November 20, 2018

Claims to transfer immovable property

A claim to transfer immovable property is essentially a claim to deliver goods. Any claim would therefore also prescribe within three years.

The Constitutional Court made an interesting judgement on 31 October 2018 in Ethekwini Municipality vs Mounthaven (Pty) Ltd Case CCT05/18 [2018] ZACC 43.

Thekwini Municipality sold immovable property to Mounhaven (Pty) Ltd at a public auction during 1985. There was a special condition in the deed of sale to the effect that Mounthaven was to erect a building on the property to the value of R100 000.00 within three years of the purchase date. If Mounthaven failed to do so, the property had to be transferred back to the Thekwini Municipality.

Mounthaven failed to comply with the special condition. No buildings were erected and the property remained undeveloped. Mounthaven explained that they were unable to proceed with any development due to a dispute with the municipality regarding a stormwater pipe running beneath the property. Mounthaven argued that it was the responsibility of the municipality to relocate the stormwater pipe in order for them to proceed with the development.

In 2012, 24 years later, the municipality approached the High Court, relying on the special condition and claiming the re-transfer of the property. Mounthaven argued that the claim for re-transfer constituted a debt for purposes of the Prescription Act and that the municipality could rely on such a claim as the debt prescribed within three years. The High Court found in favour of Mounthaven and the position remained the same in the Constitutional Court.

The Court found that the dictionary definition of debt – an obligation to pay money, deliver goods, or render services – covered a claim to transfer immovable property. The claim to transfer the property is essentially a claim to deliver goods. It is therefore a debt that satisfies the definition of a debt in the Prescription Act. The claim has therefore prescribed after three years.

The court rejected the municipality’s submission that the obligation to re-transfer stems from a real right and not a personal right. A real right cannot expire. The rejection was based on the fact that the clause in the deed of transfer did not bind successors in title and registration of that clause in the Deeds registry does not change the fact that the clause remains a personal right.

Raullene Marais
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