City of Tshwane Metropolitan Municipality v Uniqon Wonings (Pty) Ltd

Uniqon Wonings (Pty) Ltd, a property developer, purchased farmland in 2003 from Kungwini Local Municipality (later subsumed by the City of Tshwane Metropolitan Municipality) for township development. The farm was converted to a township of 200 erven called Six Fountains Estate. From inception, Uniqon encountered difficulties regarding rates levied against the township property. In June 2012, the City instituted action for arrear rates. In 2013, Uniqon sought three clearance certificates required under s 118(1) of the Local Government: Municipal Systems Act 32 of 2000 to transfer erven to purchasers. The City refused to issue certificates unless all arrear rates on the entire township property were paid. Initially, Kungwini incorrectly valued and rated individual unsold erven rather than the remaining extent of the township. When the City gained jurisdiction, it attempted to remedy this by closing individual accounts, commissioning a proper valuation of the remaining extent as commercial property, and opening a new rates account. However, the City demanded payment of all municipal debts for the entire township property before issuing clearance certificates. Uniqon launched an urgent application for an order compelling the City to issue clearance certificates upon payment of rates it considered due in connection with each erf.

• How should s 118(1) of the Local Government: Municipal Systems Act 32 of 2000 be interpreted in relation to clearance certificates for township property?
• What amounts must be paid in connection with 'that property' when a township owner seeks a clearance certificate for transfer of an individual erf?
• Should a township be rated as a single entity (remaining extent) or should individual unsold erven be rated separately?
• Does an erf come into legal existence before it is sold and transferred by the township owner?
• What is the correct method for determining rates payable when transferring an erf from a township that is still partially owned by the developer?

The Supreme Court of Appeal partially upheld the appeal. Order 1 (requiring immediate issuance of clearance certificates upon payment of R50.40 per stand) was set aside. Order 2 was dismissed but reworded to declare: (a) the City must value and enter the entire remaining township property on the valuation roll as a single entity, not individual erven; (b) the City must issue clearance certificates once rates and municipal charges incurred in connection with the specific erf have been determined and paid. Order 7 (requiring issuance of clearance certificates pending disputes upon payment of application fee only) was set aside. Order 8 (attorney-client costs) was replaced with an order that the City pay costs on the ordinary scale. Each party was ordered to bear its own costs in the Supreme Court of Appeal given the partial success of each party.

Property rates are payable by a township owner over the remaining extent of the township as a single entity, not on all unsold erven separately. A municipality must value and enter onto its valuation roll the entire remaining township property, not individual erven constituting that property, and levy property rates calculated on the value of that property. When a township owner applies for a clearance certificate under s 118(1) of the Local Government: Municipal Systems Act 32 of 2000 in respect of a specific erf to be transferred, the phrase "all amounts that became due in connection with that property" refers to that specific erf, not the entire remaining extent of the township. The municipality must determine the rates and municipal charges attributable to that specific erf (calculated on a pro rata basis from the total rates due on the remaining extent) for the preceding two-year period, and must issue the clearance certificate upon payment of that amount. The municipality cannot refuse to issue a clearance certificate on the basis that all rates for the entire township property must be paid first.

The court expressed views on Heritage Hill Home Owners Association v Heritage Hill Devco (Pty) Ltd 2013 (3) SA 447 (GNP), noting it was distinguishable as it dealt with homeowners' association levies governed by contract, not municipal rates, and therefore the distinction it sought to draw from the rating cases was not relevant. The court indicated it was unnecessary to consider the correctness of the principles in Heritage Hill for purposes of this case. The court commented that the City's reliance on Heritage Hill to argue each erf should be separately rated did not assist with interpretation of s 118(1). The court noted that there is nothing to preclude township developers from presenting their own calculations when applying for clearance certificates to expedite the process. The court observed that the City was entitled to proceed on the basis that the Mooikloof judgment, which contradicted decades of settled law, was wrongly decided, and this did not warrant a punitive costs order despite the trial court's view that the City acted unreasonably.

This judgment clarifies the interpretation of s 118(1) of the Local Government: Municipal Systems Act 32 of 2000 regarding clearance certificates for township developments. It establishes the binding principle that municipalities must rate township property as a single entity (the remaining extent) rather than rating individual unsold erven separately, confirming decades of settled law. The judgment provides crucial guidance on how to determine the amounts payable "in connection with that property" when a township owner seeks to transfer an individual erf: municipalities must calculate a pro rata share of the rates and charges attributable to that specific erf. This balances the rights of property developers against municipal revenue collection needs. The decision prevents municipalities from blocking all transfers by demanding payment of all township debts, while ensuring municipalities receive proper payment for the specific property being transferred. It is significant for property developers, municipalities, conveyancers, and anyone involved in township development and transfer in South Africa. The judgment also reaffirms the principle of strict construction of statutes that interfere with established property rights.