The provision of Section 118 (3) of the Local Government: Municipal Systems Act 32 of 2000 serves as a form of security for services rendered by the Municipality. Under this section the Municipality enjoys the protection of being a preferent creditor over bond holders of the property since a real right is created over the property in favour of the Municipality by this section.
The SCA has held that historical debt that remains unpaid after a clearance rate certificate has been obtained is not extinguished by the subsequent transfer of the property despite the property being sold and purchased through a sale in execution. The court held that it is irrelevant whether the property was purchased through an agreement between the parties or through a sale in execution. What this means is that the Municipality can still recover historical debt from the new owner since the section clearly states that the municipal charge created by section 118(3) burdens the property being transferred and not the erstwhile owner of the property. It is a real right created over the property and not a personal right that can only be enforced on an erstwhile owner. However, this section is not without limitations; the court held that before the Municipality can enforce the provisions of section 118(3), there has to be due compliance with its own by-laws when recovering the historical debt. This means that the Municipality has to exhaust all remedies afforded to it by its own by-laws in recovering historical debt before implementing the provisions of section 118(3).