Good news for home buyers: historic debt ruling declared invalid

The Gauteng High Court has ruled that new homeowners cannot be held liable for the ‘historic debt’ owed to municipalities by previous owners.

This comes as welcome news since the market was thrown a curveball towards the end of January this year when the Supreme Court of Appeal ruled that new owners could be held responsible for municipal debt - rates, water and electricity - dating back 30 years.

The ruling was made in terms section 118 of the Local Government Municipal Systems Act in order to obtain a clearance certificate.

“We expected that this ruling would be challenged as it was not only blatantly prohibitive, but also unfair to new buyers,” says Bruce Swain, MD of Leapfrog Property Group.

“We’re delighted to see that the ruling has been declared invalid.”

Judge Dawie Fourie queried why a municipality was entitled to "visit the sins of a predecessor in title upon innocent third parties when there is no relationship or connection between that party and the debts in question", and declared the section of the Act constitutionally invalid.

Swain says the judge has ordered that the Tshwane and Ekurhuleni metros render municipal services where no debt exists in respect of municipal services between the municipalities and the new owners.

The municipalities were also restrained from claiming payment of outstanding amounts from new owners where they have no debt relationship with the municipality concerned in respect of municipal rates, taxes and charges, he says.

“Local municipalities do have legal recourse to deal with arrears, and expecting new owners to pay a previous owner’s debt is simply ludicrous,” says Swain.

“Hopefully this judgment will not only offer a lifeline to new homeowners saddled with debt that’s not their own, but will encourage prospective buyers to purchase, safe in the knowledge that they won’t suddenly be hit with massive historic debts.”

“Hopefully this judgment will not only offer a lifeline to new homeowners saddled with debt that’s not their own, but will encourage prospective buyers to purchase, safe in the knowledge that they won’t suddenly be hit with massive historic debts,” says Swain."