The Judgement of the Supreme Court of Appeal certainly has all parties with property interests alarmed! Without argument over what we all
understand to be fair, the judgment stands from the 29th of January 2016 and has to be adhered to in the meantime.
We are of the opinion that Section 118 of the local Government: Municipal Systems Act, No 32 of 2000 should be tested by the Constitutional Court which will then hopefully bring an end to this controversy.
There are 2 main causes of concern:
- The Municipality now has a very large extra arrow in it’s quiver for debt collection. It’s Hypothec (type of interdict or right towards a property) has been extended. What this means is that should there be “old debt” registered against the property (outstanding Rates and Taxes, Electricity, Water where appli- cable) then the municipality will be entitled to bring an applica- tion in the High Court to prefect it’s interest in the property for the ”old debt”. Should it not be paid, the municipality may attach and sell the property in execution to extinguish the debt as far as possible.The municipality will however, need to conform with applicable By Laws, meaning that before they prefect their claim they will have to try to execute against the original debtor (the person in whose name the account was registered when the debt originated). Only thereafter can they proceed against the property. As can be seen new owners do not become liable to pay the arrears, but their property might eventually be sold to pay for such debt. Such distinguishing factor will make little difference to a new owner faced with that reality.
- In our opinion the fact that the Municipality might refuse to issue a clearance certificate is of more concern as it may make finalisation of a transaction impossible until the arrears are settled. It is a sensitive subject for any party to approach as no one will want to end up with a scenario as above nor with a transfer that is essentially put on hold indefinitely. Should Sell- ers want to sell their property, then they should try to find out if there are any archaic debts outstanding against the property. Out of the point of view of the purchaser, they will want to be informed of the existence of such debt and in- demnified, regardless. The interests of Banks, Home Loan Companies and Estate Agent’s will be uncertain as a Mortgage Bond on the property will more than likely not be preferred above the Municipality’s claim.
Thought must therefore be given to an Agreement of Sale of immovable property to incorporate protection for the affected parties.