Great News for New Homeowners – New Owners NOT liable for previous owner’s debt

The question on everyone’s mind is when the Constitutionality of Section 118 of the Municipal Systems Act (MSA) will be tested by our courts. Well that time has come and the Constitutional Court has spoken.
The Constitutional Court recently handed down judgement in the Jordaan and Others vs City of Tshwane Metropolitan Municipality and Others, and declared that a new owner is not liable for the previous owner’s debts arising before transfer of the property.

The unconstitutionality of Section 118 has cause of a lot of concern under homeowners, as this section is viewed as enabling a municipality to hold a new homeowner responsible for the arrear municipal debts of a previous owner. According to this section, an amount due for municipal fees is a charge upon the property and enjoys preference over any mortgage bond registered against the property, thereby creating a security provision in favour of the municipality for the payment of the outstanding debts. No time limit is attached to this provision and it does not matter when the secured debt became due.

The Court stated that Section 118(3) does not require public formalisation (e.g. registration in the Deeds Registry) and thus is required to give notice of its creation to the world. Therefore, to avoid unjustified arbitrariness in violation of Section 25(1) of the Bill of Rights, Section 118(3) of the Municipal Systems Act must be interpreted so that the charge it imposes does not survive transfer to a new owner. According to the Constitutional Court, section 118(3) is constitutional and is well capable of being interpreted so that the charge does not survive transfer to the new owner and it 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 118(3) of the Local Government: Municipal Systems Act 32 of 2000.

New homeowners can feel relieved knowing they are free of historical debt from previous owners