As you are aware the judgment in the case of City of Tshwane v Mathabathe has led to the Municipalities seizing upon the opportunity to demand payment of rates and taxes and other debts not incurred by the new owner but by a previous owner. This sent shock waves throughout the property industry.
This led to most purchasers never feeling quite at ease as the municipalities in terms of the above Court Case demanded payment of the previous owners’ outstanding rates and taxes which were not collected at the time when the Clearance Certificate was issued by the Council from the new owners.
The good news is that the Gauteng Division of the High Court in the case of Mitchell v City of Tshwane has now ruled that the interpretation of the municipalities of the Tshwane Court Case is incorrect and has now ruled as follows:-
The new property owner after transfer of the property into his name does not become liable to the municipality for any outstanding debts incurred by the seller;
The security of the lien held by the municipality over the property is extinguished the moment transfer of the property takes place in the deeds office from the seller to the purchaser;
Any outstanding debt not collected at the time of issuing of the Clearance Certificate remains a debt owed by the seller to the municipality. This debt is unaffected by the transfer and as such the municipality can collect any monies after transfer from the seller.
This is certainly good news and until this judgment is challenged and/or reversed the situation is quite simply that new owners are not liable for debts of the previous owners/sellers.
Any person who was forced to pay a debt incurred by the seller should immediately request a refund from the municipality.