Michelle Dickens, managing director of TPN credit bureau, notes, "Owning your home is one of the biggest expenses a consumer will incur. Buy-to-let owners continue to invest in the market. How alarming then, if the local municipality came after them for an amount owed on the property to municipality by the previous owner?"

This is exactly what the Supreme Court of Appeal (SCA) decided when handing down judgement in the so-called Mathabathe decision. As most home owners understand, when a property is sold the municipality provides a rates clearance certificate, certifying that all amounts due in connection with that property for a period of two years have been paid in full.

However, and most concerning, the legislation also provides that the amount due for municipal services, rates and taxes constitute a charge on the property and enjoy a preference over any registered mortgage. In short the municipality has a 'hypothec' (read mortgage) over the property in question.

William Fullard, partner at Fullard Mayer Morrison Inc. and drafting attorney of the TPN Lease and Sales Packs points out, "the effect of this was that while it was true that the municipality could not block a transfer if the rates and taxes had been paid for the stipulated two year period, it might never the less be able (perhaps subsequent to the transfer of the property to the buyer) to have the property attached and sold in execution for the "historical" debts owed by the seller."

Then came a world of confusion, it was widely reported that the Mitchell decision had effectively overturned the SCA Mathabthe decision. But, notes Fullard, in reality this was not the case, "In the Mitchell decision, the buyer purchased the property at a court-sanctioned sale in execution."

"Now it is old law that when a property is sold in execution (only) it is sold to the buyer fee of pre-existing hypothecs or other such encumbrances."

When coming to its decision in the Mitchell case, the court concluded that the disposal of the property by sale in execution had the effect of extinguishing the municipality's statutory 'hypothec' over the property for the historical debts owed by the previous owner.

In short there is distinction between a sale in execution and the "sale in a normal course of business". It seems properties transferred by sale in the normal course of business are still encumbered with the municipality's statutory hypothec over that property for any old debt.