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Debt | Property

The previous owner did not pay. Can the municipality now cut off your electricity?

The municipality has notified me that it will disconnect my electricity supply because there are outstanding payments in respect of my property. However these outstanding amounts are not mine but belong to the previous owners from whom I bought the property last year. These accounts are nearly five years old! Can the municipality do this and cut off my electricity?

In the recent judgment of Stand 278 Strydom Park (Pty) Ltd v Ekurhuleni Metropolitan Municipality the applicant sought to obtain an interdict against the municipality preventing it from terminating the supply of municipal services to the property. The municipality wanted to terminate the services to the property because of ‘historical debt’ relating to the property ie. municipal debt in relation to property rates, taxes and charges for the provision of municipal services pertaining to all prior owners of the property. 

In this case the court confirmed that a current owner (“current owner”) of property is not liable for arrear debt or charges on accounts held by previous owners of the property (“prior owners”) and a municipality is not entitled to terminate the supply of services to the current owner on the grounds that the prior owners of the property are indebted to the municipality. 

The court however also confirmed the law as it currently stands – that a property can provide security for a municipal debt and that it may happen that a new owner’s property is declared executable for the municipal debt of a previous owner and that the municipality can sell a property in execution to recover such arrear debt. However the municipality must follow the following procedure:

• In the event that there is historical debt relating to the property, the municipality must first obtain a judgment against the party legally responsible for such debt i.e. the relevant prior owner. 
• Only once such a judgment has been obtained and the prior owner fails to settle the historical debt as required by the judgment order, can the municipality proceed to obtain an order to declare the security in relation to that historical debt to be executable – the security being the property of the current owner. 
• To obtain such an order against the property, the municipality must join all parties having an interest in the matter, such as the current owner and bond holders (with registered bonds over the property) in order to allow each party to state their interest and defend the granting of an order to execute against the property.
• The court will then have to decide whether the property of the current owner may be declared executable to recover the amount of the outstanding judgment owed by the prior owner.

Municipalities may accordingly not disconnect or threaten to disconnect any services or declare a property executable to recover historical debt against the property without obtaining a court order. If any such action is threatened it is advisable that you immediately consult with an attorney to assist you with defending your rights.

July 16, 2015
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