You buy your dream house but are shocked to learn that (a) the seller still owes the municipality for old rates and taxes and (b) you can’t get a new electricity account unless and until you settle all these arrears. You point out how unfair it is that you are being asked to pay someone else’s debts, but the municipality won’t budge. What can you do?
Regular readers (see “Rates Clearance – a New Risk for Buyers?”) will remember the controversy over whether buyers might be exposed to this type of claim in respect of rates older than 2 years i.e. those not included in the municipal clearance certificate.
Now a new High Court judgment has it seems settled the question in favour of buyers at sales in execution, holding that a municipality cannot refuse to supply such buyers services such as electricity, water, sanitation and waste removal only because of old outstanding municipal debts.
But it’s not over yet – protect yourself up front
Media reports have implied that this judgment applies to all property sales, but in fact it relates specifically to a sale in execution. That is hopefully an indication of the direction our courts will take on the question generally, and you may well be able to rely on one or more of the other arguments raised on behalf of the buyer during the trial.
So certainly if you come under pressure to settle old arrears, don’t pay a cent without legal advice.
But the fact remains that this decision (a) may not be followed generally and (b) may still be challenged. So protect yourself up front by insisting that your sale agreement requires the seller to prove before transfer that all municipal debts, old as well as new, have been settled in full.