Roshila Pillay
Estate agencies are up in arms about the new Municipal Services Act which makes
property owners responsible for all service charges arrears instead of their
tenants.
Previously owners were liable only for rates payments and tenants for water and
electricity.
“I think it puts a huge burden on property owners. I can’t see that the property
sector is going to accept this violation of their property rights,” says attorney Richard Spoor.
The Act became effective on March 1 but it is unclear whether the new provisions
become effective from then or whether owners have to pay arrears outstanding
before that date.
According to Spoor, provision 118 of the new Act could be unconstitutional because it interferes with the contractual relationship between two parties.
Jackie Manche, deputy director general for institutional reform and support in
the Department of Provincial and Local Government, disagrees.
“It is very constitutional this law relates to the relationship between the
municipality and property owners.”
“In our view we did not think the new law would be retrospective, except for
rates, because that law was previously in place.”
Before selling a house or property, owners have to obtain a rates clearance certificate indicating that property taxes and all other fixed charges including sewerage, refuse removal and an availability charge for electricity
and water have been settled with the local municipality.
With the new Act, owners now also have to ensure that consumption charges for
electricity and water are settled before the registrar of properties will issue
the rates clearance certificate for a property to be transferred to a new owner’s name.
“[The Act] empowers municipali-ties to collect revenue due to them. When you own
property you enter into a contract with the council. From a municipality perspective, where we want municipalities who are financially viable, we need to empower municipalities to collect revenue due to them,” says Manche.
The problem is when a property owner has been letting out property. An owner has
no control over how much water and electricity a tenant uses and if the tenant
runs into arrears with these accounts, the power is vested in the local municipality to stop services until payment is settled.
“The arrears accrued are outside the control of property owners. Many local authorities allow service charges to run to ridiculously high amounts because
they fail to apply proper credit control policies. The second such charges approach the deposit [paid for such services], the utility should be cut off,”
says Spoor.
Manche defends the Act, saying that it forms part of a “package of legislation
to regulate the system of government”. Manche says in terms of the requirements
of the Act, municipalities will have to come up with integrated development plans to determine their priorities and implement the right systems to measure
consumption of services.
While large property brokers dealing in commercial property have always applied
the practices prescribed by the new law, residential estate agencies are outraged.
Wendy Machanik, managing director of Wendy Machanik Properties, says her company
has had difficulty registering the transfer of properties on behalf of a seller
because a tenant has failed to pay service fees for water and electricity.
“This is one of the worst pieces of legislation to be passed. It is unfair and I believe against constitutional rights. I believe we should vehemently object to
this.”
Machanik believes that the solution lies in councils improving their systems so
that service charges are not allowed to run into debt.
“They must improve their systems to facilitate this and implement bigger deposits and stricter controls. Previous councils managed why not now?” asks
Machanik.
But commercial property brokers say the new law is a fair way for municipalities
to recoup money owed to them for services.
“In the commercial property sector, the landlord pays any amounts outstanding
when a building is sold. If there is outstanding debt, the landlord will arrange
payment thereof with the new owners if necessary,” says Roger Corlett, director
for property management at Liberty Properties.