By Liad Hadar – Director
It’s happened to landlords around the country. A standard municipal bill opening results in a second glance, a thorough reread in disbelief, harried phone calls to property managers and several words that are unprintable in this esteemed publication.
This article addresses the bureaucratic nightmare that is “municipal bill shock” and the correct legal process to follow in the event of incorrect account charges for your commercial property asset.
Amongst the key responsibilities of local municipalities are the supply of water and electricity as well as general property valuation. In turn, these entities charge for their services; rates and taxes bills and their utility counterparts are commonplace for landlords of all shapes and sizes.
Our municipalities play a critical role in the day-to-day functioning of homes and businesses around the country. Given their level of influence, operational and payment issues with these local governing bodies present a significant existential risk to property owners, as well as their tenants.
It happens all too often
Service supply issues, materially incorrect charging, over-valuation and other property related issues are not new, especially in our beautiful but administratively challenged South Africa.
Working as a property law specialist and advisor to many property owners, I have dealt with countless municipal accounting issues over the years. Of late however, there has been a sharp uptick in these infuriating instances.
The primary offence in this realm is inflated or incorrect charges levied against a property owner’s account. This issue is not merely a financial one but also carries grave practical consequences in the event that services to the property are terminated.
Unfounded but severe implications
Financially, insofar as major commercial and retail properties are concerned, the overcharge can extend into the hundreds of thousands of Rands. In terms of industrial properties, where service consumption charges are generally much higher, the accumulative incorrect charges can be staggering.
More worrying, the municipalities have started taking the unfounded and aggressive approach of disconnecting water and electricity supply to properties in “arrears”. Generally this scenario involves a bona fide property owner who has diligently paid its accounts for years but suddenly finds itself in arrears due to a huge back charge, over charge or mischarge.
In other circumstances, there is a historical issue of incorrect charges, sometimes spanning several years, wherein property owners continue to pay a reasonable monthly amount despite the inflated and incorrect charges on the account. Yet, at an unknown point in time, and without warning, the municipality disconnects the supply to such properties.
Frighteningly, these disconnections are happening even when there is a patently obvious issue with the account and a genuine dispute has been raised by property owners.
You can fight this.
I must, however, first refer you to your local municipality’s dispute resolution procedures. By way of example, the City of Johannesburg municipality has the option of logging a query/dispute on their website/by phone/mail/in person. This is not to say that the procedures are effective, but they do exist.
If you are not satisfied with the result of this process (which can be escalated to an Ombudsman), my advice is that you then approach a property law specialist to institute legal proceedings on your behalf.
For urgent relief
Given the severe repercussions of service disconnections, property owners have an urgent legal remedy available to them – the interim interdict. Simply explained, this is a Court order which either compels the municipality to immediately reconnect the supply (if already disconnected) or to prohibit them from doing so in the first place, on an interim basis, until the billing issues are ultimately resolved in Court.
In these urgent interim interdict applications, the following must be shown:
- a prima facie right (even if it is subject to some doubt)
- a reasonable apprehension of irreparable and imminent harm (a real prospect of harm being caused to the party applying for the interim interdict)
- the balance of convenience must favour the granting of the interdict (the prejudice to the applicant if the interdict is refused, weighed against the prejudice to the respondent if it is granted. In other words, the harm caused to the property owner must outweigh the harm caused to the municipality) and
- the property owner must have no other remedy.
I submit that an unfounded disconnection (or threat thereof) falls squarely within the above. This effective legal remedy is readily available for any affected or threatened property owner.
Can legal action result in financial justice?
When legal action is required to rectify accounting issues, it can be very effective. In two recent cases, our firm successfully obtained Court orders compelling the respective municipalities to reverse all incorrect and unsubstantiated charges on our clients’ accounts.
Furthermore, as explained above, we sought an urgent interdict against the municipality to ensure that they could not effect a disconnection until the matter was heard and resolved. This ultimately protected the property owner and its tenants from an unwarranted major disruption.
All in all, the process took three and a half months for an unopposed Court order to be granted in our client’s favour.
As a bonus, in one of the aforementioned matters, the municipality was ordered to pass a credit for prior incorrect charges. The net effect was a full reversal of an incorrect debt of approximately 1 million Rand, in addition to a credit of a few hundred thousand Rand.
Lastly, the municipalities were also ordered to pay our clients’ costs. Despite being an absolute waste of taxpayers’ money, it was a very welcome and warranted source of financial and emotional relief for the offended property owners.
As property owners, there are remedies available for you to dispute and take action against incorrect charges and the threat of (or actual) disconnection – even when brought by local governing bodies.
It’s worth attempting to follow the relevant municipality’s internal procedures as a starting point. However, if this does not yield the desired result within a reasonable timeframe, contact a property law specialist to assist in obtaining the required Court order to protect your interests and to avoid unlawful disconnections.