Section 118 (1) (2) (3) of The Municipal Systems Act 32 of 2000
Section 118 Restraint of Transfer on Property Local Government Municipal Systems Act 32 of 2000
WHAT IS THE INFAMOUS SECTION 118 ALL ABOUT
Want to know about the origins of Municipal Debt Specialist, view our article:
When a Property Investor Was Forced to Challenge High Clearance Figures — and Changed the Law
Read More: How the Jordaan Case Changed Property Law in South Africa
Key Takeaways: Section 118 of the Municipal Systems Act
- Only 2 years of municipal debt is required for property transfer under Section 118(1) — not the full historical balance.
- Paying a clearance figure does not extinguish all municipal debt, despite common belief.
- Section 118(3) creates ongoing risk, as older debt may still be pursued and linked to the property.
- Municipalities have a statutory obligation to recover debt, although enforcement is inconsistent across South Africa.
- As clarified in our Constitutional Court Judgment, recovery must be directed against the owner who incurred the debt.
- Failure to properly interrogate high clearance figures legally, can result in significant financial loss.
- Specialist intervention (such as MDS) can materially reduce payable amounts and manage risk exposure.
Livanos Wins in ConCourt
What Every Property Owner, Attorney and Financier Must Know
The Most Misunderstood Law in South African Property Transfers | Section 118
By consulting for many ratepayers, financial institutions and service providers, transferring attorneys and all property stakeholders we often observe that Section 118 of the Municipal Systems Act is one of the most critical — and misunderstood — provisions in South African property law.
It governs whether a property can be transferred, what must be paid before transfer, and more importantly:
What happens to historical municipal debt linked to a property.
For property owners, conveyancers, and lenders, misunderstanding this section can result in:
- Paying high or unlawful clearance figures
- Assuming liability incorrectly
- Post-transfer debt reattachment disputes
- Significant financial loss
- Or making terrible mistakes by taking shortcuts
Read more: the origins of rates clearances
Since 2002, we have been saving property stakeholders significant amounts on Rates Clearance Figures required for property transfers. By challenging municipal debts and Rates Clearance Figures, we secure dramatic legally compliant and fast reductions on high clearance figures, saving clients money while ensuring fair outcomes for municipalities.
Our expertise and pioneering efforts in this field have been validated by the Constitutional Court, solidifying our reputation as South Africa’s trusted leaders in Reductions of High Municipal Rates Clearance Figures and full and final debt settlements.
Section 118 of The Municipal Systems Act has long been a topic of debate and confusion. This legislation governs property transfers involving municipal debts, mandating municipalities to claim outstanding rates, taxes, and service charges tied to a property before issuing a Rates Clearance Certificate.
While this section safeguards municipalities, Section 118 often poses significant challenges for property owners.
Section 118 Local Government Municipal Systems Act 32 of 2000 a32-000
This page article provides a simplified breakdown of Section 118(1), 118(2) and 118(3).
For a deeper legal analysis, including Constitutional Court judgments,
historical Municipal debt context and real-world
application in property transfers, see our
comprehensive Section 118 authority guide:
Read the full in-depth
Section 118 explanation here
Section 118 Restraint of Transfer on Property:
118 (1) A registrar of deeds or other registration officer of immovable property may not register the transfer of property except on production to that registrar of deeds of a prescribed certificate–
(a) issued by the municipality in which that property is situated;
and
(b) which certifies that all amounts 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.
(2) In the case of the transfer of immovable property by a trustee of an insolvent
estate, the provisions of this section are subject to section 89 of the Insolvency Act, 1936 (Act No. 24 of 1936).
(3) 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.
Section 118 extracted from Local Government Municipal Systems Act 32 of 2000
Breakdown of Section 118 (1), (2) and (3)
Section 118(1): The Clearance Certificate Requirement
What it says:
A property cannot be transferred unless a municipal clearance certificate is issued confirming that all amounts due for the preceding 2 years have been paid.
Key Practical Meaning:
- Only 2 years’ debt is required to obtain transfer
- This is what municipalities include in clearance figures
Industry Misconception:
Many assume that paying this 2-year amount settles all municipal debt.
It does not.
Section 118(2): Insolvency Qualification
This section simply clarifies that where a property forms part of an insolvent estate, the rules of the Insolvency Act may override or interact with Section 118.
In practice, this mainly affects:
- Insolvent estates
- Trustees dealing with property disposals
Section 118(3): The “Hidden Risk” Provision
This is the most controversial and commercially significant part of the law.
