City of Tshwane Metropolitan Municipality v Mathabathe and Another

The first respondent, Thomas Mathabathe, owned immovable property over which Nedbank Limited held a mortgage bond. The property was sold at a public auction in December 2010. When transfer was to be effected, the conveyancing attorney applied to the City of Tshwane Metropolitan Municipality for a rates clearance certificate in terms of s 118(1) of the Local Government: Municipal Systems Act 32 of 2000. The municipality demanded payment not only of municipal debts incurred in the two years preceding the application (as contemplated in s 118(1)), but also of older arrear debts (‘historical debt’). Mathabathe and Nedbank approached the North Gauteng High Court for an order compelling the municipality to issue a clearance certificate limited to the two-year period. The municipality opposed the application and counter-applied for an order requiring an undertaking that the historical debt would be paid after transfer, relying on the charge created by s 118(3) of the Act. The High Court granted relief to Mathabathe and Nedbank and dismissed the municipality’s counter-application. The municipality appealed only against the dismissal of its counter-application.

The appeal was dismissed with costs, and the High Court’s dismissal of the municipality’s counter-application was confirmed.

This case clarifies the distinction between the embargo mechanism in s 118(1) and the security mechanism in s 118(3) of the Municipal Systems Act. It confirms that municipalities may not use s 118(3) to block transfer or demand undertakings for historical debt, while reaffirming the strong preferential security municipalities enjoy for unpaid municipal debts.