Section 118 of the Act Municipal Systems Act 2000
Section 118 is a very famous section in Municipal Systems Act 2000 that prevents move of a character unless municipal sets, fees, character taxes and rates or any other municipal taxes are not paid in complete. Section 118 is called: Restrained of move of character. Page 51 of the Act Section 118.
1) A registrar of deeds or other registration officer of immovable character may not register the move of character except on production to that registration officer of as prescribed certificate: a) issued by the municipality in which that character is located; and b) which certifies that all amounts due in connection with that character for municipal service fees, surcharges on fees, character rates and other municipal taxes, levies and duties during the two years preceding the date of application for the certificate have been fully paid.
This method that if a landlord of any kind of character has tenants and the tenants do not pay their proportion or what is due by them to municipal accounts, which includes sets such as water and electricity, the municipality will not move a character. The constitutionality of this section was in question for many years due to the fact that tenants often produced debts and arrears leaving the landlord without the possibility of transferring the character. The problem became already worse when the tenants were nowhere to be found and the landlord, wanting to move the character, had to pay all the debts to affect move.
The constitutionality of this Section 118 was in question simply because the landlord did not create those debts in actual fact, nor did the landlord use the sets provided; so why should the landlord pay for them?
However, the municipality has only one interface as far as responsibility for payments on the land is concerned; and that is the landlord. The Court judgement answered some long-awaited questions concerning this problem. In this case the question was: is the landlord liable for the debts produced by the tenant? The Constitutional Court basically had to decide whether those charges also related to debts of non-owner occupiers such as tenants, when in fact the tenants signed sets agreements, by opening accounts such as for electricity, directly with the consumer. The Constitutional Court held that sec.118 stood the constitutional test, because, though section 118 allows for deprivation it is not haphazard.
In simple words, the landlord can go and get copies of the tenant accounts from the municipality at any point in time. The municipality is obligated to provide a landlord such copies and hence the landlord in fact could have done something to avoid the tenant getting into arrears or arrears getting out of hand. This method that the landlord is responsible to what is happening and who he allows to dwell on the land/character. To complicate the problem further, some municipalities will discontinue the sets on accounts that get into arrears while other municipalities do not, or will take too long to take action.
This leaves the landlord with a problem. If the municipality would just switch off the utilities that are not paid at the minimum the tenant won’t create more arrears. However, this is not done by all municipalities consistently and for this reason the landlord may be left with enormous arrears. At time of move then the landlord must pay up all arrears if move is to take place as to Section 118. Though this section of the Act is not new and has been creating problems for landlords, it is now been decided with this judgement that this section stands the test of the constitution. This method that landlords have to start taking serious steps not to be left with any debts from tenants.
The after effect resulting from this judgement was further far reaching at levels of municipalities. It has been reported that some municipalities have completely stopped opening accounts in the names of tenants. The boards and signs started showing up at municipalities that tenant accounts are no longer being opened at all. This is a good idea. Not only due to arrears, but also due to double accounts on some similarities and general accounting mess. However, for a landlord this method that they are squarely responsible of the accounts.
Furthermore, and for the better, at the minimum now landlords know if arrears are being produced at any point in time and start taking some action before things get out of control. In terms of electricity supply, it has been reported that some municipalities no longer bother with disconnecting supply. After certain amount of arrears, they just remove the metering equipment all together. Some landlords reported arrears in excess of R20,000 and now adding to that, they need to pay R4,500 for the municipality to re-install the metering equipment.
The landlord always has the option to pursue the tenant for payment, which may or may not be achieved, but in the average-time, the landlord cannot place a new tenant in the premises, unless they pay all due and return the meter, otherwise a new tenant cannot live in the premises without electricity – which method losses in future rental income.