Section 118 of the Local Government: Municipal Systems Act – Our Landmark Case and its Implications
Introduction
Since 2002 to date; we’ve been helping people save exorbitant amounts to obtain Rates Clearance Certificates needed to transfer properties. By challenging the Clearance Figures and debts, we carefully review and reduce these amounts, creating significant savings. Our expertise was confirmed by the Constitutional Court, making us the trusted leaders in this field.
Below we give a concise summary and background: The Constitutional Court’s ruling in Jordaan and Others v City of Tshwane Metropolitan Municipality and Others is a significant victory that we proudly ran on behalf of our clients and our own properties. This case has far-reaching implications for property owners and municipalities alike, especially concerning the complex issues surrounding Municipal Clearance Certificates and Section 118 of the Local Government: Municipal Systems Act, 32 of 2000.
Understanding Section 118(1) and Section 118(3)
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Section 118(1) of the Municipal Systems Act mandates that a Registrar of Deeds cannot register the transfer of property unless a clearance certificate is provided by the relevant municipality. This certificate confirms that all municipal debts related to service fees, property rates, and other municipal taxes incurred during the two years preceding the application have been fully paid.
Section 118(3) goes a step further, stating that any amount owed for municipal services is a charge upon the property itself, enjoying priority over any mortgage bonds. This clause has historically caused significant concern among property owners and buyers, as it implies that unpaid municipal debts could be transferred with the property, potentially becoming the responsibility of the new owner.
Section 118 Local Government Municipal Systems Act 32 of 2000 a32-000
Historical Case Law: The Precedent Set by Mitchell’s Case
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In the case of City of Tshwane Metropolitan Municipality v Peregrine Joseph Mitchell, the Supreme Court of Appeal (SCA) addressed whether the security provided by Section 118(3) is extinguished upon the sale of a property in execution. Mr Mitchell, who purchased a property at a sale in execution, faced a substantial municipal debt that included amounts older than two years, known as historical debt.
Initially, the High Court ruled in favor of Mr Mitchell, stating that the security provided by Section 118(3) was extinguished by the sale in execution. However, upon appeal, the SCA reversed this decision, declaring that the security over the property remained intact even after transfer, and thus, the historical debt was still enforceable against the new owner.
This ruling emphasized that the hypothec created by Section 118(3) does not automatically disappear upon the transfer of property, leaving new owners potentially liable for debts they did not incur.
Our Landmark Case: Jordaan and Others v City of Tshwane Metropolitan Municipality 
We successfully represented our clients in the Jordaan and Others case, a pivotal moment in South African property law. The Constitutional Court (CC) ruled that new property owners are not responsible for municipal debts accumulated by previous owners. This judgment was a direct challenge to the constitutionality of Section 118(3) and its potential to unfairly burden new property owners.
Our involvement in this case was driven by our commitment to protecting our clients from the unjust financial burdens imposed by inherited municipal debts. We worked tirelessly to reduce their clearance figures, ensuring that their rights were upheld when obtaining clearance certificates.
The Implications of the Constitutional Court’s Ruling
The Constitutional Court’s decision brought much-needed clarity and relief to property buyers and sellers alike. By ruling that municipalities cannot hold new owners liable for historical debts, the Court effectively removed the risk of unexpected liabilities arising from the previous owner’s unpaid municipal accounts.
This ruling also has significant implications for municipalities, which must now ensure that all debts are settled by the seller before transfer. Failure to do so means that the municipality may lose its ability to recover these debts, as they cannot pursue the new owner.
For property buyers, this decision underscores the importance of thorough due diligence before purchasing a property. It also highlights the necessity for clear communication with municipalities regarding outstanding debts and the conditions of obtaining a clearance certificate.
Practical Considerations Moving Forward
In light of this landmark judgment, it is crucial for property buyers, sellers, and financial institutions to adapt their practices. Buyers should ensure that all historical debts are fully settled by the seller before transfer. Financial institutions may need to adjust their risk assessments to account for the potential liabilities associated with historical municipal debts.
