Liability for Historical Municipality Debt

3
1689

In a recent editorial published in the Cape Argus, the chairman of Rawson opined that “homebuyers, banks and tenants all need to take action to protect themselves against the effects of the recent Supreme Court of Appeal (SCA) judgment that property owners can be held liable for historical municipal debts dating back up to 30 years.”

Although no citation is included, the context reveals that the article refers to the judgment of City of Tshwane Metropolitan Municipality v Peregrine Joseph Mitchell, in which the SCA interpreted section 118 of the Local Government: Municipal Systems Act No 32 of 2000.

Briefly, section 118 provides that a registrar of deeds may not register the transfer of property, except on production of a certificate – commonly referred to as a ‘clearance certificate’ – confirming that all amounts due to the municipality, in respect of that property for service fees, levies, rates and taxes for the two years preceding the date of application for the certificate, have been paid in full.

The editorial correctly states one of the Court’s conclusions to be that the transfer of a property into the name of a new owner does not extinguish the hypothec created by section 118(3) of the Act in favour of the municipality, which means that nothing would prevent the municipality from obtaining a court order, selling the property concerned in execution and applying the proceeds to pay off the outstanding historical debt.” To continue reading click here…

3 COMMENTS

  1. What type of rates clearance certificate is a seller legally obliged to obtain? May 2016: “Following the Supreme Court of Appeal’s Mathabathe judgment in 2013, this area of practice has become fraught with risks for buyers, sellers, banks, estate agents, attorneys, and many others. Every property acquisition can now result in unintended consequences for the unaware. This article (http://www.schindlers.co.za/what-type-of-rates-clearance-certificate-is-a-seller-legally-obliged-to-obtain/) explores the question “what type of Rates Clearance Certificate” (“RCC”) a seller is legally obliged to obtain and make payment of in order to pass transfer.

    There are two types of RCC, namely an Abridged (2 year) clearance (in terms of s118(1) of the Local Government: Municipal Property Rates Act) or a full (Historical) clearance (in terms of s118(3)) of the same Act). Although it is a legal requirement that a RCC be obtained prior to registration of transfer, there is no stipulation as to what type of RCC must be obtained – this leaves it open to a seller to obtain and pass transfer on payment of either, unless there is another law (or agreement) obliging the seller to do otherwise.

    The parties to a sale agreement can expressly agree as to which type of RCC must be obtained (and in light of the Mathabathe judgment it is certainly prudent to provide for this in all sale agreements going forward). But historically standard sale agreements have not specifically provided for the type of RCC to be obtained. In the absence of express agreement, the question remains as to what type of RCC is required, as between seller and purchaser, by law.”

    By David Hepburn and Chantelle Gladwin, Partners at Schindlers Attorneys in Johannesburg. Chantelle has written extensively on the matter and deals with municipalities on a daily basis. She is, therefore, at the coalface of municipal issues and best placed to offer a reliable opinion on the matter.

  2. Please refer to Gladwin v Ekurhuleni Metropolitan Municipality 2016/14497. The article above states: “It would be entirely unreasonable for a municipality to attempt to enforce a long-standing pre-existing electricity debt – or indeed any debt as suggested in the editorial – against a tenant who patently did not live at the property at the time charges were factually accrued…” This statement makes the common sense assumption that common sense prevails at all municipalities, but the municipality can (and has) terminated electricity supply to properties for historical municipal debt, which directly affects the tenants (who may not have incurred the debt in the first place). In the recent judgment referred to above, the honourable Judge Weiner found in favour of the applicant, a property owner whose electricity supply to a rental property had been terminated on account of municipal debts accrued by the prior owner of the property.

Leave a Reply