PROPERTY Buyers cannot be liable for seller’s municipal debt Legalbrief Today A prospective purchaser of a property should include a clause in all Offer to Purchase/Sale Agreement documents to the effect that the seller undertakes to obtain a full and not an abridged rates clearance certificate (RCC), says Chantelle Gladwin. She looks at the SCA judgment in City of Tshwane Metropolitan Municipality v Mathabathe and Another, arguing that in this case the SCA confirmed that municipalities must issue abridged RCCs, but has inadvertently created a new and potentially even greater problem for the property industry. The court ruled that the municipality was ‘plainly wrong in its contention that ‘upon registration…(it) loses its rights under Section 118(3) of the Act’.’ Gladwin points out that this obiter remark is now being interpreted by some municipalities to mean that they retain the right – after transfer of the property to a purchaser – to rely on the property as security for the debts of the seller. She says that that this cannot possibly – in logic or in law – be the interpretation that the court intended. ‘The court intended to convey that after a two-year RCC is issued, but before transfer, the municipality retains its real right of security in the form of its statutory hypothec (its lien) to attach and sell the property to obtain payment of the full debt owed, including all amounts that remain owing after the two-year RCC had been issued. After transfer, the municipality’s right of retention falls away, because it cannot operate over the property of an innocent third party (namely the purchaser). So the municipality’s lien does not survive transfer, but it does survive the issue of a two year RCC.’
Posted on: Mon, 27 Jan 2014 11:28:06 +0000
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