
The court however held that it was not the obligation of Argent, as the property owner, to read water meters and determine what its consumption is. The Municipality has a duty to take reasonable steps to ensure appropriate collection of its debt. This includes fulfilling its function by taking meter readings and invoicing consumers for consumption at reasonable intervals. The Municipality did not offer any explanation for the fact that the meter readings were not taken for a period of almost six years. The failure of the Municipality to take such meter readings at reasonable intervals was therefore held to be unreasonable. It had the ability to quantify the debt and did not do so.
The court ordered the municipality to reverse all charges for water consumption, interest and legal fees that had been added to Argent’s municipal account after the meter reading was done on 13 March 2015. The court further ordered that the Municipality then had to calculate the applicant’s average monthly consumption and only charge the applicant an amount based on that average and then also only for the period of the three years before 13 March 2015 (from 13 March 2012). The court held that the Municipality, in this case, was not entitled to claim payment from Argent for any charges for the period before 13 March 2012.
It is therefore important to remember that the Municipality cannot charge you for an unlimited number of years’ outstanding water readings that you were not aware of. The municipality still has the responsibility to take reasonable steps to quantify the amount due to them.
Anke De Wet