Section 118 is NOT a Discount, Write-Off, Reduction or Saving:

The Hidden Risks of Paying Only for a Rates Clearance Certificate

Quick Summary

MDS-Section-118-Is-Not-a-Discount-2 - Municipal Debt Specialist

Section 118 Is NOT Discount

Many stakeholders still believe Section 118 creates discounts or automatic write-offs. IT DOES NOT!!!
Across the property industry, some advisors and so-called “experts” are misleading clients into thinking Section 118(1) is a shortcut or savings mechanism to settle all municipal debts. This is a dangerous misconception.
A Rates Clearance Certificate (RCC) under Section 118(1) only covers the last two years of municipal charges. It does not clear historic debt under Section 118(3).
Leaving these historic debts unaddressed can lead to:
- Interdicts and delayed transfers
- Service termination or refusal to open new accounts
- Post-transfer legal action by municipalities or debt collectors
Our Constitutional Court victory in Jordaan (run and won by MDS, acting for Chantelle Jordaan) protects new owners from previous owners’ historic debts — but it does not eliminate legitimate municipal enforcement against the correct debtor.

Get your High Rates Clearance Figures properly interrogated by MDS before transfer to enjoy legal peace of mind and savings; reach out to our Free Clearance Help Desk.

FAQs

The Costly Misconception: “Section 118 = Write-Off or Discount”

We often hear these so-called “magic words” that many professionals believe carry special powers for reductions or discounts — a complete fallacy. In reality, most don’t even understand what they’re applying for when they say:

“We’ve applied for Section 118 figures”

Section 118 (1):

The Registrar cannot register transfer unless a municipality issues an RCC confirming the preceding two years are fully paid.
It does not settle all debt.

Section 118 (3):

Municipal amounts are a charge upon the property and enjoy preference over any mortgage bond.
Misunderstanding this clause has fuelled years of confusion about historic debt.
Our Jordaan Constitutional Court outcome (MDS case) confirms new owners aren’t liable for previous owners’ historic debt; municipalities are obligated to pursue the original debtor.

Plain English: The RCC proves the last two years are paid. It’s not a full and final settlement of everything the municipality must lawfully claim.

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What Still Happens in Practice (and Why You Must Prepare)

Even with the Jordaan precedent, we continue to see worrying behaviour:

Historic debts incorrectly transferred to current owners where previous owners failed to settle; most people cannot afford High Court or Constitutional litigation to compel correction, so the pressure tactic “works”.
Service termination for new owners (or refusal to open accounts) despite the legal position — causing occupation and utility shocks.
Debts moved onto a client’s new property account after they relocate, creating cascading disputes across accounts.

BOTTOM LINE: Law on paper is not the same as practice on the ground. You need proactive, expert pre-transfer auditing to prevent these scenarios from derailing your transaction or causing future court cases, judgments, stress and severe anxiety…

Read more on our Landmark Constituional Court Victory known as the Jordaan Historical Debt Court Case that chnaged the landscape and solidified MDS as the Authority on Section 118

Why This Confusion Keeps Circulating:

1) So Called “Rates Consultants”, “Rates Experts”, “Ex Municipal Officials”, “Runners” Culture vs Reality & Proper Audits

For years and even to-date, many firms rely on the above “so called experts” to “get figures and certificates” quickly. That approach often treats the RCC as the whole job, skipping the audit required to reconcile historic charges, advance billing, misallocations, metering anomalies, by-law applications, and the specific transfer type (normal sale, estate, liquidation, sheriff sale, half-share, etc.).

Without our audit and Full & Final Settlement of ALL DEBTS, stakeholders wrongly believe RCC sufficiency = full settlement, which it isn’t.

2) Incorrect / Outdated Web Advice & Municipal Lore

Generic articles and anecdotal “insider tips” frequently say: “Just pay 118 (1) and move on.” That two-year-only mindset ignores the statutory charge in 118 (3), the municipality’s ongoing credit control powers, and the reality that unresolved items can still surface pre- or post-transfer.