It states that:
Municipal debt is a charge on the property itself and enjoys preference over mortgage bonds
What this means in real-world terms:
- Debt can attach to the property, not just the owner
- Municipalities may attempt to recover historical debt beyond 2 years
- In terms of the Prescription Act Municipalities enjoys collection for up to 30 years on rates and taxes
- This creates risk for:
- Purchasers
- Bondholders
- Conveyancing attorneys
Constitutional Court Interpretation (Critical Context)
The Constitutional Court through our Jordaan vs City of Tshwane judgment has confirmed that:
- Section 118(1) limits what is required for transfer (2 years only)
BUT
- Section 118(3) creates a separate mechanism allowing municipalities to pursue older debt
Read More: Beware of “shortcuts” and how Fear is being Exploited
This dual structure creates the core tension in property transfers:
- Transfer proceeds based on limited payment
- But liability risk may persist beyond transfer
Peace of Mind Through Specialist Intervention
Acting Across Thousands of Property Transfers
While obtaining a Municipal Clearance Certificate confirms that charges for the past two years have been paid, it does not eliminate historical municipal debt or the risks associated with it.
Whether dealing with standard property sales, auctions, repossessions, or liquidations, unresolved historical municipal debt can create significant financial exposure if not properly identified and managed.
At Municipal Debt Specialist (MDS), our role extends well beyond securing a clearance certificate. Since 2002, we have operated in the legal and practical complexities surrounding Section 118, providing a structured and results-driven approach to municipal debt resolution.
How MDS Protects Your Position
- Interrogating and challenging high clearance figures
Ensuring that only legally enforceable amounts are paid — not inflated or incorrect charges - Applying our Constitutional Court principles
Limiting exposure to unlawful historical debt and ensuring recovery is aligned with legal precedent - Securing material financial reductions on all debts
Identifying errors, prescription, and misallocations to reduce the overall payable amount - Managing ongoing risk exposure
Advising on Section 118(1,2 & 3), structuring transactions, and protecting purchasers, sellers, and financiers, whilst acting fully legal and compliant.
Practical Illustration
Scenario:
A property owners owes a total honest genuine and legitimate municipal debt of R450,000, and the municipality demands full settlement as part of the transfer process.
In practice:
- The legally required clearance figures may only reflect approximately R80,000 (covering only the last two years)
- The remaining R370,000 is often referred to by municipalities as “historical debt”
Important clarification:
- This “historical debt” does not refer to debt incurred by previous owners
- It simply refers to amounts older than two years that remain unpaid
- In this example, the full R450,000 is legitimately owed by the current owner
- The R80,000 represents the minimum required to obtain a clearance certificate
- The balance of R370,000 falls within the scope of Section 118(3)
Without proper interrogation and legal analysis, this distinction is often misunderstood — leading to significant underpayment, overpayment or misallocation of liability.
The Outcome
By conducting a comprehensive audit of all municipal charges — not just the clearance figure — Municipal Debt Specialist (MDS) ensures that:
- Financial exposure is accurately identified and reduced
- Only legally enforceable amounts are paid
- Transactions proceed without avoidable delays or disputes
- All parties achieve true peace of mind, both at transfer and beyond
Take the Next Step
For a smooth, compliant, and financially optimised property transfer, engage Municipal Debt Specialist to manage and resolve all aspects of municipal debt — regardless of complexity.
Expert Assistance
If you are dealing with:
- A pending property transfer
- A disputed or high clearance figure
- Historical municipal debt
- Legal uncertainty surrounding Section 118
Municipal Debt Specialist provides targeted intervention and results-driven solutions to protect your position and optimise your financial outcome.
MUNICIPAL DEBT ON ALL TYPES OF SALES:
If you have purchased or sold 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.
We are able to assist with Municipal Clearance Debt on all kinds of Property Transfers, i.e. Deceased Estates, Liquidations / Sequestrations, normal sales, etc.
Discover More About Our Expertise and Success:
- Read a bit more About Us.
- For more information about our services or to discuss your needs, please Contact Us.
- Our team is ready to offer expert support and ensure a smooth, efficient property transfer process.
- Please also consider our NO OBLIGATION & FREE Rates Clearance Help Desk offering.
- Why not read what other clients have to say about us under our Client Testimonials.
- Do you know what a Clearance Figure or Certificate even looks like or is? Please visit our Frequently Asked Questions page.
- Last but not least please check out our amazing News & Updates in the National Media on our massive wins, acclaims and interesting articles and blogs.
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