- The judgement, on 22 May 2013, of the Supreme Court of Appeal of South Africa in the matter of City of Tshwane Metropolitan Municipality v Mathabathe & another (501/12)  ZASC 60 forces me to agree with Mr Bumble in Charles Dickens’ Oliver Twist when he said "If the law supposes that, the law is a ass - a idiot” (sic).
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;
(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.
(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”
I will, in this memorandum, refer to “municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties relating to the two years preceding the date of application for the certificate” as ‘current municipal debts’ and to all other ‘municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties’ as ‘old municipal debts’.
The Court came to the following conclusions:
- section 118 (1) is an embargo provision whilst section 118(3) is a security provision;
- 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.
- 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 would then appear as 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.
- I, and I presume most other conveyancers and moneylenders have, to date, accepted that the existence of a rates clearance certificate guaranteed that no municipal debts (old or new) were owing or, at least, that a municipality could, after the transfer of a property on the strength of a rates clearance certificate issued by it, not enforce any old municipal debts other than against the previous owner(s) who incurred the debts.
- The judgement under discussion clearly shows that I was wrong and that conveyancers will have to devise new mechanisms to ensure that no old municipal debts exist regarding the properties transferred by them.
- I can only imagine how busy attorneys acting for municipalities are going to be in order to obtain court orders to sell in execution properties that were, since the date that section 118 came into force, transferred whilst old municipal debts were still owing.