M rates clearance certificates and council's right to recover old debts from the new owner.
Category Newsflash
M RATES CLEARANCE CERTIFICATES AND COUNCIL'S RIGHT TO RECOVER OLD DEBTS FROM THE NEW OWNER
(Again – and hopefully now for the last time!)
This Newsflash deals with a Supreme Court of Appeal judgment that was handed down two weeks ago and deals with the burning question, whether a Municipality may continue to recover arrear rates and taxes as “a charge upon the land” (and in essence from a new owner of property) after transfer, where the property was sold by way of a forced sheriff auction.
To refresh your memories, it is now established law (upheld by the Supreme Court of Appeal) that whilst section 118(1) of the Local Government: Municipal Systems Act, 32 of 2000 provides that a local municipality may not demand payment of more than 2 years’ arrear rates and taxes in order to grant a rates clearance certificate, to enable a property to be transferred, should an arrears exist which is older than 2 years, this arrears may in essence be added to the new owner’s rates account because such debts are considered as “a charge upon the land”. Council need then not chase after the old owner and may recover this by attaching and selling the land in question regardless of who ran up the account! Although the new owner is not personally liable for this debt, he/she will have to pay it to prevent the sale of his/her property – and then hope to recover it from the previous owner. This is settled law for a normal sale.
We turn now to forced (sheriff) auction sales. Some months ago we reported on a High Court decision dealing with the issue of whether a local municipality retains this same “lien” in the case of a forced (sheriff) auction. In that judgment the court held that should a municipality issue a rates clearance certificate after a property is sold on a sheriff auction, then the municipality forfeits any further lien over the property for debts that are older than 2 years. In other words, the Council can then no longer obtain an order to sell the property (which would force the new owner to pay up if he / she wanted to keep the property). The matter was then referred to the Supreme Court of Appeal. After analysing several ancient authorities on the topic, it came to the conclusion that even in the case of a forced sheriff sale, the Municipality still retains a lien over the property and can still proceed to recover the debt which is older than 2 years.
So in conclusion the same rule now applies to ordinary sales AND to forced auction sales. In both instances, rates accounts older than 2 years may be visited upon the new owner!
Author: Miltons Matsemela