– MDS has consistently cautioned against this shortcut –

3) Transfer-Type Blindness

Treating all transfers alike is a mistake. Liquidations/Sequestrations invoke 118 (2) and s 89 Insolvency Act; deceased estates, endorsements, sheriff sales each have different risk contours and timing constraints.

Using a single “RCC only” rule across all scenarios manufactures disputes.

Not All Transfers Are Equal — Our Legal Strategy Depends on the Type of Transfer

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Normal Transfers:

Obtaining a Rates Clearance Certificate (RCC) is only the starting point. For normal transfers, it is critical that we interrogate the entire municipal debt on the property, not just the bare minimum required for the RCC.

– Why? Because Section 118(3) creates a statutory charge over the property, and leaving historic debt unresolved exposes sellers to serious risk. At MDS, we apply our proven legal methodologies, backed by Constitutional Court precedent and our legendary audit and interrogation process, to ensure the correct legal amounts are settled — not inflated figures, and not shortcuts that could backfire later.

Liquidations / Sequestrations:

Section 118(2) intersects with s 89 of the Insolvency Act. Treating these like a “standard RCC” is a mistake that invites disputes and delays. When we are mandated to act in liquidations and sequestrations, we ensure that legendary interrogation process once again prevails read with the appropriate laws to protect all parties.

Deceased Estates / Half-Shares / Endorsements:

Expect legacy anomalies, timing pressures, and documentation pitfalls. Our approach: audit first, act second. All too often in these type of transfers are interrogation process yields incredible savings for the parties yet at the same time protect the rights of all parties for the best fast and legal outcome.

Sheriff Sales in Execution:

“Bargain” prices often conceal uncertain municipal exposure. Without expert intervention, transfers stall or collapse. Please read our article on sheriff sales in execution.

What the Jordaan Victory Protects — and What it Doesn’t

MDS brought, ran and won the Jordaan matter in the Constitutional Court, acting for our client Chantelle Jordaan.
The Court confirmed the municipality’s 118 (3) security does not survive transfer to bind new owners for previous owners’ historic debts.
Municipalities must pursue the original debtor.
This does not mean municipalities can’t take lawful steps where accounts are incorrect, incomplete or where the liable party remains in default.
Our audits & legal reductions before transfer remain essential.

The MDS Interrogation & Result

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We conduct a thorough legal and accounting investigation of the property’s municipal accounts. Drawing on deep statutory knowledge, case law (including our Constitutional Court work), and decades of technical experience, we reconcile, correct and present the legally accurate position to the municipality and insist that the account be aligned accordingly — fast and without delaying transfer.

Our service is no-win, no-fee: no upfront costs, fees are recovered from savings achieved.

Why Banks and Mortgage Bond Holders Must Pay Attention

The Hidden Risk to Mortgage Security

Under Section 118(3) of the Municipal Systems Act, all outstanding municipal debt is a statutory charge on the property and enjoys preference over any mortgage bond. This means that if municipal debts are not properly settled before transfer, the municipality’s claim can outrank the bank’s security, creating serious risk for lenders.

What This Means for Banks

Credit exposure: If a property is transferred with unresolved municipal debt, the municipality can enforce its rights, potentially undermining the bank’s ability to recover its loan.
Interdicts and delays: Municipalities can interdict transfers or refuse clearance, delaying registration and impacting loan disbursement timelines.
Reputational and compliance risk: Banks funding transactions where only the RCC minimum (Section 118(1)) is paid may face scrutiny if the deal collapses or litigation follows.

Common Misconception

Many stakeholders assume that paying the two-year RCC amount is enough. It isn’t. Historic debt and misallocated charges can still trigger enforcement actions, even after transfer.

Why Partnering with MDS Protects Banks

Full audit and legal compliance: We ensure municipal accounts are correctly reconciled and aligned with the law before transfer.
Risk mitigation: Our process prevents interdicts, delays, and disputes that could compromise the bank’s security.
Proven authority: Backed by our Constitutional Court victory in Jordaan, we understand the law and enforce correct outcomes.

