Division: Transvaal Provincial Division
Case No: 20768/2002
Judgment date: 23 March 2003
Coram: Du Plessis J
Section 118(3) provides:
"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."
In essence the issue at hand was whether municipalities had preference over property mortgage bondholders for any money relating to properties that is owed to them. The property was sold in execution for R725 000 in December 2001. A clearance certificate was obtained in terms of s 118(1) of the Act.
R287 900,29 was owed in respect of municipal debts that came due in the two years preceding the date of application of the certificate (since October 1999), while a further amount of R655 273,83 was sought for the earlier municipal debts. First applicant paid the amount of the certificate and the property was transferred into its name. The second applicant contended that in the distribution of the proceeds of the sale, its mortgage bond over the property took precedence over the R655 273,83 owing to the first respondent in respect of the old municipal debts.
The declaratory orders were aimed at declaring whether the old municipal debts formed a charge upon the property. Judge BR du Plessis found that s 118(3) was not retrospective. However there was no rule that existing rights cannot be interfered with and this was the case here. Therefore the Municipal Systems Act gives all council debt preference over any mortgage bond.
Full judgement on KZNLS Law Library website