For many years, numerous municipalities have adopted and enforced planning by-laws that contained transfer embargoes on properties that did not comply with their land use scheme requirements. This meant that a landowner could not transfer their property until they had first complied with the municipality’s land use scheme and had obtained a certificate to that effect, from the municipality.

This practice provided a measure of comfort to any purchaser of property, as the land use on the property and any buildings therein were deemed compliant with the municipality’s land use scheme. The transfer embargoes were also a good mechanism to prevent the continuation of non-compliance with the municipality’s land use scheme whenever the property exchanged hands from a delinquent property owner to a new owner.

However, the recent Constitutional Court (“CC”) judgment in the case of Govan Mbeki Local Municipality V Glencore Operations South Africa (Pty) Ltd & Others, Emalahleni Local Municipality V Glencore Operations South Africa (Pty) Ltd & Others, nullified the by-laws containing property transfer embargoes, and provided clarity regarding the legislative authority of local government when it comes to property rights.

The Govan Mbeki and Emalahleni Local Municipalities had both adopted municipal planning by-laws, restricting the transfer of property if the requirements of the land use scheme were not complied with.  When Glencore and several companies (“Glencore”) wanted to transfer their properties, they were restricted by these transfer embargoes in the by-laws. Glencore subsequently challenged the constitutional validity of the by-laws in the Mpumalanga High Court (“HC”), arguing that they had overstepped the constitutional limits of the local government as listed in Schedule 4B and Schedule 5B of the Constitution.

Glencore argued that the transfer embargoes in the by-laws violated property rights in terms of section 25 of the Constitution, as their application amounted to an arbitrary deprivation of property, and that they were inconsistent with section 118(1) of the Local Government: Municipal Systems Act 32 of 2000 (“Systems Act”).

The municipalities argued that section 32 of the Spatial Planning and Land-Use Management Act 16 of 2013 (“SPLUMA”) empowered them to pass by-laws aimed at enforcing their land use scheme, and that in terms of section 156(2) of the Constitution, they had the right to administer by-laws for the effective administration of matters which fell within their rights to administer. The municipalities also argued that the by-laws were in line with section 53 of SPLUMA.

The HC and the Supreme Court of Appeal (“SCA”) agreed with Glencore and declared the by-laws unconstitutional and invalid. Unsatisfied with these judgments, the municipalities appealed the SCA decision to the CC.

The CC held that the impugned by-laws went far beyond the ordinary scope contemplated in section 53 of SPLUMA, as this section only prohibits the first registration of any property resulting from a land development application unless the municipality certifies that all the planning requirements and conditions for the approval have been complied with, whereas the current by-laws impose a transfer embargo that burdens the property in perpetuity whenever a landowner attempts to transfer the property.

The CC pointed out that while municipal planning is expressly included in Part B of Schedule 4 of the Constitution, as a matter falling within the exclusive competence of local government, land registration or the deeds registration function appears in none of the schedules of the Constitution, as it is considered a residual functional area of national government competence, because the Registrar of Deeds is a national organ of state.

Thus, the municipality lacked any enabling power from the Constitution to make the impugned by-laws.  Furthermore, according to section 156 of the Constitution, the municipality has no legislative authority to make by-laws that fall outside of local government matters by creating embargoes that operate within the fields of competence for national government.

The two minority judgments in this case held the view that it was within the municipality’s competence to make by-laws with property transfer embargoes as this function was necessary or incidental to the performance of municipal planning functions as contemplated in section 156(5) of the Constitution.

This judgment has serious implications for many municipalities that have promulgated similar provisions in their by-laws. It is also a relief for property owners looking to sell or transfer their property, as they only need to produce a rates clearance certificate from the Municipality, instead of an additional certificate that verifies that all land use requirements have been met.

by Siya Mkhize, Partner and Head of Local Government and Administrative Law, and Thuthukani Masondo, Candidate Attorney.