Collection of rates and taxes

The Supreme Court of Appeal considered the remedies available to a municipality to collect outstanding rates and service charges in City of Tshwane Metropolitan Municipality and Another [2013] 3 All SA 227 (SCA).

The purchaser of a property sold by public auction applied to the City of Tshwane for a clearance certificate for registration of transfer. The City demanded an undertaking that outstanding rates and service charges in the amount of R162,722.26 be paid within 48 hours of registration before it issued the certificate.

A portion of the outstanding debt had been incurred prior to the two years mentioned in section 118 (1) of the Municipal Systems Act, 2000.

The SCA held that a municipality has two remedies for the collection of rates and service charges. Firstly, the provisions of section 118 (1) create a veto or an embargo on the registration of transfer, with a time limit. Secondly, section 118 (3) creates a charge upon the property or a form of security, without a time limit.

For historical debt, incurred prior to the two years mentioned, a municipality can rely on section 118 (3) by obtaining a court order and selling the property in execution to recover the debt.

However, a municipality was not entitled to any additional remedy by seeking an undertaking from a purchaser, such as the case here.

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