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Historical debt saga: What happens next?

Looking forward.resize

It was always an insane situation and it was always going to be challenged legally, but it took years for the courts to eventually rule that homeowners couldn’t be held responsible for historical debt.

South African homeowners undoubtedly breathed a collective sigh of relief when the Constitutional Court ruled that municipalities couldn’t withhold services or sell a new owner’s home in an effort to get them to settle debt which had been run up by previous owners.

To be blunt, the idea that municipalities could forgo any form of debt collection from a previous owner and target someone who had absolutely nothing to do with that debt was…well, just ludicrous.

The logical thing for municipalities to have done when they were owed money would have been to force the person who ran up the debt in the first place to pay. However, because of municipalities’ mistaken belief that the debt was owed by the property and not by the owner, there was no onus on it to do its job and track down the person who had actually defaulted on the payments. It was simpler and often more effective to target the current owner – and let’s be honest here, most would pay up if a municipality cut off essential services until the debt was settled.

The fact that a rates clearance certificate had to have been submitted in order for the sale to proceed offered no protection whatsoever because as things stood, a municipality could turn around at any stage and argue that although the certificate had been issued, mistakes had been made in the past and it would now be collecting the debt. The entire situation was a mess and basically boiled down to municipalities not doing their jobs correctly.

The ruling will undoubtedly protect unsuspecting homeowners going forward. But what about those who have already been forced to pay another’s debt, which in some instances ran into thousands and thousands of rands?

I paid. What now?

What to expect

According to the judgement the decision to saddle homeowners with historical debt was invalid and therefore one can assume that any money collected in this manner was done so in error. However, the judgement doesn’t appear to discuss what will happen to those who have already paid, or if their money will be refunded.

This leads to a whole new set of questions. Does the ruling mean that these people will be able to recoup their money and if so, will it take more court cases to force municipalities to pay back the money? Or will the municipalities do the honourable thing and simply refund those they had incorrectly penalised? Another problem area is what happens if homes were auctioned by municipalities to pay off the historical debt?  Will the Constitutional Court’s ruling allow those affected to take further action?

It’s a complicated area of law and we will be talking to lawyers in the coming weeks to find the answers to these and other questions, and to see if it is possible for homeowners to claim back what is rightfully theirs.

What does need to be remembered is the outcome of the Constitutional Court hearing is not good news for municipalities. Bad financial planning, corruption and a lack of a healthy rates base has taken its toll on many municipalities and these are either bankrupt or on the brink of bankruptcy. The fact that they could be forced to hand back millions as a result of the judgement could further impact service delivery.

All in all, the situation is a mess and could come back to haunt municipalities which, instead of ensuring ratepayers paid their bills in full and on time, left things to stew until the sheer volume of bad debt took its toll. The best thing about the whole unsavoury affair is that municipalities will no longer be able to target the weakest link and will not be able to force an unsuspecting homeowner into a corner. And buyers now have peace of mind that a rates clearance certificate means that nothing is owed on the property and they have a clean slate with which to work. Long live democracy.

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propjourno@icloud.com

Lea Jacobs is a freelance property writer whose articles appear in a number of publications, both print and online. While it may not be entirely accurate to say she is ‘passionate’ about property, she has a deep interest in the industry and keeps a close eye on the latest news and trends, both locally and internationally. Not afraid to tackle hard-core issues in her articles, she also enjoys taking a lighter look at life from a property perspective.

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