Why the Security Right in Section 118(3) of the Local Government: Municipal Systems Act 32 of 2000 is not Enforceable Against Successors in Title – A Follow-up Occasioned by the SCA’S Mitchell Judgment

• Jurisdiction: South Africa
• Citation: (2017) 28 Stell LR 47
• Date: 27 May 2019
• Published date: 27 May 2019
• Pages: 47-67

47

WHY THE SECURITY RIGHT IN SECTION

118(3) OF THE LOCAL GOVERNMENT:

MUNICIPAL SYSTEMS ACT 32 OF 2000 IS NOT

ENFORCEABLE AGAINST SUCCESSORS IN

TITLE – A FOLLOW-UP OCCASIONED BY THE

SCA’S MITCHELL JUDGMENT*

Reghard Brits

BCom LLB LLD

Senior Lecturer, Department of Mercantile Law, University of Pretoria

1 Introduction

Section 118(3) of the Local Government: Municipal Systems Act 32 of 2000

(“LGMS Act”) provides that outstanding municipal debts form a “charge

upon the propert y” to which the debts relate. The effect is that the mun icipality

has a statutory real security right that “enjoys preference over any mortgage

bond registered again st the property”.

In City of Tshwane Metropolitan Municipality v Mathaba the (“Mathabathe”)1

the Supreme Court of Appeal (“SCA”) implied that this charge will remain

upon the land after it is t ransferred to a new owner. Shortly after, the

Gauteng Division of the High Court i n Pretoria decided in Mitchell v City

of Tshwane Metropolitan Municipal Council (“Mitchell”)2 that this r ule,

although apparently cor rect in private sales, does not apply when the propert y

is transferred subsequent to a judicial sale in execution. However, a majority

of the SCA in Mitchell recently upheld an appeal against the latte r judgment.3

Not only did the court reject the argument that the charge on the property

falls away when the property is transferred after a sale in execution, but it

also con rmed the general implication of Mathabathe, namely that the

municipality’s real security r ight passes with the land when it is t ransferred

regardless of the cause of such a tran sfer. In other words, the secur ity right is

enforceable against successor s-in-title of the original owner – the latter being

* An earl ier draft of th is article for med the basis of a pr esentation g iven at Schindlers Attorneys,

Conveyance rs & Notaries in Johanne sburg on 3 March 2016 as well as of a semina r during the annua l

alumni week of the South Af rican Resea rch Chair in P ropert y Law at Stellenbos ch University on

11 August 2016. Thank you to Er nst Marais, C hantelle Glad win and Gust av Muller for read ing and

commenti ng on earlier dr afts as well as t o the anonymou s reviewers for th eir help in improv ing this

contribut ion. All shortcom ings are my own.

1 2013 4 SA 319 (SCA) para 12. See B Clo ete “Clearan ce Certif icates: Does the Mu nicipality’s Lien Su rvive

the Transfer?” (2013 Sep) 534 De Rebu s 46.

2 2015 1 SA 82 (GP) paras 9-15.

3 2016 3 SA 231 (SCA). See T Mashi le “Municipal ities Have a Hypoth ec Over Debts for R ates” (2016

Jun) 564 De Rebus 30; C Gla dwin “The s 118(3) Monster: City of Tshwane Metr opolitan Municipality

v PJ Mitchell (38/2015) [2015] ZASCA 1 (29 January 2016)” (11-02-2016) GhostDigest w.

ghostdigest.com/articles/the-s118(3)-monster-ii/54981> (accessed 15-02-2016).

(2017) 28 Stell LR 47

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the person who actu ally incurred the relevant debt. Although the mu nicipality

can only obtain a judgment for the outstanding debt again st its actual debtor,

the apparent implication is that t his judgment can be executed against the

burdened propert y by having it attached in execution regardless of who the

owner is.

Various authors have criticised this possible implication of Mathabathe,4

but now the SCA’s Mitchell judgment has necessitated a fresh look at this

matter. This contr ibution does not discuss the details of the existing case

law, since it is assumed that the reader is fa miliar with the decisions. Instead,

the focus is on re-afrming5 the contention that a section 118(3) charge,

in its current for m, cannot remain on the property subsequent to any kind

of transfer (except perhaps when the doctrine of notice applies). Three lines

of argument are presented, which – in my view – collectively provide a

workable interpretation of section 118(3), namely (1) a contextual, historical

and logical interpret ation of the wording of the provision; (2) a theoretical

argument regard ing the effect of real security rights t hat are not supplemented

by publicity; and (3) a constitutional perspect ive. After prese nting these three

arguments, this article also briey discusses t he impact of the i nterpretation

of section 118(3) on the rights of mortgagees.

It should be noted that the Gauteng Division of the High Cou rt in Pretoria

recently held in Jordaan v Tshwane City (“Jordaan”)6 that section 118(3)

of the LGMS Act is unconstitutional to t he extent that the charge sur vives a

transfer of ownership to some one who is not a debtor of the municipalit y. T he

Constitutional Cour t must still (and probably will) conr m this declaration of

invalidity, but it is hoped that the cour t will also consider the other arguments

made in this contr ibution, such as that section 118(3) can be interpreted to

avoid constit utional invalidit y.

2 Interpr etation of section 118(3)

A strategic mista ke in Mitchell was for council not to challenge the

correctness of the Mathabathe judgment, in which it was assu med that a

section 118(3) charge survives a tra nsfer of the property. Instead of challenging

this interpretation, as certain commentators have done,7 the focus was on the

4 See eg R Brits “T he Statutor y Security Right in Sect ion 118(3) of the Local Governme nt: Municipal

Systems Act 32 of 2000 – D oes It Survive Tra nsfer of the Land? [ Discussion of Cit y of Tshwane

Metropolita n Municipalit y v Mathabathe 2013 4 SA 319 (SCA)]” (2014) 25 Stell LR 536; H Delport

“The Implica tions of Section 118(3) of the Local Government: Mun icipal Systems Act 32 of 2000 for

Purchase rs of Immovable Prope rty” (2015) 78 THRHR 219; MM Ratiba “The Mun icipal Debt Collect ion

Beyond the Matha bathe Case – A Welcome Solution or Multiplic ation of Problems?” (2014) 35 Obiter

691; C Gladwin “Histor ical municipal debt” (23-01-2014) GhostDigest

articles/ historical-mu nicipal-debt/54 489> (accessed 29-08-2014); C Gladwi n & D Hepburn “The im pact

of Mitchell and Mathabathe on s 118” (08-12-2014) Johannesburg Attorneys Association

za/download /impact-mitchell-math abathe-s118/> (accessed 24 -01-2015); I Miltz & J Bitter “Hist orical

Debt” (2016) 16 Without Prejudice 45. See also JC Sonnekus “Sogen aamde Stat utêre Retens ieregte

ten gunst e van Plaaslike Owerhede v ir Agterstallige Er fbelasting en Mu nisipale Rekeninge” (2016) 79

THRHR 443.

5 The present aut hor is one of the comment ators who previously cr iticised Mathabathe. See the text to n 4

above.

6 2017 2 SA 295 (GP).

7 See the text to n 4 ab ove.

48 STELL LR 2017 1

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