In order to transfer immovable property, the seller is required to obtain a rates clearance certificate from the relevant municipality.
Section 118(1) of the Local Government: Municipal Systems Act, 2000 (“the Act”) provides that:
‘(1) A registrar of deeds may not register the transfer of property except on production to that registrar of deeds of a prescribed certificate –
(a) issued by the municipality or municipalities in which that property is situated; and
(b) which certifies that all amounts that became due in connection with that property for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties during the two years preceding the date of application for the certificate have been fully paid.
. . .’
Section 118(1) of the Act therefore only requires a seller to make payment of the outstanding municipal service fees, surcharges on fees, rates and other municipal taxes, levies and duties for a period of two years prior to the application for rates clearance.
There has however been much debate regarding the interpretation of the “charge” upon the property created under section 118(3) of the Act and whether this form of security is extinguished by a sale of the property to a new owner i.e. whether the municipality may, at any time obtain an appropriate court order; selling the property in execution and applying the proceeds to settle the outstanding municipal debts notwithstanding the fact that those debts were incurred by an erstwhile owner/occupier prior to registration of transfer of the property into the name of the current owner.
Section 118(3) of the Act provides that:
‘An amount due for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties is a charge upon the property in connection with which the amount is owing and enjoys preference over any mortgage bond registered against the property.’
The recent Constitutional Court judgment of Chantelle Jordaan and Others v City of Tshwane Metropolitan Municipality and Others; City of Tshwane Metropolitan Municipality and Others v Chantelle Jordaan and Others; Billie Ann Livanos v Ekurhuleni Metropolitan Municipality (CCT 283/16, CCT 293/16, CCT 294/16 Date of Judgment: 29 August 2017) has now declared that the charge against the property for all amounts owing by a municipality in terms section 118(3) of the Act does not make that charge transmissible to successors in title of the property.
This means that historical municipal debts against a property cannot be transferred to successors in title of the property i.e. cannot be recovered from a new property owner. It must however be emphasized that the Court did not find that section 118(3) was constitutionally invalid.
A local authority still retains a right [post-transfer] to proceed against the previous owner by way of an action to recover the balance outstanding, and may even take appropriate steps to attach the proceeds of the sale of the property as security for payment of the balance outstanding. The municipality is also free to take whatever action it deems necessary before transfer of the property to the purchaser in order to secure its right of security in terms of section 118(3), which action may include the attachment of the property and prevention of transfer until all amounts are paid.
C & A Friedlander Inc.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)