INTRODUCTION

Our offices have come across a number of cases recently in which strange notations have appeared on our clients’ municipal invoices, with the notation “debt rehab”. An excerpt illustrating how these strange credits look, is below:

This article explains what we have gathered about the City of Johannesburg Municipality’s (“COJ”) current debt rehabilitation program from our own investigations.

WHAT IS DEBT REHABILITATION? AND WHAT IS NOT DEBT REHABILITATION?

It’s a fancy name for a program in which the municipality makes an offer to its indebted customers, of a discount or write off of a portion of the debt owed, to help both the customer and the municipality “clear up” or “rehabilitate” some of the debt.

Debt rehabilitation is not to be confused with a write off by a municipality of charges that it mistakenly or unlawfully billed a customer. Where a municipality erroneously charges a customer, and then writes off that incorrect charge, that is not debt rehabilitation (because the municipality is just correcting an accounting error on the invoice; it is not discounting the charges in some or other way to help reduce the debt owed).

If a municipality does not collect its electricity and water debt owed to it by its customers for a period of three years, those debts become “stale” or “prescribed”, meaning that they are too old for the municipality to legally claim from the customers. If a municipality writes off or reverses these charges, which are too old to claim legally, this is regarded as the municipality crediting the account to the extent of the prescribed charges.

In doing so the municipality is making a lawful adjustment to remove charges that are no longer lawfully due and payable by the customer to the municipality. This is not debt rehabilitation – although it can be thought of as “cleaning up the account” in a manner of speaking, it is not a discount or payment arrangement to a customer to help that customer (and the municipality) reduce the unpaid debts.

DEBT REHABILITATION – 2022

In 2022, the COJ permitted customers who owned properties under the following categories to apply for Debt Rehabilitation:

Residential, small businesses, churches and/or non-profit organisations. If the property owner(s) fell into one of the above-mentioned categories, there were several other prerequisites that had to be met before the property owners would be entitled to apply for debt rehabilitation, namely:

1. The account must be in arrears for more than 90 (Ninety) days as at 28 February 2022;
2. The combined gross income of the account holder(s) is between R4,750.00 (Four Thousand, Seven Hundred and Fifty Rand) and R22,000.00 (Twenty-Two Thousand Rand) per month; (there is a sliding scale of “discounts that can be applied to those account holders who earn less than R50,000.00 (Fifty Thousand Rand) per month);
3. The Market Value of the property must not exceed R1,500,00.00 (One Million, Five Hundred Thousand Rand) based on the City’s Municipal Valuation Roll.

DEBT REHABILITATION- 2024

Although there are no official documentation on the City’s website in corroboration of this, an article available on the website dated April 20241 indicates that the City is still extending its debt rehabilitation program to residents, and that it has been re-hauled and improved.

– The 30% deposit required, has been waived and only 10% is now required as a down-payment

***We caution that as a result of the lack of information on this issue from the City’s side, the 2024 information herein might not be up to date.

MAKING APPLICATION FOR DEBT REHABILITATION APPLICATION FORM

Account Holders for Residential, Business, Public Benefit Organisations who seek financial relief on their debts must complete and submit the Debt Rehabilitation Program Application Form in one of the following ways:

Completing the form online on the following link: https://share-eu1.hsforms.com/1xhiObIJVTRio_xwwl5FO8gew554
Completing and emailing the form to debtrehab@joburg.org.za; or
Completing the application form and submitting it to any City Customer Service Centre.

RESIDENTIAL PROPERTIES

An account holder of a residential property must submit the following documents along with their application form:

1. A certified copy of the account holder’s South African identity document or a document which confirms their legal residence in South Africa;
2. A copy of the account holder’s latest municipal statement;
3. A certified copy of the account holder’s bank statement for a period of three months before the date of application;
4. A copy of the account holder and their spouse’s (if applicable) proof of income;
5. The account holder must provide meter numbers and meter readings of all meters on their properties;
6. Pictures of the meter devices which clearly identify:
   6.1 location of the device;
   6.2. reading of the device; and
   6.3. meter number of the device.
7. The account holder and their spouse (if applicable) must provide written permission to the COJ to perform a background check through a credible credit bureau;

If the property owner is deceased, the account holder must submit a Letter of Authority from the Master’s Office along with their application. Furthermore, the occupier must submit an affidavit to confirm that they are in occupation of a deceased person’s property and must attach a copy of the death certificate or Letter of Authority.

BUSINESS/PLACE OF WORSHIP/ NON-PROFIT ORGANISATION

The following documents must be submitted along with the Debt Rehabilitation application form by its account holder:

1. Audited financial statements;
2. Latest copy of the municipal statement;
3. Copies of financial statements for a period of six months before the date of the application; and
4. Pictures of the meter devices which clearly identify:
   4.1. location of the device;
   4.2. reading of the device; and
   4.3. meter number of the device.

Should the applicant misrepresent any information in their application, the COJ is entitled to reinstate the original debt and institute immediate termination of municipal services.

If property is sold during the application period, the remaining debt being owed on the property will become due and will reflect on the property’s clearance certificate.

CAVEAT – STILL MANY UNKNOWNS

Although we provide information in this article that is, to the best of our knowledge and belief, accurate at the date of publishing, we have had more difficulty than usual ascertaining how the City is implementing its current debt rehabilitation program. There is little information on this topic available publicly.

Customers of the COJ with strange (or unexpected credits) should enquire with the municipality as to what they are, and in the event that they are unable to get any useful information from the municipality, you may need to consult with an attorney about the issue.

An incorrect credit on an account can be just as difficult to deal with (from the perspective of having it resolved and reversed) as an incorrect debit, but many customers prefer to stay quiet and simple “accept” the erroneous credit in the hope that it will never be reversed and they will be able to keep the benefit of the mistake.

HONESTY IS ALWAYS THE BEST POLICY

Customers are advised to be honest and raise the issue with the municipality if they are accidentally over-credited, to avoid a situation where the credit is reversed later at a time and in a manner that prejudices the customer severely.

Better the devil you know than the devil you don’t – rather know and plan for the reversal of an incorrect credit, rather than get a nasty surprise when the credit is suddenly reversed and your account is thousands (or hundreds of thousands) in arrears that you can’t afford to pay.

CONCLUSION

If you want to apply for debt rehabilitation, or if you have strange credits that you think might be debt rehabilitation and you need to confirm the accuracy of this suspicion, you can contact our municipal law attorneys in the Public Law Department at public@hbgschindlers.com for assistance.

Please note: this article is for general public information and use. It is not to be considered or construed as legal advice. Each matter must be dealt with on a case by case basis and you should consult an attorney before taking any action contemplated herein.