KZN council wastes R600k per month renting unused building

Newcastle Council is embroiled in a legal battle with its landlord, Scarlet Ibis Investments 220 (PTY) Ltd for failing to pay its monthly rental of almost R600,000 on the old “Nedbank Centre” building despite not having been in occupation of it since 2016.

Should council lose this battle, ratepayers will have to cough up millions in legal fees, loss of income to the landlord and penalties on non-payment of rent, Newcastle Advertiser reports.

Sources within the municipality have revealed the figure could be as much as R50-million since the municipality has allegedly not paid rent since 2016.

The alarming addendum

The addendum (the fifth one) which renews the lease agreement for a further three years and which landed the municipality in a situation of having to pay the loan back on the new civic building as well as on the premises lease at 50 Harding Street Newcastle (Nedbank Centre), has the municipal manager’s signature on it.

Errol Mswane, at the time of signing the addendum, had just recently been appointed as the new municipal manager.

A copy of the addendum was leaked to the Newcastle Advertiser. It states that the lease was renewed by Mr Mswane in March 2016 for a further three years and expires on 31 July 2019.

The landlord was represented by Shabir Hoosen Goga who it seems, according to the addendum, was a director of Scarlet Ibis Investments at the time.

The addendum’s terms and conditions further reveal the lessee (the municipality) will not only be responsible for the payment of its water, electricity, sewerage and security but also pay an additional R88,000 monthly for operational costs and a further R48,000 for parking and the

“…lessee shall be liable for an admin fee on all overdue amounts payable under this lease at a rate of R10 000 (excluding VAT) per month…”.

It is uncertain at this stage whether the landlord has already attached the security deposit paid by the municipality to Scarlet Ibis of roughly R500,000 which was supposed to have been increased to R811,000 in 2016.

Legal battle

The landlord is represented by Shabir Goga and was approached for comment by the Newcastle Advertiser, but said that since the matter is still sub-judice he is unable to discuss the details of the legal suit.

He did, however say they were confident that their case against the municipality is strong.

“We have a very good case and we stand by it. Everything was done above board. We expect to go to court in May next year. We will let justice take its course,” they said.

The landlord would not confirm the amount they were suing the municipality for nor would they reveal what plans they may have if they win the case and the municipality is unable to pay the damages and costs.

Mswane was given the right to reply but deferred the matter to the mayor, Councillor Makhosini Nkosi.

Numerous phone calls were made and an email sent requesting him to respond on behalf of the municipal manager, but no reply was forthcoming.