Landlord’s vs Municipalities’ obligations to obtain a court order prior to terminating electricity to premises.

Anva Properties CC // End Street Entertainment Enterprises CC

Anva Properties (The Applicant) sought an order authorizing it to terminate the electricity supply to a unit in a building situated in Cape Town. The matter was heard in the Western Cape High Court in April 2015. The Applicant is the owner of the building and the Respondent is one of the tenants who occupy it.

The Applicant pays the City of Cape Town for electricity and recovers the costs from the tenants. The Respondent has occupied the basement of the building from 2012 where is conducts business as a bar and nightclub.

The respondent used the electricity for air-conditioning, refrigeration and lighting, however he has not paid his electricity bill since September 2014, the bill is in arrears in excess of R 300 000.

The Respondent raised two defenses to the Application. Firstly, the Respondent contends that on the Applicants own showing from the filed papers, the Respondent was deregistered in 1998. This was long before it entered into a lease agreement with the Applicant in 2012. Secondly, the Applicant has no locus standi to claim payment because it ceded all its rights to Nedbank and does not have any right to recover any amount under the ceded debt.

Regards to the first defense of deregistration; The court held that no steps were taken to restore the registration of the End St Entertainment and even if there was steps taken, the Close Corporation Act read with the Companies act does not mean that all of the activities during the deregistration are automatically validated. Due to the fact that no valid lease agreement was entered into between the parties the Applicants claim based on that fact cannot succeed.

Then the court further looked at whether apart from the lease agreement did the Applicant make out a case for relief in the Founding Affidavit, the Applicant contended that if they did not pay the city for the electricity then the city would cut the electricity this would result in the other tenants being without electricity.

At the time the Applicant was actually subsidizing the Respondents business which the court could not allow to continue and the Applicant wants to mitigate his losses by terminating the power to the premises but this would be unfair to the other tenants.

The Applicant cannot simply terminate the electricity because that would be taking the law into his own hands, thus the court held that Applicant had in fact laid a good factual foundation for relief and ordered that the Applicant can employ an electrician to cut the supply to only that part of the premises and seal it off and the Respondents may not tamper with the seal. By granting this order the other tenants will still retain their electricity supply.

The court held that is was clear the Applicant did not know the Respondent was deregistered and this fact only came to light in the replying affidavit and because of this the court ordered that each party must pay their own costs.

In conclusion, a land lord requires a court order before terminating the electricity supply to a property.

Rademan // Moqhaka local municipality

This matter was heard in the Constitutional court in 2013. Ms Rademan did not pay her full account she paid only the electricity portion she did not pay the rest because she felt that the municipality provided a poor service. She was not the only one who did this many community members did the same thing. The municipality said if she failed to pay they would cut the electricity, and Ms Rademan failed to pay so the municipality cut the electricity.

Ms Rademan brought an application in the Magistrates court, to have the electricity restored, effectively a spoliation application. The Electricity Regulation Act states that if the account is in arrears it is grounds for terminating the electricity. The court held that the municipality was not justified in terminating her electricity because her account was not in arrears. The Mag court granted in Ms Rademan’s favor and ordered the electricity supply to her home be restored.

On appeal, the High Court held that the municipality did not require an order to terminate her supply of electricity if the resident owed the municipality money. It further stated that the fact that she was not in arrears did not preclude the municipality from cutting her electricity. The high court set aside the magistrates court decision and replaced it with an order dismissing Ms Rademans application.

On further appeal the Supreme Court of Appeal had two points of contention, namely that the municipality’s failure to obtain a court order equated to unlawful termination. Secondly that the municipality can only terminate electricity if certain grounds existed, one of them is arrear accounts.

Section 102 of the Municipal System Act 32 of 2000 states that a municipality may consolidate accounts. Consolidation means consolidate any separate accounts of persons liable for payments to the municipality. Due to the fact that if consolidated her account is in arrears, the municipality is justified in cutting the electricity. Therefore the SCA dismissed the appeal.

It is for this reason that the matter came before the Constitutional court. The Court granted the applicants leave to appeal in the interest of justice. This matter held a significant amount of public interest.

The Constitutional court noted that according to constitutional provision 156(2), a municipality may make bylaws for effective administration. Further, the Constitutional court noted that Section 102 of the Municipal Systems Act allows for consolidation of accounts. Section 25(1) of the municipalities by-laws states that a Municipality may restrict or disconnect the supply of water and electricity or discontinue any other service to any premises whenever a user of any service, fails to make payment on the due date or fails to make acceptable arrangements for the repayment of nay amount for services, rates or taxes.

It is for this reason that the court held that she failed to settle her account as she withheld payments for rates. Although she paid her electricity account when consolidated she was in arrears. Therefore she contravened the municipality’s conditions of payment, therefore the municipality was entitled to cut her electricity.

In conclusion, the municipality does not require a court order before terminating the electricity supply to a property.

By Nicole Naidoo
nicole@dyason.co.za