Billing- Deposits
Has the City of Joburg “reimbursed” your initial COJ account deposit and issued a new, higher deposit in its place? HBGSchindlers attorneys have produced this helpful guide on what this new charge is on your municipal account.
INTRODUCTION
HBGSchindlers and JoburgCAN have recently been inundated with requests for assistance by confused members of the public who have received invoices from the City of Johannesburg Metropolitan Municipality (“the COJ”) from June 2024 including a line item on the front page, with the notation “Refund”, but including a correlating debit charge. An example is as follows:
WHAT IS THIS WEIRD CHARGE?
HBGSchindlers contacted the City to ask what this charge was. The COJ advised that this line item was correctly debited to certain customer accounts because in the past few months the City had erroneously granted certain customers a double credit in respect of one of their payments. The same payment that was previously double credited by mistake, is now being debited, to undo the effect of the erroneous double credit.
If a customer has indeed been double credited in the past few months with the same amount that COJ is now reversing in this “Refund” line item, then the customer’s account will be correct, as COJ would now have simply reversed the effect of the incorrect double credit.
WHAT IF I HAVE NOT PREVIOUSLY RECEIVED A DOUBLE CREDIT?
If you have not received a double credit and you are now being debited, then your account may be incorrect. It is not a guarantee that your account is incorrect – you will have to have it audited by an expert to ascertain the accuracy of your account if you are uncertain.
PURPOSE OF A DEPOSIT
In the same way that a landlord would call for a deposit in respect of a lease for damages that a tenant might cause to the property, municipalities (as service providers) are given the power in law to call for deposits in order to secure payment in the event of default by the consumer.
On default, the deposit will be applied to any amounts owing to the municipality in reduction of the debtor’s liability to the municipality.
WHERE ON MY INVOICE WOULD I FIND THE DETAILS OF MY DEPOSIT (IF I HAVE ONE)?
In short, if you see an amount for a “deposit” or a “deposit request” where the blue arrows indicate, this is evidence that the COJ does not already hold that amount as a deposit but it is now calling for payment of that amount, which it will then later “ringfence” and move to the spot just above where the red arrow is pointing to.
DEPOSITS HELD IN RING FENCED ACCOUNT
Deposits are usually indicated on a municipal invoice as having been separated from the rest of the bill and they are (at least theoretically – what in fact is done with deposit funds is unknown at this stage) allocated to a separate “ring fenced” account. This means that (ordinarily speaking) amounts that are debited or charged to the account will not be taken from the deposit and payments made into the account will not increase the deposit. The amount of the deposit will thus remain the same (note that no interest is earned on the deposit) while the outstanding balance on the account will change from month to month depending on charges and payments debited and credited in the ordinary course.
IS THE MUNICIPALITY ALLOWED TO REQUEST A DEPOSIT, IF I HAVE NEVER BEEN ASKED TO PAY FOR ONE IN THE PAST?
Provided that you are not a customer exempt from having to pay a deposit (for example, pensioners who have applied for and been granted the pensioner’s rebate are exempt within the jurisdiction of the COJ), then yes, you can be required to pay a deposit even if you have never before been asked for one.
THE COJ HAS INCORRECTLY CALCULATED THE DEPOSIT REQUEST – WHAT DO I DO?
If there is a billing error on your account because the COJ has mistakenly billed you too much for any reason, you can log a query with the City and follow the prescribed dispute resolution mechanisms set out in the City’s Policy to dispute the incorrect charge. If you are unable to resolve the dispute with the municipality amicably, you may require expert legal assistance and you may need to approach a court.
WHAT HAPPENS IF I DON’T PAY THE INCREASED DEPOSIT?
The City has the right to terminate your services, after having given appropriate lawful notice.
DIFFICULTY IN PAYING INCREASED DEPOSIT REQUEST
Deposits payable by ordinary residential consumers may pose short term cash flow constraints and frustration, but the amounts of these deposits ought to not be very large. On the other hand, commercial consumers, sectional title schemes, and multi-unit dwelling owners are facing massive deposit demands, in many cases in the many hundreds of thousands of Rands. In these cases, it may be very difficult for these consumers to be able to make payment of these amounts on the due date of the invoice, especially where they have been given little or no notice.
Sectional Title schemes may need to raise a special levy and to collect the special levy from its owners over several months in order to be able to make payment of a large top up deposit. In situations like this HBGSchindlers would recommend that the consumer concerned approach the CoJ and request that the CoJ allow the consumer to enter into an acknowledgement of debt for payment of the additional deposit requested.
In terms of the acknowledgement of debt the consumer and the CoJ can agree as to how this amount can be paid in instalments over an appropriate period of time. The larger the amount, logic dictates, the longer the period that the CoJ should be happy to give the consumer to pay that amount.
