legal update
(lien), which creates preference over any mortgage bond registered against the property, also creates a debt by successors in title to a property. He states that the nature of the statutory charge created under Section 118(3) is simply to create a preference ahead of any mortgage bond. Section 118(3), in creating the preference, does not expressly allow a municipality to recover those amounts from a person who is not the debtor. In the case of Makonthwana v Nelson Mandela Metropolitan Municipality SECLD Case No. 903102 heard in the Constitutional Court, the constitutionality of Section 118(1) in relation to the obligation of the land owners to pay consumption charges not incurred by the owner was considered. The Makonthwana judgment decided in particular what “in connection with the property’’ means. The High Court had held that Section 118(1) was unconstitutional since it was an infringement on a land owner’s rights to their property because there are other methods of debt collection available to the municipality therefore making the infringement unjustifiable. However, the Constitutional Court did not agree and held that Section 118(1) was constitutional. It held that “there is a level at which the owner and the debt are usually connected or related regardless of the nature of the relationship between the owner and the occupier, and of whether the property is lawfully occupied. This is because the owner is bound to the property by reason of the fact that ownership entails certain rights and responsibilities. Both the owner and the consumption charge are closely related to the property, and the property
is always the link between the owner on the one hand, and the consumption charge in respect of water and electricity provided by the municipality on the other hand.” Bembridge further states that from this it is clear there must be a link between the property and the owner to justify liability for a consumption charge. In other words, in order to justify the consumption charge, the person being charged should be the owner at the time the consumption charge was incurred. If the person is the not the owner of the property then the link between the owner and the consumption charge is missing. So in the case where a successor in title is held liable for previous consumption charges for the property, there is arguably no link between that owner and the consumption charge. The Constitutional Court in the Makonthwana case further found that Section 118(1) indeed resulted in a deprivation of property since it deprived the owner of the right to dispose of the property. However, the deprivation was only temporary because of the two-year period imposed. The court further acknowledged that the purpose of Section 118(1) is to “encourage regular payments of consumption charges and thereby to contribute the effective discharge by municipalities of their constitutionally mandated functions”. At the same time it acknowledged that Section 118(1) does not affect the right of ownership, being the right to freely alienate the property. However, it only lasts for two years, thus creating a proportionality between the purpose and the end result. On that basis Section 118(1) was not unconstitutional. In section 118(3), which the SCA in the Mathabathe
case pointed out, is “unbridled by time”, there is no principle of proportionality between the means and ends and this would leave the interpretation given by the municipalities to recover debts of an owner who did not incur the debts without limitation, or at all, vulnerable to constitutional scrutiny. On the principle of there having to be a link between the owner and the debt, Section 118(3) cannot have the effect of creating a debt against successors in title to the property who did not incur the debt. It simply creates a security. Further, Section 118(3) without a time limit, may be a violation of Section 9(3) of the Constitution which requires all to be equal before the law. A successor in title to land cannot be equal before the law under these circumstances. The court interpreted the word “charge” in the Mathabathe case to mean lien. A lien according to our common law, is a right tacitly conferred by law on a person who is in possession of property of another person, on which he has expended money or money’s worth, of retaining possession of the property until he has been duly compensated. A lien is merely a security and does in itself confer a right of action to claim compensation but confers a defence in favour of the possessor of the property to any action by the owner to recover his property. If the estate of the owner is sequestrated the possessor (holder of the lien) is entitled to a preference on the proceeds of a property for the amount due to him. To reiterate, a lien merely creates a security but does not confer right of action to claim compensation from the owner of the property. The security of a lien sits outside of the debtor and creditor relationship.
It simply creates a security in favour of the possessor of the property. In the absence of a link and proportionality as set out in the Makonthwana case, it does not create a debt due by a successor in title to a property. At best that security is enforceable against other creditors even in the case of successors in title. The security cannot create a new debt due by a successive owner.
Conclusion Section 118(3) simply creates a preference in favour of a municipality over any mortgage bond registered against the property. In the absence of a link and proportionality as set out in the Makonthwana case, it does not create a debt due by a successor in title to a property. At best that security is enforceable against other creditors even in the case of successors in title. The security cannot create a new debt due by a successive owner. The practical consequences of the interpretation by the municipalities are that: ● Property owners may never have peace of mind when taking transfer of a property, that all rates and taxes have been paid to date, or if they have not, that they are immune from the municipality proceeding against them for debts incurred by a previous owner; and ● Lenders who are securing debts by way of mortgage bonds will also not have the security of all rates and taxes have been fully paid, or if not paid, that the municipality will not proceed against the current owner of the property for debts incurred by a previous owner. We would like to thank Andrew Bembridge of ENS for his legal opinion on this matter.
SOUTH AFRICAN PROPERTY REVIEW
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