eThekwini Municipality v Mounthaven (Pty) Limited

In 1985 the eThekwini Municipality sold immovable property to Mounthaven (Pty) Ltd. The deed of transfer (1986) contained a reversionary clause requiring Mounthaven to erect buildings worth at least R100 000 within three years, failing which ownership would revert to the Municipality, which could demand re-transfer. Mounthaven failed to comply. The Municipality only instituted proceedings in 2014 to compel re-transfer. The High Court and Supreme Court of Appeal dismissed the application on the basis that the Municipality’s claim was a ‘debt’ that had prescribed under the Prescription Act 68 of 1969. The Municipality sought leave to appeal to the Constitutional Court.

Leave to appeal was refused with costs.

The case clarifies that reversionary clauses in deeds of transfer generally create personal rights constituting ‘debts’ subject to prescription, even if registered. It reinforces the distinction between real and personal rights in South African property law and confirms that registration alone does not transform a personal right into a real right. The judgment has important implications for municipalities and other organs of state relying on reversionary clauses for developmental purposes.