Municipalities regularly sell vacant property to developers for commercial and residential development. These sales often include a title deed condition that the property must be improved within a certain time period and, if this is not done, then the municipality may claim re-transfer of the property back to itself.
The Supreme Court of Appeal, in eThekwini Municipality v Mounthaven (Pty) Ltd , considered whether a claim for the re-transfer of property from Mounthaven to the eThekwini Municipality constituted a debt as contemplated in the Prescription Act. The court ruled that a claim for re-transfer of property does indeed constitute a debt, and that the Municipality’s right of action against Mounthaven is a personal right (not a limited real right) and subject to prescription if not exercised within three years after the obligation arose.
This means that if a developer does not comply with the title deed conditions and the time in which to comply with the condition runs out, then the municipality has three years in which to claim re-transfer of the property. If the municipality misses this three year window, then the developer is no longer compelled to re-transfer the property.
For more information, contact STBB.