Payment of Rates And Taxes during the Transfer Process

In terms of Section 118 of the Municipal Systems Act 32 of 2000, a rates clearance certificate (RCC) is required from the local authority (Municipality) before the transfer of ownership of any immovable property can be effected at the Deeds Office. From a conveyancing point of view the importance of RCC’s are that they serve the purpose of ensuring that all rates and taxes due on the property transferred are paid by the Seller and the Purchaser receives transfer of the property free of municipal debt. 

The RCC is one of the documents required for lodgement of a transaction at the Deeds Office and needs to be valid for a certain period from date of issue. For example, the period of validity of a RCC at the City of Cape Town is 4 months and therefore registration needs to be effected within the 4 months after date of issue. 

At the start of the transfer process, we as the Conveyancing Attorneys will apply to the Municipality for rates clearance figures. The Municipality issues clearance figures which include the current arrears on the property plus an advance calculation of rates and services, i.e. sewer, electricity or water charges. The City of Cape Town requires payment of the rates and taxes for 120 days in advance from the Conveyancers to enable the Municipality to issue a RCC. Stellenbosch Municipality requires rates and taxes to be paid up to the end of their rate year ending in June each year. Other Municipalities might have slightly different policies regarding the period of rates and taxes to be paid in advance. 

On receipt of the rates figures, we as the Conveyancers request the Seller to make payment of the amount into our trust account as this amount is the Seller's obligation at that stage. We advise the Seller to pay the rates figures as soon as possible but within 30 days of date of issue as the figures issued are only valid for 30 days where after revised figures must be obtained. We will in turn pay this sum to the Municipality and obtain the RCC issued by the Municipality required for lodgement. Since the Municipality requested rates and taxes to be paid in advance we advise the Seller not to pay their services after payment of the rates figures to us. 
The Purchaser will be liable for the payment of rates and taxes from the date of registration of the property in their name. We request the Seller at the beginning of the conveyancing process to furnish us with their banking details for them to receive a refund for the pro rata rates and taxes paid by them in excess for the period after date of registration. Generally, the Seller has an option to receive the refund directly from the Municipality or they can nominate us to receive the refund on their behalf to be paid to them. The City of Cape Town currently takes 3 to 4 months to pay refunds to Sellers. 

The connection and disconnection of services such as water and electricity is the responsibility of the Seller and the Purchaser. The Municipality will only connect the services into the name of the registered owner of the property. The property is only registered into the Purchaser’s name once the transfer is registered in the Deeds Office. Should the sale agreement allow for early occupation then we advise the Seller to retain the electricity and water accounts in their name and to collect payment of the monthly account directly from the Purchasers. It would further be advisable to take a reading of both the electricity and water meters on date of occupation by the Purchasers to prevent any uncertainty.


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