Outstanding Municipal Rates on Purchase of Property

Outstanding Municipal Rates on Purchase of Property

Category Newsletter: Article 1

On 25 August 2014 Carte Blanche screened a bulletin relating to Municipal rates on property. There were examples whereby Purchasers had just taken transfer of the property, only to fund that there were rates still outstanding for which the municipality was finding them, as the new registered owners, responsible.

Supreme Court of Appeal Case of City of Tshwane Metropolitan Municipality vs Mathabate and another 2013 - confirmed that Section 118 (3) of the Municipal Systems Act 32 of 2008 meant that a person who had taken transfer of a property on the strength of a Rates Clearance Certificate was still liable for any amount due for municipal service fees surcharge and rates, levies and duties that arose prior to the transfer of the property. This meant that any debt that arose in respect of the property stayed with the property even though the property had changed hands and a Rates Clearance Certificate had been issued.

Carte Blanche suggested that prospective purchasers obtain a FULL rates clearance certificate rather than the certificate that reflects only the last two years.

We have been advised that when a rates clearance certificate is applied for in eThekwini, each application is treated thoroughly and the Municipality checks several areas before issuing the clearance certificate. However, it is accepted that human error can still occur. As a result of this “thorough treatment”, eThekwini does not issue a full rates clearance certificate as mentioned by Carte Blanche.

It has been suggested that a clause, if not already included, is added to the sale agreement along the following lines:

"The Seller hereby indemnifies the Purchaser against any liability for Local Authority or Electricity debts incurred prior to registration of transfer. If a claim for any such debt arises after registration of transfer, then the Seller undertakes to pay this debt on demand by the Purchaser."
 

Author: Wakefields Property Management