Real estate agents should consider incorporating clauses in offers to purchase that protect buyers from the risks associated with Section 118(3). These clauses should explicitly require sellers to obtain comprehensive clearance certificates that cover all outstanding debts, not just those incurred in the two years preceding the application.
Conclusion
Our victory in the Jordaan and Others case is a testament to our expertise in navigating complex legal issues related to municipal clearance certificates and property transfers. By securing this favorable outcome, we have not only protected our clients but also set a precedent that benefits property owners across South Africa.
As we continue to advocate for the fair treatment of property buyers and sellers, we remain dedicated to reducing High Municipal Clearance Figures and ensuring that our clients receive the protection they deserve.
Q&A: Insights into Section 118 and Our Landmark Legal Victory
Section 118 of the Local Government: Municipal Systems Act, 32 of 2000, deals with municipal clearance certificates required for the transfer of property. It includes provisions that ensure all municipal debts related to service fees, property rates, and other municipal taxes are paid before the transfer. Our firm legally reduces and settles the amounts fast by not delaying transfers.
Section 118(1) mandates that a Registrar of Deeds cannot register the transfer of property unless a clearance certificate is provided by the relevant municipality, confirming that all municipal debts incurred during the two years preceding the application have been fully paid. For this reason it imperative to ensure the debts are correctly paid and that sellers are not over charged through our services.
Section 118(3) states that any amount owed for municipal services is a charge upon the property itself, enjoying priority over any mortgage bonds. This clause has historically caused concern among property owners and buyers, as it implied that unpaid municipal debts could be transferred with the property. However, we successfully represented Jordaan, a few of our other clients and our wn properties in the landmark case of Jordaan and Others v City of Tshwane Metropolitan Municipality. Our victory in this case not only protected our client but also led to a significant change in the law, ensuring that new property owners are not held liable for municipal debts incurred by previous owners. This landmark judgment has provided much-needed clarity and relief for property buyers across South Africa.
Our matters ruling which became precedent law, means that property buyers are not liable for municipal debts incurred by previous owners, reducing the risk of unexpected liabilities. It emphasises the importance of thorough due diligence and clear communication with municipalities regarding outstanding debts. At Municipal Debt Specialist, we assist property buyers by conducting comprehensive audits and settling with reductions in Municipal Clearance Figures to ensure a smooth transfer process.
Property buyers should ensure that all historical debts are fully settled by the seller before transfer. They could also consider incorporating clauses in offers to purchase that require sellers to obtain comprehensive clearance certificates covering all outstanding debts, ie not just for the 2 years debts. Municipal Debt Specialist provides expert services to help buyers and sellers navigate these complexities, ensuring all debts are settled and clearance certificates are obtained efficiently.
Due to our Landmark court Case win, municipalities must now ensure that all debts are settled by the seller before transfer, as they cannot pursue the new owner for historical debts. This may impact their ability to recover unpaid municipal debts. Municipal Debt Specialist works closely with municipalities to correct billing and debt collection practices, ensuring a fair and transparent process for all parties involved.
Real estate agents could include clauses in offers to purchase that protect buyers from the risks associated with Section 118(3). These clauses could explicitly require sellers to obtain comprehensive clearance certificates that cover all outstanding debts. Municipal Debt Specialist offers support to real estate agents by providing detailed audits and legal expertise to ensure all municipal debts are addressed before property transfers. Although by rights, this should not be necessary due to our Landmark Court Win, this is an extra precaution one could make, as we have heard some municipalities are still acting outside the law.
The Jordaan and Others case is considered a landmark because it set a precedent that new property owners are not liable for municipal debts incurred by previous owners, providing significant protection for property buyers and sellers. Municipal Debt Specialist played a crucial role in this case, representing Jordaan and securing a favorable outcome that has benefited property owners across South Africa.
Municipal Debt Specialist specialises in reducing high Municipal Clearance Figures to obtain clearance certificates essential for property transfers. We conduct comprehensive audits, settle with reductions, and handle the legalities of debt resolution efficiently. Our no-win, no-fee approach ensures that clients only pay from the savings we achieve, making the process risk-free and cost-effective.
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