electricity service charge - rental housing - Rental Housing Act - electricity by-laws

SERI represents 80 tenants of a building in Hillbrow, inner city Johannesburg, in a hearing before the Gauteng Rental Housing Tribunal. Their complaint concerns the legality of a “service charge” levied by the landlord against them on their electricity accounts. The landlord charges each of the tenants an electricity service charge of approximately R385 per month. The charge is not for electricity actually consumed at the property – that is metered and charged separately. It is rather for the “service” the landlord claims it provides in delivering the electricity from its connection with City Power to each of the tenants' units. City Power does itself charge the landlord a service charge – of approximately R385 per month – and the landlord, in essence, claims the right to pass the charge on to each of the tenants. The net effect of this is that the landlord pays City Power approximately R385 per month in a service charge, but charges the tenants approximately R27 000 per month in its own “service charges”.

The tenants argue that there is no basis in law on which the landlord can levy such a charge to them, and seek a ruling that orders the landlord to stop levying the charge, and to pay back the service charges that have already been paid. The case is likely to turn on whether the Rental Housing Act 50 of 1999 or the City of Johannesburg’s electricity by-laws are applicable, and the proper interpretation of those instruments.

The first hearing was held on 20 February 2013, where the matter was postponed to 8 May to allow for the filing of further papers and heads of argument.

On 14 June 2013, the Tribunal handed down its ruling, finding that the charging of a "service charge" to each tenant violates Regulation 13(1)(d) and (f) of the Gauteng Unfair Practices Regulations, and amounts to a profit which the landlord is not entitled to make (off electricity charges):

13(1) A landlord who is obliged by law or in terms of the express or implied terms of the lease to provide water, electricity or gas services to a tenant, must -
(d) charge the tenant the exact amount for services consumed in the dwelling if such dwelling is separately metered;
(e) ............
(f) in a multi-tenanted building not recover collectively, from the tenants for services provided in excess of the amounts totally charged by the utility service provider and the landlord.

In response to the landlord's argument that the "service charge" covers maintenance of the water and electricity reticulation system in the building, the Tribunal stated that "maintenance required must be funded from the rental collected and not under the guise of a separate 'service charge'." The Tribunal also found that the City's electricity by-laws and the Electricity Regulation Act preclude the landlord from making a profit off electricity. In terms of the latter, the landlord would need to have a licence to trade in electricity, which it does not have. The landlord also raised the arguments that Regulation 13 does not apply because it is superseded by the tenants’ lease agreements, and that it is the electricity service provider to the tenants, not City Power, and hence is entitled to levy its own service charge in addition to City Power. The Tribunal unanimously rejected these arguments. It ruled that the landlord is interdicted from levying the charge in future, and ordered the landlord to repay to the tenants all the service charges levied against them since May 2009.

The landlord subsequently launched review proceedings in the South Gauteng High Court under Rule 53 of the Uniform Rules of Court, seeking an order reviewing and setting aside the ruling of the Rental Housing Tribunal. The landlord suggests that it has three main grounds of review, relying on a multitude of complaints in relation to the judgment, the majority of which are aimed at the Tribunal’s ruling that Regulation 13 was applicable and the applicant’s conduct was a contravention of the regulation.

The review application was heard on 1 December 2014. The residents argued that the reasoning and ruling of the Rental Housing Tribunal is unassailable, particularly that the Unfair Practice Regulations are applicable and that the landlord’s conduct constitutes a contravention of Regulation 13. The residents further argued that there was no procedural irregularity in the proceedings before the Tribunal that would constitute a basis for setting aside the ruling.

On 20 February 2015 judgment was handed down in the High Court. Judge Coppin dismissed the application with costs, finding that the Tribunal’s ruling was reasonable, just and fair. He further found that the Gauteng Unfair Practices Regulations, which govern the relationship between residential landlords and tenants, prohibit a landlord from making a profit from allowing electricity to be supplied to its tenants.

SERI represented the tenants in a further hearing at the RHT. The complaint concerned the increased rental of a select few tenants. In 2013 the landlord increased the rent for all the tenants. The increase disregarded a 2010 written agreement between the owner and the tenants that there would be no rental increase until after 2015.

All tenants rejected the increase on the basis of the agreement. The owner resorted to victimising the tenants through lockouts and cutting off their electricity. Most tenants, particularly households with vulnerable people, had no option but to pay the forced and unlawful increase. A few tenants resisted and refused to pay the new increase.

In 2015 the owner used the 2010 written agreement to increase rent. The owner however decided to single out the tenants who refused to pay the 2013 increase. He increased their monthly rental at a rate higher than the tenants who had paid the 2013 increase. The tenants viewed this not only as unlawful, but as punishment for refusing to pay the 2013 increase . The tenants took the owner to the RHT.

On 15 March 2016 the RHT ruled that:

  • the 2010 agreement "constituted a binding agreement between the parties and that the tenants were under no legal obligation to accept the increased rental in 2013,
  • non payers are prejudiced by being asked to pay a higher rent than the payers as a result of refusing to pay the increased rent in 2013 when they were well within their rights to refuse to do so,
  • the practice (of differentiating tenants by the owner) can also be construed as constituting unfair practice and cannot be condoned.

The ruling vindicated the decision of the tenants refusal to pay the 2013 rent increase. The ruling further stressed the importance of treating all tenants equally and it ordered that all tenants must pay the same rental.

  • Gauteng Rental Housing Tribunal ruling (15 March 2016) here.
  • SERI press statement (20 February 2015) here.
  • Judgment (20 February 2015) here.
  • Residents' heads of argument (24 June 2014) here and practice note here.
  • Answering affidavit in review application (29 January 2014) here.
  • Answering affidavit in eviction application (19 December 2013) here.
  • Review application notice of motion and founding affidavit (18 July 2013) here.
  • SERI press statement (18 June 2013) here.
  • Gauteng Rental Housing Tribunal ruling (14 June 2013) here.
  • Written submissions (15 April 2013) here.
  • Read the notice of motion and founding affidavit (20 February 2013) here