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High Court Rule 46

24 April 2014

In essence Sheriffs must comply with Form 21 - Conditions of Sale in Execution of Immovable Property and High Court Rule 46 and the conditions therein.  See the summary of the judgment of Absa Bank v The Sheriff of the High Court Simon's Town, Case Number 26018/2010. 

It is clear that the Conditions of Form 21 refer to the purchaser who is liable to obtain a Clearance Certificate in terms of Section 118(1) to effect transfer, while the Municipality is entitled to and/or obliged to claim the outstanding debt directly from the proceeds of the Sheriff's sale.  However some transferring attorneys and sheriffs are adding in a clause which states that the purchaser is liable for all municipal debts on the property.  This clause is unconstitutional because it makes a purchaser liable for the debts of previous tenants and owners which could run into many years.

The landlord/owner however is only responsible for the past two years debts in order to obtain a Clearance Certificate, even if a tenant ran up the debt.  In the Supreme Court of Appeal matter between BOE Bank v City of Tshwane Metropolitan Municipality, Case Number 240/2003, it was made clear that the Municipality must issue a Clearance Certificate for the past two years in terms of Section 118 and that they must claim the balance of the outstanding debt directly from the Sheriff. 

In City of Johannesburg v Kaplan NO [2006] SCA 45 (RSA) 111/05, the Court sets out a summary of the Municipalities debts and claims [refer to paragraph 25 et seq].  While in City of Cape Town v Real People Housing (77/09) [2009] ZASCA 159, the Court held that it will be unlawful to withhold a Clearance Certificate if the debts for the past two years were paid.  It is is interesting to note that the original High Court judgment (Real People Housing (Pty) Limited v City of Cape Town (9692/07) [2008] ZAWCHC 65; 2010 (1) SA 411 (C)) specifically refers to the above judgments [paragraphs 25 - 28, 34, 39]. 

It is imperative therefore that all Sheriffs comply with their obligations by "settling" the Conditions of Sale as defined in Rule 46(8)(a) which reads as follows:

(8) (a) (i) The conditions of sale shall, not less than 20 days prior to the date of the sale, be prepared by the execution creditor as near as may be in accordance with Form 21 of the First Schedule, and the said conditions of sale shall be submitted to the sheriff to settle them,

and not allow themselves to be intimidated by creditors and attorneys. Some of whom are trying to cancel sales to purchasers when they refuse to be held ransom to infinite municipal arrears. This failure to comply is causing unnecessary disputes and tension between the parties.  

Peter Livanos
New Ventures Consultancy and Services

Letter to Board of Sheriffs and Conditions of Sale

Reader Comments: 7
Peter Livanos - New Ventures Consulting & Services 25/04/2014:

This matter has gotten so far out of hand that certain attorneys have even cancelled sales due to them putting in Conditions that are not compliant with Form 21. People out there that do not know their rights are being effectively "blackmailed and bullied"! If purchasers know their rights, they could sue the Sheriff personally, as he/she was supposed to make sure the conditions are legal. Recently, the Sheriff and the bank was ordered by the courts to refund the monies that purchaser was forced to pay in terms of Section 118(3), because the attorneys "blackmailed" the purchaser. I am so glad they defended their rights! We will not allow our clients to suffer the same fate and ensure that our clients pay the correct and lawful amounts to the municipalities!

Peter Livanos

Tanya Sakota 30/04/2014:

Thanks for the eye opener Peter! I have also been a victim blackmailed by "reputable" attorneys for the very same reason....UNACCEPTABLE and UNLAWFUL!

Rene Cronje 02/05/2014:

Have you considered the following ruling: In a Supreme Court of Appeal Case ( City of Tshwane Metropolitan Municipality v Mathabathe & another (501/12) [2013] ZASC 60) the court found the following: 1. In the said matter the Court examined the security given to a municipality by section 118(1) and 118(3) of the Local Government: Municipal Systems Act 32 of 2000 which provides as follows: “118 (1) A registrar of deeds may not register the transfer of property except on production to that registrar of deeds of a prescribed certificate- (a) issued by the municipality or municipalities in which that property is situated; and (b) which certifies that all amounts that became 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. 118(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”

The Court came to the following conclusions: i. section 118 (1) is an embargo provision whilst section 118(3) is a security provision; ii. in terms of section 118 (1) the municipality can refuse to issue the prescribed certificate (colloquially referred to as a ‘rates clearance certificate’) and thereby block the transfer of the ownership of the property unless all current municipal debts are paid. iii. in terms of section 118(3) the municipality has a lien having the effect of a tacit statutory hypothec (and no limit is placed on its duration outside of insolvency) on the relevant property for any municipal debts (old and new) that have not prescribed. The municipal debts are secured by the property and, if not paid and an appropriate order of court is obtained, the property may be sold in execution and the proceeds applied in payment of the relevant municipal debts. It is thus noted that if the immovable property of any person, who took transfer of the relevant property on the strength of a rates clearance certificate issued in terms of section 118(1), may be sold in execution for old municipal debts incurred by his predecessors in title. The old municipal debts would also enjoy preference over the relevant new bondholder’s mortgage bond.

Peter Livanos 03/05/2014:

Hi Rene, that's exactly the point, everyone has protection under the law and legislation. I am of the opinion it was written pretty well by the legislature. It needs to be followed carefully and then we will all be okay! Its all about making sure that the right people or entities pay what they are obliged to pay and no underhand business goes on. You may or may not be aware of the huge litigation with regards to how the municipalities have completely misinterpreted the above judgment you have quoted. Our firm is spearheading the correct interpretation and how the municipalities are supposed to be acting. If it interests you its all on our website under press releases.

Elizabeth Anne Morris 28/05/2014:

Hi Peter, I would like to thank You and Your Staff for the excellent service rendered in obtaining my clearance certificate for a property purchased last year. Your Staff kept me up-to-date on the whole process and it was a really pleasant experience dealing with a company who know the law, and are able to assist those of us who have very little experience in these matters. The excellent service and knowledge of the law relating to these matters made the transfer process a pleasure. However, I do need to contact you again, regarding other issues that have arisen. I know that I now know that I have the confidence to deal with these matters, when we have experienced people like yourself to assist us. Kind regards Liz

P Livanos 30/05/2014:

Liz, Thank you for the kind words. That's why we are here, you are always welcome to contact us for anything we may be of assistance with. Tanya, its only our pleasure... You know us, JUSTICE FOR ALL!!!

Riaan 04/03/2015:

Hi Peter. It has come to pass that the Rates clearance certificate issued to me was done so on an Estimate reading rather than an actual reading. Months down the line COJ has issued the previous owner and myself with a R30 000 invoice each for electricity not paid. It seems that they have split the fee between us. Is this legal ? They have no means to pinpoint the reading as per transfer date as there is none. They have failed to supply the clearance certificate correctly, which is the sole reason for the clearance certificate. I have been disputing this with them for over 4 years and once again they have cut my services because I refuse and dispute paying the Estimate lump sum. I do however pay my monthly usage etc. as that is fair and correct. Please help !

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