New property owners not liable for historical municipal debt
The Constitutional Court has
ruled on August 29 that new home owners are not liable for historical debt incurred by previous owners.
Several municipalities including Tshwane, eThekwini and Ekurhuleni had argued in the case brought by several property owners that it was lawful for a municipality to attach and sell a recently purchased property in order to pay debt owed to them.
Historically, a property was not allowed to be transferred to a new buyer until a municipal certificate was issued, clearing any debt spanning a two-year period. However, debts that surpassed the cut off became the liability of the new owner.
The core of this appeal was the interpretation of the Municipal Systems Act, which municipalities used to refuse to issue clearance certificates until all debts had been paid.
In a unanimous judgment, Justice Edwin Cameron says the Municipal Systems Act can be interpreted so that the charge does not survive the transfer.
The court held that the Bill of Rights prohibits arbitrary deprivation of property, which would happen if debts without historical limit are imposed on a new owner of properties. Therefore, to avoid violating section 25 of the Constitution, section 118(3) of the Municipal Systems Act must now be interpreted so that the charge it imposes does not survive transfer to a new owner.
The court has also ordered municipalities to pay the costs of the application brought by homeowners.
Said Judge Cameron: “It is declared that upon transfer of a property, a new owner is not liable for debts arising before transfer from the charge upon the property under Section 113. The appellants and the appeals and the minister are to pay the applicant costs, including the costs of two counsels.”