Those who buy repossessed homes at auction could still find themselves liable for certain unpaid municipal charges linked to the property.
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Those who buy repossessed homes at auction could still find themselves liable for certain unpaid municipal charges linked to the property.
This is based on a recent Johannesburg High Court judgment involving Standard Bank.
As part of the order, the court said that the property could be sold as long as the purchaser settled municipal charges incurred during the two years preceding an application for a municipal clearance certificate before transfer can take place.
Judge WJ du Plessis dealt with the issue while determining a reserve price in a foreclosure dispute involving an Eldorado Park property in Johannesburg.
The property had municipal arrears of about R185,000, according to updated valuation material presented to the court.
However, the court said buyers should not automatically be forced to assume unlimited historical municipal debt because doing so could unfairly depress reserve prices for foreclosed homes.
“Sale in execution should not require the purchaser to assume unlimited historical municipal debt prior to transfer,” du Plessis said.
“Doing so would artificially reduce the reserve price.”
The judgment referred to section 118 of the Local Government: Municipal Systems Act, which required certain municipal charges linked to a property to be paid before a clearance certificate can be issued for transfer.
“According to the municipal statement, the average debt is approximately R2,000 per month. Rounding up, R50,000 appears to be a reasonable estimate to cover expected charges at transfer,” the judge said.
The court also referenced the Constitutional Court ruling in Jordaan and Others v City of Tshwane Metropolitan Municipality, which distinguished between municipal charges incurred during the two years preceding a clearance certificate application and older historical debt that municipalities must recover separately.
The broader case involved a foreclosure application brought by Standard Bank after the respondents fell roughly 46 months into arrears on their home loan repayments. The court heard arrears totalled about R500,000.
The respondents opposed the application and argued that the process had been unfair from the outset.
One of the respondents claimed he had filed a plea or notice to defend with the bank’s former attorneys and argued the matter therefore should not have proceeded as a default judgment application.
However, the court said no plea appeared in the official court record and none was produced when the respondent was asked to provide proof. “The court cannot decide the case on the basis of a plea that is said to exist outside the record and was not produced when given the opportunity to do so,” Du Plessis said.
The respondents also questioned the reliability of the bank’s figures and alleged that some documents may have been fabricated or digitally manipulated.
The court rejected those allegations, saying no evidence had been presented showing that the bank’s documentation or indebtedness calculations were false. “The first respondent’s suspicion does not displace the prima facie evidentiary value of the certificate of balance produced by the bank,” the judgment stated.
The respondents further complained that updated valuation material was uploaded shortly before the hearing and argued this was unfair. The court disagreed, finding that updated valuations are necessary foreclosure matters because courts must consider current information when deciding whether execution against a home is justified and on what terms.
The respondents also requested insurance-related documents and argued these were necessary for their defence. But the court said the bank’s claim was based on the loan agreement, mortgage bond and payment default rather than insurance issues.
“The insurance also does not pay out in the event of non-payment,” Du Plessis said.
The court ultimately granted judgment in favour of the bank and declared that the property could be sold at execution.
Updated valuation figures before the court showed the property had a market value of R900,000 and a forced-sale value of R630,000. The court took into account the municipal debt when setting the reserve price at R580,000.
“The conditions of sale shall include that the purchaser at a sale in execution will be liable to the municipality in which the property is situated for all unpaid amounts due in connection with the property during the two years preceding the application for the clearance certificate for municipal service fees, surcharges on fees, property rates, municipal taxes, levies and duties,” the ruling added.