Section 118 of the Municipal Systems Act Explained: Constitutional Court Judgments, Historical Municipal Debt and Property Transfers

Key Takeaways

• Section 118 governs the recovery of Municipal charges during property transfers.
• Section 118(1) requires certain Municipal charges to be paid before a Clearance Certificate can be issued.
• Section 118(3) created significant debate regarding historical Municipal debt and security over property.
• Our Constitutional Court’s Jordaan judgment clarified important aspects of Municipal debt recovery.
• Municipal Debt Specialist (MDS through Livanos) has been involved in this field since 2002 and participated in litigation that helped shape the legal landscape.

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.

Why MDS – Livanos Is Uniquely Qualified To Explain Section 118

Municipal Debt Specialist (MDS), under the direct leadership of Livanos, has operated exclusively in the field of municipal debt and clearance figures since 2002. Over more than two decades, MDS has advised and assisted property owners, conveyancers, attorneys, executors, insolvency practitioners and financial institutions in resolving complex municipal debt disputes.

This expertise is not purely advisory—it is rooted in direct, sustained litigation at the highest level.

MDS did not merely participate in Section 118 litigation; we initiated, funded and drove the legal campaign that ultimately culminated in the Constitutional Court’s 2017 Jordaan and Others judgment. That process was built on numerous High Court matters—many involving our own properties alongside client matters—in which we achieved consistent success against municipalities who repeatedly resisted compliance, necessitating final determination by the Constitutional Court.

The constitutional clarity that now governs historical municipal debt is therefore not theoretical to us—it is the product of litigation we personally advanced, case by case, over many years, until the issue was definitively settled.

As a result, this article is not an academic interpretation of legislation. It reflects first-hand legal experience at every level of the process, combined with practical insights drawn from thousands of matters involving municipal debt, clearance certificates and property transfers. The legal principles discussed here are the same principles that were tested, challenged and ultimately established through our own efforts—and which today underpin the functioning of the South African property market.

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What Is Section 118 Of The Municipal Systems Act?

Understanding Section 118(1) and Section 118(3)

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. 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

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The Legal Evolution of Section 118: From Mkontwana to Jordaan

Our Landmark Case: Jordaan and Others v City of Tshwane Metropolitan Municipality

What Did The Constitutional Court Decide In our Famous Historical Debt Jordaan Matter?

What is commonly referred to as the Jordaan matter was, in reality, the public face of a far larger, sustained litigation campaign driven entirely by Livanos – Municipal Debt Specialist. Chantelle Jordaan was simply the first-named applicant—but behind that name stood numerous matters, many of which involved our own properties, where we were directly and materially affected by unlawful municipal debt practices.

This was not a case we passively supported—it was a case we initiated, funded, and drove relentlessly, both in defence of our clients and in protection of our own property rights. We took on municipalities across multiple High Court actions and won every single matter. Despite clear and repeated High Court victories, municipalities persisted in opposing us, refusing to align their conduct with the law and effectively forcing the escalation of these disputes.

As a result, multiple cases—spanning different applicants, properties, and factual circumstances—were ultimately consolidated into a single constitutional challenge heard by the Constitutional Court under Jordaan and Others. This was not coincidence; it was the inevitable culmination of a body of litigation we had built, case by case, judgment by judgment.

In 2017, the Constitutional Court finally settled the issue decisively. In what stands as our landmark judgment, the Court confirmed that purchasers of property cannot be held liable for historical municipal debts incurred by previous owners, striking at the unconstitutional application of Section 118(3).

This outcome was not handed to the industry—it was fought for, established, and secured through our direct efforts.

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The Implications of the Constitutional Court’s Ruling

The protections that today’s property market takes for granted—the certainty relied upon by banks, conveyancers, estate agents, bridging financiers, buyers and sellers alike—exist because of the litigation we pursued and the precedent we established.

Yet, as we continue to engage with professionals across the property sector, it remains clear that very few fully appreciate the origin of these protections. The reality is simple: the legal certainty that now underpins property transactions in South Africa was hard-won through the persistence, risk, and strategic litigation led by Livanos – Municipal Debt Specialist.

