Consumer Information

Author : Maryna Botha – STBB
17 November 2016

HISTORIC DEBT LIABILITY:  RELIEF
JORDAAN V CITY OF TSHWANE MUNICIPALITY (74195/2013) [2016] ZAGPPHC (7 NOVEMBER2016)

The Municipal Systems Act provides that outstanding debt remains a charge against the land, even after it changes hands. This could have the effect of making a new owner pay for debts the previous owner incurred. The constitutionality of this provision was finally challenged in this matter and the outcome provides relief to property purchasers.

SUMMARY OF JUDGMENT

FACTS

The Municipal Systems Act provides in section 118(3) that municipal debt, i.e. debt in respect of a property relating to “municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties”, remains a charge against a property even if that property changes hands.

The constitutionality of the section was challenged in the Pretoria High Court which ruled, in Jordaan v City of Tshwane Metropolitan Municipality, that this provision is indeed unconstitutional. It concluded that the security afforded to the municipality by the section will remain in place only for so long as the debtor owns the property, and does not extend to the period after ownership has passed. This means that municipalities in the jurisdiction of the Pretoria High Court may no longer hold a new property owner liable for debts relating to the property incurred by a previous owner. The new owner has no connection to the historical debt and section 118(3) thus unjustifiably limits the new owner’s property rights under the Constitution.

It is generally believed that the judgment is correct and that the finding of unconstitutionality will be endorsed by the Constitutional Court. Other High Courts will follow suit in all likelihood and municipalities would be well advised to adapt collection procedures accordingly.

Note that in execution sales, the Conditions of Sale usually make the purchaser liable for all municipal debt on the property. If the purchaser accepts this contractual obligation, he will be liable for the debt and the Jordaan judgment is not relevant.

The Judgment can be viewed here: