Why the security right in section 118(3) of the local government : Municipal Systems Act 32 of 2000 is not enforceable against successors in title - a follow-up occasioned by the SCA's Mitchell judgment

Abstract

Section 118(3) of the Local Government: Municipal Systems Act 32 of 2000 (“Municipal Systems Act”) provides a security right for municipalities by imposing a charge upon any land to which outstanding municipal debts relate. In recent years, the Supreme Court of Appeal has confirmed in at least two judgments that this charge passes with the land when it is transferred to a purchaser. The effect is that the municipality can enforce its security right against a successor in title – someone who is not the original debtor. This article forwards three lines of argument why this problematic interpretation of the provision is not (and cannot be) correct. Firstly, in view of its historical context, the wording of the provision clearly implies that the municipality’s secured claim must be settled before any mortgagees are paid and hence it must logically be discharged before the land is transferred to a purchaser. Secondly, a case is made that real security rights cannot be enforceable against successors in title unless the publicity principle is fulfilled through registration or delivery, or if another good policy consideration justifies the lack of publicity and if the statute in question is designed to avoid as much prejudice as possible. Thirdly, the charge in question, which is imposed upon the land against the owner’s will, amounts to a deprivation of property in terms of section 25 of the Constitution. This means that it must satisfy the non-arbitrariness test. It is argued, however, that the purported effect of the municipal charge, as currently interpreted by the SCA, is not sufficiently nuanced to satisfy this test, and would therefore not pass constitutional scrutiny. In view of these arguments, it is contended that section 118(3) should be re-interpreted or amended to be more in line with legal theory and constitutional requirements.