Bottom line: Banks should insist that transferring attorneys obtain full clearance figures and submit them for audit. Anything less is a shortcut that exposes lenders to unnecessary risk.

Risks to Bridging Finance Companies

reducing high clearance figures stress free property transfers

Legal Risk Clarification

118 (3) creates a statutory charge over the property for all outstanding municipal debt, not just the RCC window.
The municipality retains enforcement rights, and unresolved exposure can surface pre- or post-transfer.
Failure to settle properly pre-transfer can trigger interdicts, delayed registration, legal action, reputational harm, and potential financial exposure for attorneys and financiers involved in the transaction.

Common Misconceptions

Some “advisors” still promote “pay 118 (1) only”. That mischaracterisation exposes sellers, attorneys, financiers and buyers to avoidable legal and cash-flow shocks.

Specific Risks to Bridging Finance Providers

Deals needing bridging often involve high municipal arrears and distress; when stakeholders pay RCC minimums only, the municipality’s superior rights under 118 (3) can still bite, threatening timelines and recoveries.
Data integrity risks: clearance figures can be erroneous or manipulated without audit; financiers funding against flawed numbers inherit execution risk if the municipality acts later.

Strategic Value of MDS for Financiers

Fast, lawful alignment of municipal accounts and material, defensible reductions where charges are incorrect or inflated.
Protection of legal interests for attorneys and financiers through proper 118 (1)/(2)/(3) management and our proven methodologies.
Assurance: backed by our Constitutional Court victory and long-standing working relationships with municipalities such as Ekurhuleni and Tshwane.

Collaborative Approach

A three-way partnership: Bridging Finance Company + MDS + Transferring Attorneys → faster transfers, lower stress, improved financial outcomes & risk mitigation.

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What to Do before paying for a RCC – Rates Clearance Certificate (Simple Workflow)

Ask your transferring attorney to obtain full clearance figures (not “bare minimum” or similar requests).
Send the figures to MDS’s Free Clearance Help Desk for a same-day no-obligation assessment.
Mandate us to Act on your matter.
We investigate, interrogate and correct the account and ensure on lawful alignment.
You pay the correct amount, the RCC issues, and the transfer proceeds without avoidable shocks.

Full & Final payments, no-come backs & everyone can rest well!

Frequently Asked Questions:

Does the RCC mean all municipal debt is settled?

No. It certifies that the last two years are paid. Historic and misbilled amounts must still be dealt with correctly to avoid later action.

Can a municipality act after transfer?

Yes — against the liable party — and we still see interdicts, service cuts and claims where accounts weren’t handled properly pre-transfer.

Is “pay 118 (1) only” safe?

No. It’s a shortcut that ignores 118 (3) and routine municipal credit control, creating avoidable legal and operational risk.

Why involve MDS early?

Early audits mean accurate figures, fewer delays, and robust documentation that stands up if the municipality or a debt collector acts later — across 118 (1), (2), (3) contexts.

Final Word

Section 118 is not a discount. It’s a “ticket to the Deeds Office” — nothing more. Paying only the RCC window invites stress & anxiety by way of interdicts, service disruption, registration delays and litigation which could result in judgments against you and have your name blacklisted and having sheriff attachments against your assets.

Get the right figures.
Get our our legendary audit & our reductions.
Get it done properly. No-comebacks!
Fast & Legal by the Authority on Section 118… MDS!

Send your clearance figures to the MDS Free Clearance Help Desk for a same-day review — no obligation, no upfront costs, no-win, no-fee.

Constitutional Court to Hear New Ventures Consulting & Services / Municipal Debt Specialist – Livanos

Section 118, rates clearance certificate, municipal clearance figures, historical municipal debt, transfer delays, sheriff auctions municipal debt, no‑win no‑fee municipal debt specialist.

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