Property Reporter

COMMERCIAL and residential property owners will get the opportunity next month to test in court whether it is constitutional for local authorities to hold property owners responsible for tenants' water and electricity arrears.

If property owners are successful, many owners forced to pay their tenants' arrears when wanting to sell their properties may claim back millions from local government.

Success will also simplify property transfers, a headache for some owners trying to sell properties.

Port Elizabeth attorney Robert Martindale, who is representing the Transfer Rights Action Campaign (TRAC) and three others in a case against the City of Johannesburg, Ekurhuleni Metropolitan Municipality, provincial and national government and other government stakeholders, says that they are confident they will be successful when the Constitutional Court hears their case on March 3.

TRAC is a nonprofit association of 30 property owners who object to carrying the burden of their delinquent tenants' unpaid municipal water and electricity accounts. The association was formed in 2002 on the initiative of property owner Shirley Armstrong.

TRAC was formed primarily to institute legal action against the Johannesburg and Ekurhuleni municipalities and other government stakeholders to win legal redress for landlords who have been adversely affected by local government's interpretation and administration of section 118 of the Local Government Municipal Systems Act, section 49 of the Local Government Ordinance, and water and electricity by-laws.

Martindale says the relevant parts of the these laws concern the transfer of private property. A prerequisite for the transfer of property is that local authority rates and service charges for water and electricity must be paid up.

Martindale says that in Johannesburg the arrears exceed R5bn, while nationwide municipal arrears exceed R24bn. In Port Elizabeth, the arrears have reached R1bn.

This debt is not all incurred by owners, with a large portion being incurred by tenants who signed consumer contracts with their local authority but failed to pay.

Martindale says these laws are being interpreted and applied in such a way that owners are being forced to pay debt that they did not incur.

"We believe that's the wrong interpretation. Parliament never meant for owners to pay for debts they never incurred. We are saying the law means that only debts incurred by owners must be paid."

Martindale says a tenant in the commercial property building or house must pay for any consumption of electricity and water. "It's not the owner's fault that tenants are in arrears," he says. The fault lies primarily with the tenants and with the relevant local authorities for not following up and doing credit collections.

"If the municipalities' interpretation is the right, meaning that the landlord is responsible for any outstanding debts, then we will argue that the legislation is unconstitutional," Martindale says.

He says they will argue that this breaches section 25 of the property rights clause in the constitution, and amounts to arbitrary deprivation of property on the one hand and expropriation without compensation on the other.

"We are, in a similar vein, challenging the ordinances and by-laws relating to water and electricity," says Martindale. Recent cases in Port Elizabeth have strengthened TRAC's case.

In September, high court judges Frank Kroon and Eric Leach found in two cases heard together that section 118 was constitutionally invalid. Martindale says that because the law says the high court cannot strike down a law made by Parliament and that only the Constitutional Court can, the judges referred their rulings to the Constitutional Court for confirmation.

National provincial and local government department spokesman Xolani Xundu confirmed that the department would be defending the constitutionality of section 118 of the Local Government Municipal Systems Act.

Feb 11 2004 07:42:51:000AM Nick Wilson Business Day 1st Edition