We successfully represented our clients in the Jordaan and Others case, a pivotal moment in South African property law. The Constitutional Court 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 legally reduce their high clearance figures, ensuring that their rights were upheld when obtaining clearance certificates and transferring properties.

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.

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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.

Read our article on: Offer to Purchase Risks OTP: Municipal Debt & Clearance Trap

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Why Was Section 118 Introduced?

From colonial legislation to modern constitutional safeguards, South Africa’s property landscape tells a complex story of balancing municipal finances with fair property ownership.

Read our article on: South Africa’s Rates Clearance Laws: Origins to Section 118

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Final thoughts and Conclusion: A Defining Contribution to South African Property Law

The Constitutional Court victory in Jordaan and Others stands as more than a successful legal outcome—it represents a defining moment in South African property law, achieved through the persistence, strategy, and direct litigation efforts of Livanos and Municipal Debt Specialist (MDS).

This was not a passive involvement. It was a sustained legal campaign, built over years of High Court victories and driven by matters involving both our clients and our own properties, which ultimately compelled constitutional scrutiny.

The result is a judgment that did not merely resolve a dispute, but fundamentally reshaped the legal position under Section 118, restoring fairness and certainty across the entire property sector.

Today, the legal protections relied upon by banks, conveyancers, estate agents, bridging financiers, and property owners are rooted in the precedent we established. Yet, despite the widespread reliance on these protections, few fully appreciate their origin.

The reality is that the certainty now embedded in property transactions across South Africa was hard‑won through our direct efforts and has become part of the fabric of South African law.

Section 118 of the Municipal Systems Act remains one of the most consequential provisions affecting property transfers. While it may appear straightforward, decades of judicial interpretation have revealed its complexity—and the significant risks it once posed to unsuspecting purchasers.

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With over two decades of exclusive focus in this field since 2002, and as the driving force behind the litigation that culminated in constitutional clarity:

Livanos is not merely a participant in this area of law—we are one of its principal architects.

As we continue to act for property owners and professionals, our focus remains firmly grounded in what matters most in practice: the reduction of high municipal clearance figures at the point of transfer. While our Constitutional Court success provided decisive legal validation and reshaped the law, our core work lies in applying that authority on the ground through a proven, risk‑free model.

Every instruction we take is driven by a singular objective—to reduce our clients’ financial exposure, unlock stalled transactions, and ensure that properties can transfer fairly, efficiently, and without unjust historical debt burdens.

Section	Legal Purpose	Practical Effect in Property Transactions
Section 118(1)	Imposes a statutory requirement that a municipal clearance certificate must be obtained prior to transfer, confirming that prescribed municipal charges (limited to the relevant statutory period) have been paid.	Transfer of ownership cannot be registered in the Deeds Office unless the municipality certifies that qualifying charges have been settled, effectively giving municipalities a gatekeeping role in property transfers.
Section 118(2)	Regulates the treatment of municipal debt in circumstances of insolvency, liquidation, or sequestration, and must be read together with Section 89 of the Insolvency Act.	Establishes the ranking and recovery of municipal claims in insolvent estates, ensuring that municipal debts are dealt with in accordance with insolvency law frameworks rather than ordinary recovery processes.
Section 118(3)	Creates a statutory charge (hypothec) over immovable property as security for municipal debts, irrespective of ownership change.	Historically gave rise to significant legal uncertainty and litigation, as municipalities sought to enforce historical debt against property itself—an issue ultimately clarified and constitutionally limited by the Jordaan Constitutional Court judgment (2017).

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Common Questions About Section 118

What Do Sections 118(1), 118(2) and 118(3) Mean?

Although Section 118 is often discussed as a single legal provision, each subsection serves a different purpose and has different implications for property owners, purchasers, conveyancers and Municipalities.

Understanding the distinction between Sections 118(1), 118(2) and 118(3) is essential when dealing with Municipal debt, Clearance Figures and property transfers.

MUNICIPAL DEBT ON ALL TYPES OF SALES:

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.

We are able to assist with Municipal Clearance Debt on all kinds of Property Transfers, i.e. Deceased Estates, Liquidations/Sequestrations, normal sales, etc.

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