Title Deed Conditions: Municipal building clause containing reversionary right in favour of a municipality

05 July 2022,  Libo van Aswegen 140
The practical implication of a recent Constitutional Court ruling is that should a Title Deed contain a similar condition affording a Municipality the right to claim re-transfer of a property within a certain period of time, the right will not be valid in perpetuity of time for it is not a registrable real right. The right to claim re-transfer of a property will at best be enforceable as a contractual obligation prior to it lapsing after three years in terms of  Chapter III of the Prescription Act.

In October 2018, in the matter between eTHEKWINI MUNICIPALITY and MOUNTHAVEN (PTY) LTD, the Constitutional Court handed down judgement. In an unanimous judgement written by Justice Froneman, the Constitutional Court confirmed the Supreme Court of Appeal’s earlier judgement. 

On 24 May 1985, the eThekwini Municipality sold immovable property to Mounthaven at a public auction for an amount of R60 000. In the Deed of sale, a special condition was included to the effect that Mounthaven was to erect buildings on the property to the value of R100 000 within three years of the purchase date. In the event that Mounthaven failed to do so, the Municipality would be entitled to the re-transfer of the property. The aforementioned contractual conditions were registered in the Title Deed in due course. Mounthaven failed to develop the property within the specified time period of three years and the property remains undeveloped. The failure on the part of Mounthaven to develop the property was explained as a result of a dispute that arose with the Municipality regarding a storm-water pipe that runs beneath the property. According to Mounthaven, it was the Municipality’s responsibility to relocate the storm-water pipe. In 2012 the Municipality approached the High Court, relying on the special conditions in the Deed of Sale duly registered in the Title Deed, claiming the re-transfer of the property. 

Council for Mounthaven argued that the claim to take re-transfer of the property by the Municipality constituted a debt as contemplated in Chapter III of the Prescription Act and that it has prescribed. 

The Supreme Court of Appeal confirmed that the Municipality’s claim constituted a debt that had prescribed after a period of three years. The Municipality’s contractual right to claim re-transfer of the property did not amount to a real right (subtraction from dominium) and was not registrable in terms of Section 63 of the Deeds Registries Act. Accordingly, the Municipality had lost its right of action when it prescribed after three years.

The practical implication of the above-mentioned is that if a Title Deed contains a similar condition that affords a Municipality the right to claim re-transfer of a property within a certain period of time; the right will not be valid in perpetuity of time for it is not a registrable real right. The right to claim re-transfer of a property will at best be enforceable as a contractual obligation prior to it lapsing after three years in terms of  Chapter III of the Prescription Act.

A conveyancer that is faced with a Title Deed that contains a similar condition that affords a Municipality the right to claim re-transfer of a property (pending a Chief Registrar Circular being issued) must request the relevant Registrar of Deeds, whilst registering a subsequent transfer of the property, to endorse the Title Deed in terms of Section 3(1)(v) of the Deeds Registry Act. This is to indicate that the title deed condition lapsed or was not registrable to give effect to the object of the judgement of the Supreme Court of Appeal that was confirmed by the Constitutional Court. In effect, the Registrar of Deeds will ensure the application of the principle ‘stare decisis’ – to stand by things decided.

Similar rights that afford a Municipality the right to claim re-transfer of a property that do not amount to a real right (subtraction from dominium) must not be allowed to be registered in future by the Registrar of Deed.


Disclaimer: This blog is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy has been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s). 
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