Answer to a question from a reader

How do I go about buying municipal land in a township to develop and rent out to students?

The short answer

There are several different ways of buying municipal land.

The whole question

Can one buy vacant land in a township to develop and rent out to students from the municipality? If yes, how?

The long answer

Thank you for your email asking if you can buy vacant land from the municipality in the township to develop and rent out to students.

Yes, municipal land can be sold, in terms of Section 14(2) of the Municipal Finance Management Act of 2003 (MFMA), if the land in question is not needed by the municipality to supply a minimum level of basic services. Because there have been disputes about the way municipal land has been sold, the courts have ruled that “any transfer of municipal land must be fair, equitable, transparent and competitive” and must be in line with the supply chain management policies that every municipality has. This is Section 14(2).

There are different ways of buying municipal land:

  • A private treaty between buyer and municipality where offers are made and negotiations concluded in terms of Section 14(2) of the MFMA.

  • Public auction where the property is sold to the highest bidder.

  • Public tender where the municipality puts out a notice for 30 days calling for tenders. The municipal council or committee will decide on the winning tender in terms of its supply chain policies.

  • Public/private partnership in terms of Section 120 of the MFMA. Section 120 says that a public/private partnership must “provide value for money to the municipality”, “be affordable for the municipality” and “transfer appropriate technical, operational and financial risk to the private party”.

So these are the steps in the process of buying municipal land:

1. Approach municipality about the land you want to buy.

2. Your application will then be circulated to all municipal departments.

3. The land must be evaluated so that it is sold at market price.

4. Provisions of MFMA have to be complied with, in terms of income and expenditure.

5. Municipal officials prepare a report for the Council / Committee to approve.

6. If approved, a Deed of Sale is finalized which includes any conditions attached to the sale.

7. You pay all the fees and the purchase price before you sign the Deed of Sale.

8. The municipal manager signs the Deed of Sale.

9. A copy of the Deed of Sale is given to you, to all the departments and to the conveyancing attorneys who will do the transfer.

10. Transfer papers are drawn up, clearance certificates are issued and all tax/VAT matters settled.

11. The transfer is done in the Deeds Office.

12. The property is removed from the municipal assets register

Though vacant land is obviously cheaper to buy than developed land, the banks are less keen to finance it as they see it as a risky proposition. Even though you are not living on the land, you would be required to fence it off against intruders and keep it clean and neat. You would also be paying rates on the land, though again not as much as you would pay on developed land.

If you are in Cape Town, there is an online manual called Applying to Buy or Lease Municipal Land at https://resource.capetown.gov.za/documentcentre/Documents/Procedures.

Wishing you all the best.

Answered on Sept. 18, 2019, 1:47 p.m.

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