Your tenant’s municipal bill – your problem

A new policy took effect in a number of municipalities across the country, which stipulates that all municipal bills are in the proprietor’s name, not the tenant’s.

This strategy change comes on the back of a Constitutional Court judgement in the case of Mkontwana v Nelson Mandela Metropolitan Municipality 2005 (1) SA 530 (CC) which indicated that: “The basic reason for the accumulation of consumption charges due in connection with any property occupied by non-owners is non-payment by those occupiers.  However, it is ordinarily possible for both the municipality and the owner to guard against an unreasonable accumulation of outstanding consumption charges” (as quoted on the website).    

The new policy is an improvement on the situation over the last few years where tenants defaulted and the municipality made no moves to rectify the situation; resulting in massive municipal rates bills for the owner – often leaving them unable to obtain rates clearance certificates in the event that they wanted to sell.

Owners or property managers will now have to become more involved in terms of having to consolidate the rates, water and electricity into one account and sending this to tenants on a monthly basis. Tenants are able to query these amounts should they be concerned but, will not as a rule receive copies of the original, separate, bills.

According to Dr Sayed Iqbal Mohamed, as quoted on IOL, municipalities stand to benefit from the arrangement whereas tenants are potentially the biggest losers as they could be disconnected due to non-payment by owners. “A possible solution to the situation could be that tenants receive the consolidated bill from their landlords and then pay the monies owed directly to the municipality,” suggests Jan le Roux, CEO of Leapfrog Property Group.

All municipalities are obligated to give prior notice should a service be suspended and, can send tenants these notices even though their names are not on the rates account. However, even if tenants know that the rates are in arrears they could still suffer during the process of rectifying matters between the landlord and the municipality.

In terms of water supply, sewage services and refuses removal – these will remain in place no matter the amount owed. As such the main problem for landlords is electricity, which has increased and, will increase again in the short term.  
Jan le Roux believes that the best solution for both parties is to have pay-as-you-go systems installed, whenever possible, so as to ensure absolute compliance and making sure that they don’t become responsible for the tenant’s debts. Going this route also give tenants a measure of security in that they won’t get penalised for their landlord’s non payment either.
“Should this not be possible, it will be advisable to take an adequate deposit to cover for electricity expenses should the tenant default on payment”, says le Roux.

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