The Constitutional Court recently held that historical municipal debt does not “survive” transfer. In other words, the new purchaser or successor in title cannot be held liable after transfer for any municipal debt incurred before transfer. Historical municipal debt referring to that debt attached to a property, which is older than two years at the date of application for a rates clearance certificate.
Section 118(3) of the Local Government Municipal Systems 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”.
This specific provision was debated in the Constitutional Court case of Jordaan v Tshwane Municipality in August 2017. The court had to deal specifically with whether the municipality could claim the debts of the seller, from the new home owner, and if it was constitutional. This was an appeal matter from the High Court.
The High Court had to decide whether it is unlawful for a municipality to claim from the new owners for debts not incurred by them. The High Court stated that it was unlawful of the municipality to suspend municipal services until the debts of the property were paid in full.
The Constitutional Court found that the municipality can only claim the money from the actual debtor that incurred the debts, i.e. the former owner. The municipality cannot then claim any old debts from the purchaser. It further held that holding the new owners liable will be regarded as an arbitrary deprivation of property, and declared it to be unconstitutional.
Contact our conveyancing attorneys in Cape Town for assistance with your property transfer, purchase, or property law.
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