auction house hammer picMany people look at buying properties on auction hoping to find a bargain of a lifetime, sometimes only to realise it was the mistake of a lifetime. Many people do not realise that purchasing repossessed and distressed properties have a number of associated potential nightmares. For the purpose of this article, we will be confining the so-called “nightmares” and hidden risk to MUNICIPAL DEBT.

Potential bidders are under the false impression that the amount that you bid at an auction is the amount that you pay in total for a property. If you do not listen very carefully and understand the Terms and Conditions of the Sale Agreement that you sign, depending on the wording of the contract, you could end up being liable for unfathomable amounts of money that you may not have budgeted for. This could even place you under severe financial and legal distress.

There are a number of different types of auctions/sales, to mention a few:

  • Private Auctioneer Houses,
  • Sheriffs of The Court known as Sales In Execution,
  • Estate Agents,
  • Online Auctions,
  • Properties In Possession (this is when the Bank buys the property back from a previous auction and resells same),
  • etc.

In the instance of a Sheriff Sale in Execution, the Conditions of Sale are supposed to conform to The Rules of Court, Form 21. However, even though the Conditions may or may not limit the risk to the Purchaser a recent Supreme Court of Appeal Judgment (Click here to read more on this Judgment) has in effect made the Purchaser responsible for all debts related to the property, subject to certain Legislation.

It is absolutely imperative that on the day of the auction, the Parties are aware what the estimated Arrear Rates & Taxes, Water & Electricity, i.e. Municipal Debt is on the Property. Very often the Sheriff and/or attorneys do not have this information at the auction, and if the Sheriff proceeds to auction the property, this places the Purchaser in a potentially dangerous situation. Many of the Auctioneers often advise that even if they do have the estimated Arrear Rates & Taxes, the amounts cannot be guaranteed. Again this places the Purchaser at risk as it becomes very difficult to calculate and estimate the correct amounts you would like to bid on the Property.

Some auctions are carried out on the basis that the Purchaser will only be liable for Municipal Debt from the date of sale going forward. We have seen a wide variety of wonderful and worrying contracts of how Municipal Debt payments are structured. It is very important that the Parties understand what they are binding themselves to when signing the Contract.


We have acted and assisted clients where on the day of the auction they were told and budgeted to pay approximately R 100,000.00 only to find that after the Transferring Attorney had applied for Clearance Figures from the Local Municipality, that the Clearance Figures went up to staggering amounts of R 500,000.00; R 750,000.00, R2,5 Million and so forth.  In the case of Sheriff Sales in Execution, the amount that you pay towards the Municipal Debt will affect the amount of Transfer Duty that needs to be paid to SARS.


In most, if not all of the examples, due to our expertise and being pioneers in this specific field since 2002, we have helped many people reduce the Municipal Debt that they would have ordinarily had to have paid in order to obtain a Clearance Certificate. Not only do we ensure that the amounts paid are corrected in order to obtain a Clearance Certificate, but taking the new Legislation into account, we ensure that all Historical Municipal Debts are properly extinguished so that they will be no further risk to potential Purchasers and Owners in the future.

We ensure that ALL DEBTS are properly extinguished and paid on the property.


If you have purchased a property and/or have any kind of high Municipal Debt problem when transferring a Property, please contact the Municipal Debt Specialist to assist you. We have a FREE RATES HELP DESK that you are most welcome to use. Please note that we are able to assist with Municipal Debt on all kinds of Property Transfers, i.e. Deceased Estates, Liquidations/Sequestrations, normal sales, etc.