Landlords celebrate landmark court ruling

Extracted from The Star, 20 October 2003. By Anna Cox

The City of Johannesburg, which is already owed R5-billion by its residents, could face millions more in debt.

A shock court judgment holds major repercussions for all municipalities. The Port Elizabeth High Court has found it is constitutionally invalid for landlords to be held liable for their tenants' arrears. The matter has been highly controversial, with many landlords objecting to being held liable for their tenants' accounts, over which they have no control, which municipalities have sometimes allowed to run into millions of rands.

Municipalities, in terms of section 118(1) of the Local Government Municipal Systems Act, refuse to issue clearance certificates - which landlords need if they want to sell their property - if the landlords don't cough up.

In Johannesburg, the Transfer Action Rights Campaign (TARC) - a group of landlords trying to fight the legislation - has welcomed the decision.

It says it will strengthen the class-action lawsuit it has brought against the City of Johannesburg, the Ekurhuleni council and the MEC for local government.

The landlords' attorney, Robert Martindale, said this law had been introduced as an easy way of collecting arrears.

At the receiving end of the law as it stands is Johannesburg property owner Flavia Nunes, who has decided to join the TARC lawsuit.

She rented out a property in Kew in 1998. The following year she decided to check whether her tenants were paying their water and lights accounts, only to find that they owed R3 700.

She wrote several letters to the council, asking it to disconnect the services, but with no success. She was eventually told by a city employee to "mind her own business" as the account was not in her name, but in her tenant's.

In 2001 she tried to sell her property but lost the sale when she could not get a clearance certificate because there was R60 000 in arrears on the municipal bill.

In September she again tried to sell her property, and was horrified to find that R94 000 was owing.

"I'm at my wits' end. I cannot believe that after all the phone calls I've made and letters I've written, the council has allowed this bill to run up so high. I also can't believe that I'm being held responsible for a bill that someone else has run up."

City of Johannesburg spokesperson Virgil James said Nunes would be held responsible only for the last two years of debt.

In the Port Elizabeth case, two judges, Frank Kroon and Eric Leach, last week concurred in declaring the provisions of section 118(1) to be constitutionally invalid, and referred the declaration to the Constitutional Court.

The court held that section 118(1) led to the deprivation of property, as it interfered in the right to transfer property, which was one of the entitlements of ownership.

The judges said the impugned law could be crucially important for local authorities to recover their debts, but care had to be taken not to "throw the baby out with the bath water" and sacrifice the constitutional rights of landowners on the altar of expediency.

A court date for the Johannesburg case is likely to be set before the end of the year, said Martindale.

The City of Johannesburg's defence is firstly that section 118(1) is a crucial piece of legislative assistance that enables local authorities to collect money, without which the financial wellbeing of municipalities could be severely jeopardised.
"They argue that it is not unreasonable for the legislature to impose on property owners the burden of ensuring the tenants' debts are paid," said Martindale.
The case could force municipalities to refund landlords who paid tenants' debt under protest solely to get a clearance certificate - and then search for the tenants to recover the money.
James said the City of Johannesburg was not acting unconstitutionally. Landlords were responsible only for the past two years of their tenants' debt.
"We will then pursue the tenant for the rest of the money."

What the row is about

• Municipalities use section 118(1) of the Local Government Municipal systems Act to deny landlords clearance certificates - which they need to sell their properties - if their tenants are in arrears
• Landlords say they should not be held liable for debts incurred by their tenants
• Landlords say the councils' use of the provision denies them their constitutional rights

What the court decided

• The Port Elizabeth High Court ruled that the provisions of section 118 are constitutionally invalid
• The judges referred the matter to the Constitutional Court for confirmation
• They ruled that section 118 interfered in the right to transfer property, which was one of the entitlements of ownership