Can I be held ransom with a rates clearance certificate for future municipal debts?
“I’m in the process of selling my house. When I requested a property rates clearance certificate from my municipality they requested me to pay the estimated rates until the end of their financial year, which would be months after my house has been transferred to the new owner. Surely I can’t be held ransom for these future rates just because I need a rates clearance certificate?”
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 certificate.
In the 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 lodgement at the deeds office to register the transfer. However, they were not happy with the fact that they were accountable for R1 066 532.00 more than was actually due and took the municipality to court.
The question the court had to consider was whether a property owner in the case of a sale of property, is liable to pay rates calculated until the end of the financial year of the municipality or until date of registration of the property transfer?
The court held that the intention of the legislature was clear from Section 118 of the Municipal Systems Act 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. The court accordingly found in favour of Amber Mountain Investments.
If your municipality is accordingly asking you to pay rates estimated until after the date of application for the rates clearance certificate, you should ask your attorney to assist you to bring the outcome of this case to the municipality’s attention.
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