New Owners and Seller's Historic Debt
Category Advice
Our Thought of the Week on Tuesday referred to the judgment in Mitchell v City of Tshwane Metropolitan Municipal Authority which we link to HERE (17 pages) for your ease of reference.
As a result of oversight, enquiries and discussions subsequent thereto, we highlight the following:
The statutory hypothec that a municipality holds over a property in respect of historic debts (debts older than 2 years) lapses when it allows transfer to pass from the owner (debtor) to a purchaser in an execution sale, without exercising its rights in terms of the hypothec.
When such auction purchaser on-sells the property to a third party as happened in the above matter, the municipality cannot refuse to provide municipal services to the third party as a result of the outstanding historic debt.
The historic debt survives the auction sale, only the security is lost, and the purchaser does not become co-debtor in respect thereof. It remains a debt between the historical debtor and the municipality in these circumstances.
Author: STBB
