Concourt to hear municipal debt liability case

THE Constitutional Court is set to hear a ground-breaking case regarding the interpretation of a section of the Municipal Systems Act and the controversy over whether or not property owners should be liable for previous owners’ municipal debt.

The case involves litigation between municipal debt specialist, New Ventures Consulting and Services (NVC) and the city of Tshwane Metropolitan Municipality, Ekurhuleni Metropolitan Municipality and the Minister of Co-Operative Governance and Traditional Affairs.

NVC has been driving the litigation against the municipalities in order to ensure what it believed should be the correct interpretation and implementation of Section 118 (3) of the Municipal Systems Act.

The municipalities involved had interpreted this section in a manner that had allowed them to “visit the sins of a predecessor in title upon innocent third parties,” according to NVC managing director Peter Livanos.

“In effect, they attempted to hold the new owner of a property liable for the previous owner’s municipal debt,” he said.

In November last year, after these matters were heard in the North Gauteng High Court, the court held that the conduct of the two municipalities was unlawful and declared that it was constitutionally invalid for the municipalities to hold the new owner of a property liable for the previous owner’s municipal debts on that property.

It was also unconstitutional for the municipalities to refuse to supply services or to suspend municipal services or to refuse to enter into consumer agreements with the new owner.

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In compliance with the Constitution, this matter was referred to the Constitutional Court for confirmation. Thereafter, the respective municipalities filed appeals with the Constitutional Court.

The confirmation application and the appeal applications are set down to be heard in the Constitutional Court on May 23.

“Our ground-breaking case has been closely followed by various interested parties as it has potentially far-reaching effects upon every municipality, every property owner and every mortgage bond holder in South Africa.

Some of these interested parties have recently decided to attempt to get involved in this matter. Various applications, including those of another metropolitan municipality and a mortgage bond holder, have been launched to intervene as an interested party,” Mr Livanos said.

He added that Section 118 had been contentious since its enactment in 2000, with various court challenges having been launched over the past 16 years. Unfortunately, none of these court challenges had dealt directly with the constitutional invalidity of the section, he explained.

He said his company was confident the forthcoming court case would be a landmark and historic one as it should settle the interpretation of Section 118(3) once and for all.

This legal certainty should provide clear direction to all involved in local government including the Minister of Co-operative Governance and Traditional Affairs, the South African Local Government Association and all municipalities.

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Judi Davis
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