Tenants’ debts now property owners’ risk
Landlords may soon have to carry the risk of their tenants’ water and lights non-payment.
As of December this year, the municipality will no longer allow municipal accounts to be opened in tenants’ names, unless they are indigent or a government department.
Furthermore, should a tenant default on their existing municipal account more than twice, the account will be closed immediately and can only be reopened in the property owner’s name.
Over the next two years, active tenant accounts may be phased out entirely. The new policy will be applicable to business and domestic tenants, and its implementation aims at removing the municipality’s risk of non-payment of services by tenants and instead making it the responsibility of the property owner to collect payment.
While the proposal tabled in a meeting of the Finance Portfolio Standing Committee in August was applauded by committee representatives, it has concerned many property owners who lease out their premises.
Democratic Alliance Councillor, Bertie Meiring has since attempted to intervene.
Cllr Meiring believes this policy change will result in a reworking of the bylaws to hold the property owner liable for a tenant’s debt, which he believes may be unconstitutional.
Should the policy go ahead, landlords will have to pay for their tenant’s water and lights consumption and be refunded by the tenant.
But what happens if the tenant decides not to refund the landlord? Will the municipality consent to have the property’s services disconnected?
“The administration of this will be difficult because of the reconnection issue,” Cllr Meiring explained.
The municipality could also refuse to allow the landlord to disconnect saying it’s an infringement on basic human rights, which gives the landlord very little leverage over the tenant.
Cllr Meiring indicated the new policy would be an administrative nightmare with the process of disconnections and reconnections.
The other concern is the two to three week delay on final readings of water and lights accounts. Once the tenant has vacated, it takes this long to obtain the final account after which the tenant is long gone.
The municipal deposits often do not fully cover the outstanding amounts, posing a further risk to landlords when consumer accounts are opened in their names.
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On the flip side however, in the past tenants have been allowed to enter into payment arrangements with the municipality on their consumer accounts, unbeknownst to the property owner and without the property owner’s consent.
The new proposed policy will eliminate any non-payment surprises for landlords going forward.
Cllr Meiring believed that at present, when a consumer account was opened no credit checks were done and when the tenant racked up debt they were not even blacklisted.
“The municipality should get a debt collection firm in as this is a source of revenue.”
It is believed the municipality intends informing the public of the new policy through a communications campaign.
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