ConCourt rules property owners not responsible for inherited debt

Municipalities can no longer hound you for the debt that the former owner of your property accumulated, thanks to a new ruling made by the Constitutional Court this week. The Constitutional Court in the Case of Chantelle Jordaan and others vs. City of Tshwane Metropolitan had to determine if Section 118(3) of the Local Government Municipal Systems Act 2000, which refers to "an amount due for municipal services fees, surcharges on fees, property rates and other municipal taxes, levies and duties is a charge upon the property in connection which the amount is owing and enjoys preference over any mortgage bond registered against the property", means that the new owner can be saddled with the historical debt which a previous owner incurred.

When it came to the Act, the Court specifically focused on the words "charged upon property". Section 118 (3) does not require the charge to be registered or noted on the register of deeds. “The Court held that this was a telling indication that the charge (the debt) only takes effect on current owners and not new owners unaware of the new historical debt. The debt effectively does not pass to the new owner, as it does not survive transfer,” said Aidan Kenny, director and property specialist at Werksmans Attorneys.

Kenny added that the Court further held that the bill of rights prohibits arbitrary deprivation of property and Section 118 (3) must be interpreted to the effect that the historical debt of a previous owner does not pass to a new owner. Hence Section 118 (3) must be interpreted that the debt does not pass the new owner.

“The ruling of the Constitutional Court to the effect that new owners cannot be held liable for the historical debt of a previous owner, is indeed a victory for property owners and financial institutions alike,” added Kenny.

“This will certainly provide our financial institutions with peace of mind, when borrowing funds for the purchase of property, knowing that neither the owner nor the financial institutions can be deprived of their security, for the sins of the previous owner.

“Municipalities will immediately have to desist with the practices of imposing and trying to collect historical debt, which they omitted to collect from a previous owner, from the new owner.

“The aforesaid practices of the Municipalities is now finally declared invalid and new owners can justifiably refuse to pay such new historical debt of a previous owner.”

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