GIVING OF A GUARANTEE
The Policy and By-law provide that a deposit equal to the average of 2 months deemed charges must be paid. Section 3 of the By- laws expressly states that a deposit must be paid in cash or by cheque, or that “other acceptable security, as prescribed” may be furnished in its place.
WHAT DOES SECURITY “AS PRESCRIBED” MEAN?
We are not aware that the CoJ has prescribed any form of “acceptable security”. In the absence of anything to guide us, the legal position is that the nature of such security should be the same or similar to that required in similar commercial transactions, i.e. an attorney’s Irrevocable Letter of Undertaking, or a Bank Guarantee.
ACKNOWLEDGEMENTS OF DEBT FOR DEPOSITS?
Where consumers wish to pay the deposit demanded, but are unable to do so in a single lump sum on short notice, the CoJ ought to accommodate its consumers in this respect. Firstly because it is legally obliged to collect debt and in allowing payment in instalments where the consumer simply cannot afford to make payment of the whole amount upfront, it would be fulfilling this function, in the most cost effective and efficient manner possible. Secondly because it would be unreasonable (in the authors’ opinion) for the CoJ to act in any other fashion. Where the CoJ does allow a consumer to pay arrears in instalments, the CoJ is limited to giving the consumer a maximum of 60 months (5 years) to pay everything owing.
IF I PREVIOUSLY PUT DOWN A DEPOSIT BEFORE I WAS A PENSIONER, AND I AM NOW A PENSIONER, CAN I ASK FOR PAYMENT OF MY DEPOSIT BACK?
Unfortunately not. When you sell your property, your deposit should be credited to any amount owing on your account. If your account is in credit or there is nothing owing on it, when you sell your property, your deposit should be refunded to you. This is known as your deposit being “released” back to you.
CAN A DEPOSIT BE ISSUED FOR RATES AND TAXES?
Yes, in terms of the Policy, it can. It can be called for in relation to any charge that would go onto a customer’s account.
IS VAT PAYABLE ON A DEPOSIT?
No.
WHAT LAWS AFFECT THE LEGALITY OF HOW MUCH, WHEN AND HOW COJ RAISES A DEPOSIT?
The CoJ’s Credit Control and Debt Collection Policy of 2022 (“the Policy”) and Credit Control and Debt Collection By-laws in 2005 (“the By-laws”) are the most important pieces of legislation that govern this important issue, but there are other subsidiary laws that might come into play depending on the facts of each case.
In the case of pensioners, it is section 8 of the Policy, and in particular, 8.8, that exempts pensioners who are receiving a pensioner’s rebate (for rates) from having to pay deposits.
You might need to consult an attorney if you require further information about your particular case.
CAN I BE REQUIRED TO “TOP UP” MY DEPOSIT AS A PENSIONER?
It is not 100% clear from the wording of the Policy, but most probably the answer is ‘no’. Just as you cannot be required to put down a brand new deposit as a pensioner, you (by parity of reasoning) ought not to be liable for increasing any deposit already held if you are already receiving a pensioners’ rates rebate. This is not crystal clear, however, so we cannot provide conclusive answers to this question at this time.
WHAT ARE THE CONSEQUENCES OF DOING NOTHING TO DISPUTE A CHARGE FOR A DEPOSIT THAT SHOULDN’T BE THERE?
Failure to pay the charges levied for a deposit can lead to interest charges accruing thereon (which theoretically ought not to happen, but it sometimes does) and even to a termination of services (including electricity and water supply) if a dispute is not properly raised and the incorrect deposit charges removed from the account.
CONCLUSION
The reissuing of deposits in the City of Joburg is legal, however the calculations may be off on what your deposit may be, so query if you believe this to be the case. If the deposit is too high for you to manage a single payment you are within your rights to pay it off and enter into a payment plan with the City.
For pensioners- unfortunately the COJ has received, but not yet processed, several thousand pensioner rebate applications flowing from the 2023 General Valuation Roll, and because it is behind in its data-capturing of these applications, its invoicing run in July 2024 calling for deposits will be incorrect in respect of pensioners who have applied for and are waiting for their rebate applications to be “loaded” onto the system.
This puts this category of persons (who are already vulnerable) at a greater risk of being cut off for non-payment of amounts which ought never to have been billed in the first place.
There is another complication, however. The exemption from having to pay a security deposit only applies to customers who are receiving a rates rebate for pensioners – if you have not yet applied for this rebate at all, you will first need to apply for, and be granted approval to receive, this rebate, before you will qualify for not having to put down a security deposit. As there is already a data-capturing backlog, this could take several months (or potentially even years).
In desperate cases, it is sometimes necessary to approach a court to compel a municipality to decide an application urgently – if you find yourself in this situation you can contact the Public Law Department at HBGSchindlers for legal assistance: public@hbgschindlers.com.