NEW OWNER LIABLE FOR HISTORIC DEBTS

In terms of the recent Supreme Court of Appeal case;  City of Tshwane Metropolitan Municipality v P.J. Mitchell (38/2015) [2016] ZASCA 1 (29 January 2016) (case attached for ease of reference) the court held that a new owner can be held liable for historic debts of previous owners of the property, pertaining to outstanding rates and taxes etc.
 
For a property transfer to be registered, proof must be submitted to the deeds office that rates and taxes for the preceding two years have been paid (section 118(1) of the Municipal Systems Act).  Older debts are secured by section 118(3) of the Act which creates a charge on land in favour of a municipality.  In this judgment the Supreme Court of Appeal overturned previous judgments that held that this hypothec is extinguished where transfer follows on an execution sale.  Thus, in both a private and an execution sale, a municipality can, having exhausted the debt collection provisions in its by-laws against the original debtor, proceed against the property's successor in title for historic debts.
 
This means that the municipality is not prevented from perfecting its security over the property, should it wish to do so, to ensure payment of the historical debt.  Perfecting its security would involve obtaining a court order, selling the property in execution and applying the proceeds to pay off the outstanding historical debt. In that event, the respondent might be forced to pay the debt in order to avoid losing his property.  It is in that sense that the respondent, as owner of the property, could be said to be liable for the historical debt.
 
It is thus prudent to sensitise purchasers on the possible risk that this case holds.  It is trusted that this matter will eventually land up in the Constitutional Court.  We await the outcome with abated breath.

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