The City of Cape Town v Real People Housing (Pty) Ltd

Real People Housing (Pty) Ltd owned various properties in Cape Town, including Erf 23548 Khayelitsha, which it had sold and wished to transfer to purchasers. The City of Cape Town alleged debts had been incurred for municipal services to the properties, some outstanding for more than two years. Real People disputed liability for the debts, asserting they were incurred by occupiers and not by itself. Real People was willing to pay debts incurred in the two years preceding its request for clearance certificates required for transfer under s 118(1) of the Local Government Municipal Systems Act 32 of 2000. The City refused to issue certificates unless all debts were paid, regardless of when incurred, applying its credit control policy which allocated payments to the oldest debts first. The City also refused to provide details of amounts incurred in the preceding two years. Real People approached the High Court for declaratory relief.

• Whether s 118(1) of the Local Government Municipal Systems Act 32 of 2000 impliedly obliges a municipality to issue a clearance certificate once all debts incurred in the two years preceding the application have been paid, notwithstanding that older debts remain unpaid
• Whether a municipality is obliged to provide particulars of amounts due for the two-year period preceding the application for a clearance certificate
• Whether a municipal credit control policy can override the express statutory limitations in s 118(1)
• The proper construction of s 118(1) in light of the principle that statutes intruding upon property rights should be strictly construed

The appeal was dismissed with costs. The High Court's orders were upheld, declaring that: (1) the City must furnish full itemised particulars of amounts due for the two-year period; (2) the City must issue a clearance certificate upon receipt of payment of amounts due for the two-year period; and (3) the City's refusal to issue a certificate for Erf 23548 Khayelitsha was unlawful.

A municipality is obliged by s 118(1) of the Local Government Municipal Systems Act 32 of 2000 to issue a clearance certificate once all amounts that became due in the two years preceding the application for the certificate have been paid, even if older debts remain outstanding. The express two-year limitation in s 118(1) cannot be nullified by implied qualifications or municipal policies requiring payment of all debts regardless of age. Statutes that intrude upon property rights must be strictly construed, and under the Constitution there is no warrant for choosing a wide construction that intrudes upon protected rights if a narrower construction is available. A municipality has an implied obligation to provide particulars of amounts due for the two-year period, as owners cannot be expected to tender payment without knowledge of what is due, supported by s 95(e) of the Act.

The court observed that municipalities have a statutory duty to adopt and implement credit control and debt collection policies, and must take reasonable steps to collect amounts due promptly - they cannot allow debts to accumulate indefinitely in the knowledge that recovery will be possible when property is transferred (citing Mkontwana). The court noted that practical considerations such as computer system design cannot override statutory obligations - if a computer system is not designed to produce required information, it must be reprogrammed to comply with the statute. The court noted that while municipal by-laws and policies were informative as to how the problem arose, they were not material to the appeal - the question was what the statute demands, not what the by-laws authorize.

This case provides authoritative guidance on the interpretation of s 118(1) of the Local Government Municipal Systems Act 32 of 2000, particularly the two-year limitation on municipal power to withhold clearance certificates. It confirms that municipalities cannot use credit control policies to circumvent express statutory limitations that protect property rights. The judgment reinforces the principle of strict construction of statutes that interfere with property rights, particularly under the constitutional dispensation. It clarifies municipalities' obligations to collect debts promptly and cannot allow debts to accumulate beyond two years while blocking property transfers. The case balances municipal revenue collection powers with constitutional property rights protections, and confirms that statutory obligations can be implied where necessary to give effect to express statutory provisions.