eThekwini Municipality v Mounthaven (Pty) Limited

In May 1985, the Municipality sold property to Mounthaven subject to conditions recorded in the deed of transfer registered in August 1986. Clause C(2) provided that if Mounthaven failed to complete buildings worth R100,000 within three years from the date of sale, ownership would revert to the Municipality, which could demand re-transfer against payment of the purchase price less costs. Mounthaven failed to erect the required buildings within the three-year period. The Municipality only brought an application in 2014 (approximately 23 years later) to compel re-transfer of the property. The High Court dismissed the application, finding that the registered right in the reversionary clause constituted a "debt" that had prescribed under the Prescription Act 68 of 1969 after three years (by May 1991). The Supreme Court of Appeal confirmed this decision.

• Whether a reversionary clause in a deed of transfer creates a 'debt' subject to prescription under the Prescription Act 68 of 1969
• Whether the reversionary right constituted a limited real right not subject to prescription
• Whether the reversionary right was a claim secured by mortgage bond prescribing after 30 years
• Whether prescription presents a bar to access to courts under section 34 of the Constitution

Leave to appeal refused with costs.

A reversionary clause in a deed of transfer creates a personal obligation (debt) to re-transfer property, not a limited real right, unless it expressly binds successors-in-title and subtracts from the dominium of the land. Registration of such a clause under the Deeds Registries Act 47 of 1937 as complementary or ancillary to a registrable condition does not convert a personal right into a real right. A claim to transfer immovable property is an obligation to deliver goods (the immovable property) and therefore constitutes a "debt" within the meaning of the Prescription Act 68 of 1969, which prescribes after three years from when the obligation becomes due. An accessory obligation (such as one created by mortgage bond) cannot extend beyond the principal liability - when the principal debt prescribes, so does the accessory obligation.

The Court accepted that in appropriate cases, interpretation of the Prescription Act may impact the fundamental right of access to justice under section 34 of the Constitution, raising a constitutional issue conferring jurisdiction on the Constitutional Court, but expressed doubt whether a separate arguable point of law of general public importance was additionally at issue. The Court noted that the doctrine of notice may operate in appropriate circumstances to prevent a third party from establishing a real right where a personal right has been registered, but this issue did not arise for decision in this case. The Court observed that iura in personam ad rem acquirendam (personal rights to acquire things) have their origin in feudal law, and their only analogy in South African law may be the right created by section 20 of the Alienation of Land Act 68 of 1981.

This case clarifies important principles of South African property law regarding the distinction between real and personal rights in the context of reversionary clauses in deeds of transfer. It confirms that: (1) reversionary clauses create personal rights, not real rights, unless expressly binding successors-in-title; (2) registration of such clauses under the Deeds Registries Act does not convert personal rights into real rights; (3) such personal rights constitute "debts" subject to the ordinary three-year prescription period under the Prescription Act; (4) the case has significant implications for local authorities and other organs of state that have relied on standard reversionary clauses in land disposals for developmental purposes, as such rights may prescribe if not enforced timeously. The judgment provides important guidance on when prescription may bar enforcement of conditions in property transactions and reinforces the need for careful drafting of conditions intended to bind successors-in-title.