Which Debts Follow the Property and Which Die at Transfer

The Municipal Half: Settled in 2017

Jordaan and Others v City of Tshwane Metropolitan Municipality was decided on 29 August 2017. The Constitutional Court dealt with municipalities that were refusing to supply services to new owners until debts run up by previous owners were paid.

Section 118(3) of the Local Government: Municipal Systems Act 32 of 2000 makes money owed for municipal services a charge on the property, ranking ahead of a mortgage bond. The municipalities argued that this charge survived transfer and could be enforced against whoever owned the property next.

The Court disagreed. On transfer, a new owner is not liable for debt that arose before transfer under the section 118(3) charge. The debt does not follow the property into your hands. A municipality cannot refuse you services, or pursue you, for what the previous owner owed.

The Part That Still Bites

That does not mean municipal debt is irrelevant to your transaction. Section 118(1) is a separate mechanism: the registrar may not register a transfer without a clearance certificate, and the municipality issues that certificate against debts from roughly the two years before application.

So the recent debt has to be dealt with to get the transfer through, even though the older debt cannot be pursued against you afterwards. In practice the amount is negotiated and paid out of the transaction, and the conveyancer handles it. The distinction matters because it tells you what to argue about and what to walk away from.

The short version: recent municipal debt is a transfer cost to be quantified. Historic municipal debt is not your problem, and if a municipality tells you otherwise, the answer is a Constitutional Court judgment.

Sectional Title Is a Different Story

Now the half that is right, and it catches people who have read about Jordaan and assumed it covers everything.

Section 15B(3)(a)(i)(aa) of the Sectional Titles Act 95 of 1986 blocks the registrar of deeds from registering the transfer of a unit without a conveyancer’s certificate. That certificate must confirm that the body corporate has certified that all money owed to it by the transferor has been paid, or that provision satisfactory to the body corporate has been made.

That is an embargo, and it is deliberate. It exists so that bodies corporate can keep schemes financially viable, and it gives them a strong hand. No certificate, no registration. You can win the auction, pay the deposit, pay the commission, and still not become the registered owner until the arrear levies are dealt with.

• Municipal historic debt: extinguished on transfer, per Jordaan.
• Municipal recent debt: must be cleared to obtain the clearance certificate.
• Body corporate levy arrears: block registration until paid or secured.
• The body corporate may accept security instead of payment, and must consider that in good faith.

Why This Matters More Than It Sounds

Sectional title is not a niche at sheriff auctions. Across 300 recent South African sheriff auction notices we parsed, 189 were freehold, 95 were sectional title and three were leasehold. Roughly one in three properties on the roll carries this exposure.

Arrear levies on a distressed unit are rarely small, because a body corporate that has not been paid for two years has usually also raised a special levy to cover the shortfall. The number can run to tens of thousands of rand, and unlike the historic municipal debt, it stands between you and the deeds office.

The good news is that the amount is knowable before you bid. The managing agent will tell you what is owed on the unit if you ask, and that figure belongs in your maximum bid calculation as a straight deduction.

What to Do Before You Bid

Establish the title type first, because it determines which rules apply. A deed number beginning ST is sectional title. One beginning T is freehold. That single character tells you whether the body corporate embargo is in play at all.

If it is sectional, find the managing agent and ask for the arrear levy figure and whether a special levy has been raised or is planned. Treat the answer as a cost, not a risk.

If it is freehold, get the municipal account position and budget the clearance figure. Do not budget the historic arrears, and do not let anyone tell you that you must.

• Read the deed prefix to establish freehold or sectional title.
• For sectional units, get the arrear levy and special levy position from the managing agent.
• For all properties, quantify the municipal clearance figure with the conveyancer.
• Deduct both from your maximum bid before auction day.

Use GemFinder Alongside This Guide

Use GemFinder to find live property auctions, compare reserve prices and auction dates, save watchlists and move promising listings into a structured due diligence workflow.

Browse live auctions or return to the research library.

Sources and Further Reading

This article is general educational information, not legal, tax, conveyancing or financial advice. Confirm the latest law, the specific conditions of sale and your own numbers before bidding.

• Jordaan v City of Tshwane Metropolitan Municipality [2017] ZACC 31
• Local Government: Municipal Systems Act 32 of 2000
• Sectional Titles Act 95 of 1986