PropertyLaw

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“No,” you cannot be held liable for payment of the property rates.

Herewith the real question: Can a seller be held to ransom after selling his/her property and applying for a rates clearance certificate for future municipal debts which may occur to the property involved?

Recently; we received the following query from a seller who had sold her house in Johannesburg. 

“I have just sold my house and the conveyancers applied for a rates clearance certificate as it is required in the transfer process. The municipality has now requested me to pay the estimated rates until the end of their financial year, which will be months after my house has been transferred to the new owner; and they will not issue the rates clearance until I pay them the sum they want.

How can I be held to ransom for these future rates just because I need a rates clearance certificate now?”



In short, the answer according to a recent Supreme Court of Appeal case is “no,” you cannot be held liable for payment of the property rates for the entire financial year of the municipality when requesting a rates clearance.  

In the recently reported case of Nelson Mandela Bay Municipality v Amber Mountain Investments 3 (Pty)Ltd, the municipality required Amber Mountain Investments to pay rates from 1 July 2009 until the end of its financial year, which would be a few months after the date of the registration of the property transfer. Amber Mountain Investments paid the amount of R2 281 014.68, under protest, in order to obtain the rates clearance certificate needed for lodgment at the deeds office to register the transfer.

However, they were not happy with the fact that they were accountable for an amount of R1 066 532.00 more than was actually due by them and took the municipality to court seeking an appropriate order.

The question the court had to consider was whether a property owner in the case of a sale of immovable property, is liable to pay rates calculated until the end of the financial year of the municipality or only until the date of the actual registration of transfer of the property into the name of the new purchaser?

The court held that the intention of the legislature was clear from Section 118 of the Municipal Systems Act; namely that municipalities were only entitled to recover municipal debts due two years prior to the date of application for the clearance certificate, and that the municipality was not entitled to recover future municipal debts for periods which extended beyond this date, irrespective of whether the municipality had a policy in place which determined otherwise or where they relied on their own financial year end. The court accordingly found in favour of Amber Mountain Investments and made an appropriate order against the Respondent Municipality.

This is an important precedent for all property owners, sellers and Estate agents as well as for municipalities.

In the result; if your municipality is asking you to pay rates estimated until after the date of application for the rates clearance certificate, you should ask your legal representative and the conveyancer involved to assist you to bring the outcome of this case to the municipality’s attention.

 

Please visit our website at www.legaladviceoffice.co.za or send us an email to This email address is being protected from spambots. You need JavaScript enabled to view it. with your legal questions.

About our author:

Hugh Pollard (Legal Consultant), has a BA LLB and 41 years’ experience in the legal field. 22 years as a practising attorney and conveyancer; and 19 years as a Legal Consultant.

082-0932304 (Hugh’s Cell Number)

This email address is being protected from spambots. You need JavaScript enabled to view it.

www.legaladviceoffice.co.za

 

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