SECTION 118 OF THE MUNICIPAL SYSTEMS ACT

LEGAL UPDATE  |  PROPERTY LAW  |  JULY 2026

SECTION 118 OF THE MUNICIPAL SYSTEMS ACT

Section 118 of the Local Government: Municipal Systems Act 32 of 2000 (the “Systems Act”) regulates the interaction between the local authority and the conveyancing process. It operates on two distinct tracks: subsection (1) governs the rates clearance certificate (“RCC”) required by the Registrar of Deeds before transfer, and subsection (3) creates a statutory charge over the property in favour of the municipality. 

1.    SUBSECTION (1): THE RATES CLEARANCE CERTIFICATE

Section 118(1) provides that no transfer may be registered without a certificate issued by the municipality confirming that all amounts that became due in connection with the property “during the two years preceding the date of application for the certificate” have been paid in full.

The two-year ceiling

The two-year window is a statutory ceiling. Once the seller has tendered the amounts that became due during that period, the municipality is obliged to issue the certificate and may not withhold it on the basis that older debt remains outstanding.[1]

Future rates may not be demanded

This is the point most often misapplied by municipal credit-control departments. Section 118(1) does not authorise the prepayment of rates that have not yet become “due” in law. 

The position was settled in Nelson Mandela Bay Municipality v Amber Mountain Investments 3 (Pty) Ltd (576/2016) [2017] ZASCA 36; 2017 (4) SA 272 (SCA). In this matter the municipality there refused to issue an RCC to the seller unless the seller paid rates calculated to the end of the municipal financial year (R2,281,014.68) in respect of months falling after transfer (para [2]).[2] Amber Mountain paid the figure under protest, took transfer, and recovered the surplus.

Reading section 118(1) with sections 13, 26, 27 and 28 of the Local Government: Municipal Property Rates Act 6 of 2004 (the “Rates Act”), the SCA held that property rates become “due” only once the municipality has determined both the amount payable and the date on which payment must be made.[3]

An owner’s underlying obligation in respect of rates arises at the start of each financial year, but the obligation to make payment of a particular amount arises only “once the municipality has determined the date of payment and amount due”.[4] Section 118(1) accordingly “clearly applies to municipal debts which have become due in the two years preceding the date of the application for the certificate and does not apply to future municipal debts”.[5] A demand for pro-rata or projected rates as a precondition to issuing the certificate is, on the SCA’s analysis, “a substantive obstacle to alienation” and unlawful.

The position was reaffirmed in KwaDukuza Municipality v Consolidated Aone Trade and Invest 6 (Pty) Ltd [in Liquidation] and Others (1273/2023) [2025] ZASCA 86 (11 June 2025), in which the SCA held that payments made under protest of amounts demanded beyond the two-year window are recoverable: the municipality is not entitled to retain funds it was never lawfully entitled to demand. Where a seller faces an inflated demand and transfer timing requires payment, the proper course is to (i) record the payment expressly as made under protest, (ii) preserve documentary evidence of the demand and the protest, and (iii) institute recovery within the prescribed period.

Validity and forward estimates

The RCC is valid for sixty days from the date of issue. Clearance figures issued by municipalities ordinarily comprise arrears within the two-year window together with a forward estimate (commonly three months) of charges that will become due during the certificate’s validity period. That estimate is an administrative bridge to lodgement; it is not a licence to demand prepayment of obligations that have not yet crystallised under sections 27 and 28 of the Rates Act.

2.    Subsection (3): the charge upon the property

Section 118(3) provides that amounts owed in respect of municipal service charges, rates and other levies “are a charge upon the property” and are recoverable in priority to any mortgage bond. 

In City of Tshwane Metropolitan Municipality v Mitchell (38/2015) [2016] ZASCA 1; 2016 (3) SA 231 (SCA), the SCA held that this hypothec survived transfer, including transfer pursuant to a sale in execution. The consequence was that a purchaser, having taken transfer on production of a section 118(1) certificate, remained exposed to enforcement for the seller’s historical debt.

Mitchell was reversed by the Constitutional Court in Jordaan and Others v City of Tshwane Metropolitan Municipality and Others [2017] ZACC 31; 2017 (6) SA 287 (CC). Cameron J, for a unanimous court, held that section 118(3) must be read so that the charge does not survive transfer. 

Two reasons underpinned the conclusion: a security right binding successors in title must, on settled principle, be subjected to a publicity formality such as deeds-office registration, which section 118(3) does not require,[6] and a contrary reading would impose arbitrary deprivation of property contrary to section 25(1) of the Constitution.[7] The Court declined to invalidate the provision but read it down. The order records: “Upon transfer of a property, a new owner is not liable for debts arising before transfer from the charge upon the property under section 118(3).”[8]

Three consequences follow. First, the hypothec continues to bind the property in respect of debts incurred by the current owner during the current owner’s tenure; mortgagees accordingly remain subordinate to the municipality’s claim for those accrued charges. Second, Jordaan did not invalidate section 118(3) — the provision remains in force, read down — and a municipality may still perfect its security before transfer (for example, by interdicting registration) or pursue the original debtor in the ordinary course. Third, municipalities that continue to refuse to open service accounts for new owners until historical debts are settled act unlawfully; Jordaan is binding authority against the practice.

PRACTICAL POINTS

1.             Confine clearance figures to amounts currently due. Where pro-rata or projected rates are included, you can object in writing to payment of the forward projections.

2.             Pay under protest where the figure is disputed. Payment tendered without that reservation may be treated as voluntary, with significant evidentiary consequences.

3.             A purchaser is not liable for the seller’s historical municipal debt under section 118(3).

4.             Considerte drafting of the sale agreement. A clause obliging the seller to settle all municipal debt, not merely the two-year window remains prudent, both to allocate cost and to immunise the purchaser from administrative friction post-transfer.

SOURCES AND AUTHORITIES

1.              Local Government: Municipal Systems Act 32 of 2000, section 118.

2.              Local Government: Municipal Property Rates Act 6 of 2004, sections 13, 26, 27 and 28.

3.              City of Tshwane Metropolitan Municipality v Mathabathe and Another (502/12) [2013] ZASCA 60; 2013 (4) SA 319 (SCA) — paras [11]–[14].

4.              Nelson Mandela Bay Municipality v Amber Mountain Investments 3 (Pty) Ltd (576/2016) [2017] ZASCA 36; 2017 (4) SA 272 (SCA) — paras [2], [16], [19] and [21].

5.              KwaDukuza Municipality v Consolidated Aone Trade and Invest 6 (Pty) Ltd [in Liquidation] and Others (1273/2023) [2025] ZASCA 86 (11 June 2025).

6.              City of Tshwane Metropolitan Municipality v Mitchell (38/2015) [2016] ZASCA 1; 2016 (3) SA 231 (SCA) — overtaken by Jordaan.

7.              Jordaan and Others v City of Tshwane Metropolitan Municipality and Others [2017] ZACC 31; 2017 (6) SA 287 (CC); 2017 (11) BCLR 1370 (CC) — paras [21]–[34], [35]–[47] and [56].

8.              Mkontwana v Nelson Mandela Metropolitan Municipality 2005 (1) SA 530 (CC).

Disclaimer: This article is provided for general information only and does not constitute legal advice. All judgments referenced are accessible via the Southern African Legal Information Institute (www.saflii.org). 

Contact Neser Incorporated for advice on a specific matter.