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Buy That House! You’re off the hook for the Seller’s Municipal Debts

a1b“Why should a municipality be entitled to visit the sins of a predecessor in title upon innocent third parties when there is no relationship or connection between that party and the debts in question?” (Extract from judgment below)

A recent Pretoria High Court judgment has come to the rescue of property buyers being pressured by the local municipality to pay the previous owner’s debts.

When you buy a property, the municipality won’t issue the seller with a “clearance certificate” – necessary for the transfer of the property to you – until all rates and taxes, water and electricity accounts etc. due for the 2 years prior to transfer have been paid in full.

But there’s a problem when the seller’s debts are older than 2 years. The municipality cannot force the seller to pay those historical debts by holding back transfer.

Relax; you’re no longer the soft target

And – until this latest judgment – you were the softest target for the municipality’s debt collection department.  It could cut off your electricity and water.  It could threaten to have your property sold in execution.  And you could end up shelling out a lot of money to settle someone else’s debts – R6,5m was claimed from one of the buyers in this matter.

If fear of that happening to you held you back from buying a house, relax – that’s all changed.  Holding that “In the absence of an agreement to that effect, a new or subsequent owner… is not liable for the payment of historical debts incurred by previous owners or occupiers”, the Court declared the provision allowing such action by the municipality to be constitutionally invalid.  It seems likely that this will be confirmed by the Constitutional Court and adopted by all the other High Courts.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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