SELLERS AND CLEARANCE CERTIFICATES - NOTE THE 2-YEAR LIMIT ON RATES!
A sold property cannot be transferred to the buyer thereof unless and until the local authority issues a "clearance certificate", being its confirmation that it has received full payment of all amounts due in connection with the property in respect of "municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties during the two years preceding the date of application for the certificate."
The danger here for sellers of course is that these debts could include substantial service fees, run up by tenants without your knowledge. If the outstanding amounts relate to the property and fall within the 2-year period, you have no option but to pay them in full, regardless of whose debts they actually are.
But at least this danger is limited to the 2 years. In a recent case before the Supreme Court of Appeal, a municipality had attempted to force the seller to pay older debts by allocating all payments to the oldest debts, and then refusing to advise the seller how much of the debt fell within the 2-year period.
However, ruled the Court, a municipality cannot do that. It is required to: -
- Advise you what part of the debt relates to the 2-year period, and
- Issue a clearance certificate to you against payment of no more than that part of the debt.
(Municipalities - tailor your credit control and debt collection policies to avoid debts ageing to anywhere near the 2-year limit. Collecting older debts is not going to be easy without the leverage provided by a seller's reliance on your clearance certificate before transfer can be effected!)
Recent Articles for April 2010;
Source: www.dotnews.co.za
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