Is a municipality entitled to claim, from a new owner of property, debts incurred by the previous owner?
This was the question the Constitutional Court (CC) had to answer in the case of Jordaan and Others v City of Tshwane Metropolitan Municipality and Others  ZACC 31.
The applicants each complained that the municipality in question suspended municipal services or refused to conclude a consumer services agreement for municipal services until the historical debts relating to the property had been cleared. The applicants were all relatively new owners and in all the cases the debts owed to the municipality were incurred by the previous owners.
The municipalities held that they were entitled to claim the debts from the new owners because of the wording used in section 118(3) of the Local Government: Municipal Systems Act. This section provides that “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 owes and enjoys preference over any mortgage bond registered against the property.
In making its decision the CC took a journey into the origins of the section in South African statute law, for that history casts light on the section’s meaning. The CC held that the section’s purpose was to create an embargo, whereby the transferor of property with unpaid municipal debts had to pay up first, before such property could be transferred. This was a preferent claim, which conferred a priority in the debt-collecting process. The preceding statutory history shows no intention that the municipality’s claim should survive beyond transfer to a new owner.
The CC held that if the charge in section 118(3) survives transfer, there could be a significant arbitrary deprivation of property in terms of section 25 of the Constitution. Section 25 clearly states that no law may permit arbitrary deprivation of property.
Therefore, upon transfer of a property, a new owner is not liable for debts arising before transfer from the charge upon the property under section 118(3) of the Local Government: Municipal Systems Act 32 of 2000.
For more information on this, please contact Janus Olivier of Van Velden-Duffey attorneys in Rustenburg on 014-592 1135 or email@example.com.
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