EAST LONDON -- The Buffalo City municipality has been accused by the local chapter of the South African Property Owners' Association (Sapoa) of committing commercial blackmail against landlords by implementing the new Local Government Municipal Systems Act.
In terms of its implementation of the act, the municipality insisted that landlords jointly be held accountable for the water and electricity payments by their tenants.
The act, according to the municipality's interpretation of it, also blocks the transfer of the property at the Deeds Office until a landlord has settled a tenant's water and electricity arrears, which had been allowed by the municipality to accumulate.
The municipality bases its interpretation of the section of the act on the words 'all service charges'.
At the same time, in Port Elizabeth, local attorneys will meet tonight to recommend to the South Eastern Cape Attorneys Association, a member of the Cape Law Society, that a declaratory order be sought from the court to define what falls under service charges.
Attorney Sandra van Staden, of PE firm Kaplan Bloomberg, said landlords in the Nelson Mandela Metropole experienced the same problems as in East London.
'It is horrific some of the amounts that are now included in all kinds of charges,' said Van Staden.
'It is our municipality's view that this act enables it to include anything under service charges,' she said.
Buffalo City director of finance Brian Shepherd and other senior officials met with local attorneys Stuart Boucher from Smith Tabata Loon & Connellan Inc, Leon Kemp from Bax Inc, and a representative from Mdantsane attorneys Mlontzi about 10 days ago to discuss the public outcry against the interpretation of the act.
It is understood that the attorneys have cautioned the municipality against its interpretation of the relevant section.
Now, in a strongly worded letter sent to Shepherd yesterday, Sapoa chairperson Mick Webb said after a meeting it had been agreed to challenge the ruling, should it still be in force.
'We were under the impression that the issue had been placed on hold pending further investigations by council and its legal representatives,' wrote Webb.
But, he said, his association had been informed that the council was still refusing to reconnect services to new tenants until the owner signed as a co-debtor.
'It is our belief that this should be challenged in the Constitutional Court or by any means possible and unless it is withdrawn, we will take the matter further,' he warned.
Webb asked Shepherd to provide Sapoa with a copy of the Buffalo City legislation and by-laws in connection with collection of service fees and levies; the council's current ruling; and the status of the law in this regard.
After the meeting with attorneys, Shepherd said the municipality would not penalise landlords by immediately implementing the act.
'In the interim, the status quo of not holding landlords responsible for tenants' arrears will remain,' he said.
'We have decided that implementation of the law will only come into effect once we have cleared up certain legal aspects.'
Extracted from dispatch.co.za 24/5/2001
Municipal Structures Act
Wanted: a legal leg to stand on
An emotional debate has been sparked by the new Municipal Systems Act. Business Editor Eddie Botha looks at the various legal arguments.
BUFFALO City acting finance manager Brian Shepherd is right when he says that Section 118 of the Municipal Structures Act has caused tremors -- and possibly far-reaching implications for landlords.
The law, which came into effect on March 1, 2001, seeks to restrain the transfer of a property until all outstanding rates and service charges on it are paid for a maximum of the past two years.
For that reason the municipality has decided to retain the status quo until such time as senior counsel's opinion has been obtained, says Shepherd.
The Nelson Mandela Metropole Municipality in the Greater Port Elizabeth area has already obtained legal opinion.
Advocate Richard Buchanan SC says in his mind the additional burden imposed by Section 118 was probably not merely foreseen by the legislature but in fact intentional.
It would seem, says Buchanan, that the legislature foresaw that it was at the time of transfer of immovable property that the maximum pressure could be applied upon land owners to ensure that arrear debts due to municipal structures were paid.
It follows, he says, that the legislature foresaw that this would impose an additional burden upon landowners who wish to transfer property with debts due to the municipality.
Buchanan says the ordinary meaning of a debt being 'due' is that such a debt is immediately claimable by a creditor. Even debts which are being paid off in instalments become payable on transfer, as well as amounts being disputed.
He concedes it may be unfair to prevent persons from selling their own properties because of charges incurred before they had any control over the property, and despite the tenants' binding contracts with the relevant municipalities for the rendering of services.
But he argues that to restrict the provisions of the section only to amounts due 'by the present owner' would require the insertion of additional words into the section.
'If effect is given to the ordinary grammatical meaning of the section, then it is all amounts due in connection with that property which must be certified as having been 'fully paid' and not merely amounts due 'by the present owner',' he says.
'The fact that the provision may be harsh or have severe commercial consequences in the property market (as is now being claimed by landowners and the local branch of the SA Property Owners' Association) is not the test,' he concludes.
There are differing legal opinions on the issue, however.
Some lawyers feel that a wide interpretation of the section should not be accepted.
The Constitution provides that everyone is equal before the law and has the right to equal protection and benefit of the law.
It further provides that the state may not unfairly discriminate directly or indirectly against anyone. It is in the light of these sections of the Constitution that the new Municipal Systems Act should be interpreted, some legal minds argue.
It follows the argument that a wide interpretation of Section 118 would clearly discriminate against landowners.
What if a municipality had not employed an effective credit control and debt collection policy prior to March 1, 2001?
Shepherd correctly points out in his article that, in terms of the new developmental local government, politicians and officials face the sanction of law for failing to deliver or to execute the laws of the land.
Judge Willem Heath, then still head of the Special Investigation Unit, on numerous occasions warned councillors and municipal officials against the dereliction of their duties and possible consequences in this regard.
If councillors and officials had met their statutory obligations, debt collection for arrears in electricity and water would have been stepped up.
Landlords, until now, have not been given the opportunity to monitor payments by tenants and their compliance to the law. Until the law was passed, landlords did not, and even now do not, receive accounts to indicate that their tenants were running into arrears.
Shepherd says it is not the intention of the Buffalo City council to penalise landlords. In carrying out its legal mandate, he says, it is unfortunate that there are attempts to fuel conflict between the municipality and landlords instead of promoting a partnership of responsibility toward the effective running of the city.
But the counter argument also holds water. Why should landlords and property owners now be penalised when the present situation of a multi-million-rand debt for service arrears has been allowed to escalate, despite warnings ad nauseum?
Is this not in conflict with what the writers of the Constitution had in mind when they included the sections on unfair discrimination?
By interpreting Section 118, as it seems Buchanan does, a municipality would now create a debt which does not exist. To impose this with an embargo on the transfer of property seems highly punitive. Contrary to what Shepherd says, the council seems intent on doing so.
It further appears as if it is the council's intention to impose additional taxes and burdens. Again, this is not the primary focus of what the act intended.
Most scholars of law will note what Professor Lourens du Plessis of Stellenbosch University Law School writes in his book, The Interpretation of Statutes. An order of law officially vouches or provides for the protection and status of its subjects, says Du Plessis.
'It can be presumed that individual enactments are aimed at the promotion rather than the frustration of this object,' he writes.
'Justice, equity and reasonableness give life to the law. Without them an order of law is easily turned into a disorderly instrument of untamed power, succumbing only to the whims and fancies of the powerful whose main object is to have their arbitrary will done -- at the expense of both the security of the individual and the public interest.'
Proponents of a municipality's intention to give a wide interpretation to the words 'in connection with that property' will argue this includes the cost of electricity and water.
By doing so they unilaterally declare the contract between municipality and tenant null and void.
Is this what the legislature really intended? Highly unlikely