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Following the recent ruling by the Constitutional Court, new homeowners<\/strong> will no longer<\/strong> have to worry about being held liable for historical debt<\/strong> incurred by previous owners, and having their municipal services cut off as a result, or possibly even having their property attached and sold in execution.<\/p>\n The judgment brings to an end a long period of confusion \u201cand no little controversy\u201d since judgment was given in 2013 in the Gauteng High Court case Mathabathe vs Municipality of Tshwane, which concerned the process of obtaining and lodging a municipal clearance certificate.<\/p>\n In terms of Section 118(1) of the Municipal Systems Act, conveyancers are obliged to obtain such clearance certificates before properties can be transferred to new owners, in order to ensure that any rates and utility charges to the local authority by the property seller have been paid up to date.<\/p>\n However, the Act in fact only stipulates that the municipality must issue the certificate if the outstanding debt for the two years immediately preceding the date of sale has been paid in full, and in the above case the court ruled that if there was debt older than that (historical debt), the property could be transferred to the new owner but the seller would remain indebted to the municipality for historical debt.<\/p>\n Charge upon the property<\/u><\/strong><\/p>\n All would have been fine at that point, except for the fact that Section 118(3) of the Act stipulates that all municipal debt (including the historical debt) is actually \u201ca charge upon the property\u201d, rather than on a person \u2013 which led the court to also rule that the municipality would therefore have a lien (statutory tacit hypothec) over the property for the payment of the historical debt \u2013 and that this lien would not be extinguished when the property was transferred to a new owner.<\/p>\n The effect of this, in legal language, was seemingly that a municipality which wanted to \u2018perfect its lien\u2019 could thus attach the property from the new owner and sell it on auction to settle the previous owner\u2019s historical debt. And in fact some municipalities did start trying to use this judgment to try to collect historical debt from new owners. Some even went so far as to refuse to open utility accounts in the name of new owners until they had settled the previous owners\u2019 historical debt.<\/p>\n This has obviously created a major worry and frustration for property buyers, and for the real estate industry as a whole, and the situation was only slightly improved by the 2014 judgment in the case of PJ Mitchell v City of Tshwane Metropolitan Authority, when the same court ruled that a municipality\u2019s lien over a property had been extinguished by a sale in execution and that the new owner should be granted a clean title.<\/p>\n In that case, the court did also rule that a municipality cannot refuse to provide services to a new owner on the grounds that there is a historical debt that has not been paid \u2013 but it remained to be decided what should happen when a property is not sold in execution but, as is usually the case, in terms of an agreement between buyer and seller.<\/p>\n