The City of Johannesburg has confirmed that it plans to begin deducting unpaid municipal debt directly from the proceeds of property sales before transfer can take place. This has raised concern among property owners, conveyancers, and legal practitioners alike.

Recovering Debt Before Transfer

In practical terms, the city intends to recover unpaid amounts — including rates, taxes, utilities, and service charges — by instructing the transferring attorney to withhold funds from the purchase price. This is part of the municipality’s effort to address the mounting billions owed by both residential and commercial account holders.

According to the city, persistent non-payment by property owners has significantly affected its ability to operate efficiently. In response, it has introduced a stricter enforcement mechanism, aimed at recovering debts before a transfer of ownership is finalised.

Withholding Clearance Until Full Payment

The process centres around the issuing of a rates clearance certificate — a legal requirement for any property transfer to proceed. The City of Johannesburg has indicated that it will not issue this certificate unless the full amount owed on the municipal account is paid upfront. Where debts are outstanding, the municipality will instruct conveyancers to retain those funds from the seller’s proceeds and pay them directly to the city before lodging with the Deeds Office.

In some cases, the municipality has indicated it may even seek recovery of amounts from the buyer, depending on the circumstances and whether historical debt applies to the property.

Legal Concerns and Industry Pushback

This move has triggered a strong reaction from the property sector, with legal professionals warning of unintended consequences. Sellers may find themselves receiving less than anticipated from the sale, particularly if they were unaware of outstanding amounts. Conveyancers also warn of potential delays and disputes over whether certain charges are lawfully recoverable — especially where they relate to historical debt or matters in dispute.

Questions have also been raised about the legal basis for the city’s approach. While municipalities do have a right to recover debts, critics argue that this method could overstep constitutional boundaries — especially in cases where debt may not have been incurred by the current owner.

Johannesburg Stands Firm

Despite these concerns, the City of Johannesburg has defended its position, stating that it is entitled to secure all debts tied to a property before transfer. It views this as essential to protecting its revenue base and maintaining municipal services.

Until this approach is tested in court — which many expect may happen soon — sellers in Johannesburg should be prepared for the reality that any unpaid municipal charges may be deducted directly from the proceeds of their property sale.

VDM Attorneys – Property Lawyers in Sandton 

The City of Johannesburg’s approach to recovering outstanding municipal debt through property sale proceeds raises important legal and practical considerations for both sellers and buyers. While municipalities do have the right to demand payment of amounts owing before issuing a rates clearance certificate, the withholding of sale proceeds and the recovery of historical debt remain contentious issues — particularly where ownership has changed hands or the debt is disputed.

For sellers, this development highlights the importance of conducting a thorough account reconciliation with the municipality before initiating the transfer process. For conveyancers and legal practitioners, it reinforces the need for clear communication and careful handling of municipal obligations during registration.

This is a fast-evolving area of property law, and developments like this one from Johannesburg are likely to influence how other municipalities approach debt recovery going forward. Until definitive legal clarity is established, all parties involved in a property transaction would be well advised to seek accurate, up-to-date legal guidance to avoid surprises and ensure compliance with all regulatory requirements.

Contact us for more information about how we can assist you with property related legal matters.