Rates and Levies clearance certificates

Before a property transaction can be lodged in the Deeds Office an original rates and taxes and/or levies clearance certificate is required for lodgement in the Deeds Office. Documents which are lodged without the necessary clearance certificate will be returned unregistered to the conveyancer.

How much must the seller pay?

Sellers are required by the municipality as well as, the Deeds Office, to pay a lump sum which is:

1. In the case of freehold properties, an amount which is the equivalent of six months rates and taxes, six months electricity and six months water consumption (not applicable in some properties) plus arrears, all together in one combined lump sum in advance; before the transaction can be lodged.

The clearance certificate will have to be valid at least until the date of registration or for 120 days from issue, whichever occurs last;

2. In the case of sectional units, a levy clearance certificate valid until after registration of transfer of the unit. The amount required varies in the case of each different sectional title body corporate.

Using rates and taxes consultants to obtain the necessary assessment figures is the most efficient way of obtaining figures.

It is not unusual for the Council’s records to be inaccurate and therefore the process of obtaining the amount that has to be paid, can be delayed and does require extra work on the part of the consultant. The consultant does charge for additional time spent in expediting the reconciliation of the records of the Council.

Who is liable to pay rates before and after the date of transfer of ownership?

3 For as long as the seller is the registered owner he will be debited with rates and taxes charges until the day upon which transfer passes to the purchaser.

4 The purchaser is billed for rates and taxes from day after registration of transfer.

5 As the seller will have already made an advance payment to the Council for the issue of a clearance certificate, the Council will reconcile and refund the seller any surplus payments which are determined by the Council after the transfer is registered. Unfortunately the Council does not attend to "the transfer of the account” immediately after registration of transfer. Due to recent changes in Council policy, Council has taken over the role of reconciling rates and taxes, water and lights accounts between purchaser and seller. The Council specifically requires conveyancers not to attend to the apportionment; as they used to do.

6 We issue a written notice to the Council informing it of registration of transfer. The original letter is hand-delivered to the Council and a facsimile transmitted as well.

7 We have been told that the Council ignores our letter as they prefer to work from a schedule of registrations that is issued by the Deeds Office every quarter. However for the record we still send the above mentioned letters.

Collecting the refund

8 It has always been the Council’s duty and function to refund the seller‘s surplus credits on his account after transfer. Previously the Council used to post refund cheques directly to sellers.

9 Due to the rise in fraud and the theft of many refund cheques, the Johannesburg City Council has chosen to pay the refund amount, owing to the seller, directly into the conveyancer’s trust account. Currently this practice is erratic and unreliable. There is no regular time that one can expect refunds to be made. Furthermore sometimes refund cheques are deposited "un-referenced" into our trust account and we are not able to identify whose money belongs to whom? In other instances refund cheques, made out in the name of the conveyancer, are simply put into a pigeonhole at the Council’s offices without any prior arrangement.

10 Sellers normally follow up with the Council to expedite payment of their refunds. They are quite often informed that the cheque has been paid to the conveyancer when in fact it has not been. In our experience the cheque will normally appear in our pigeonhole in the Council’s offices, about three weeks after the seller has been told that the cheque has been issued.

11 The follow up and recovery of refund cheques is costly and time-consuming and the fees that were paid to us by the purchaser do not cover the cost of expediting refund cheques for the sole benefit of the seller. The seller did not pay the conveyancer for the service. We were not paid by the purchaser to unravel the seller’s rates accounts and recover the seller’s money.

12 Despite the aforegoing, we have nonetheless provided for a courier to visit the Council on a daily basis to collect refund cheques and sellers are charged a nominal fee for this convenience.

13 Alternatively there are rates and taxes recovery specialists who are able to assist directly with the recovery of the seller’s refund.

Closing and opening rates and taxes water and electricity accounts

14 The reconciliation of rates and taxes, water and electricity cannot be finalised unless the seller and purchaser respectively close and open accounts in their names. This must be done by personally visiting the Council and signing contracts and agreements to close municipal services. The Council requires copies of sale agreements, identity documents and all company documents and/or trust documents as may be applicable.

15 The seller must close his Municipal accounts after the clearance certificate has been issued by the Council and before he vacates the property. If the seller does not make sure that he closes his accounts with the Council after his six-month assessment payment has been paid and receipted by the Council, he will effectively cause a delay in the reconciliation and payment of his refund.

16 The purchaser is expected to open accounts with the Council when he takes occupation of the property or just before he takes occupation. He can open his account with the Council once the rates and taxes Clearance certificate has been issued prior to him taking occupation. He must take a letter from the attorneys confirming that transfer is in process, with the copy of the offer to purchase and his identity document

Levy clearances

Body Corporates deal with levy clearance certificates in one of 2 ways:

1. Figures are issued for the period requested by the Conveyancer (normally until the end of the month during which registration is expected) and on registration the Conveyancer pro-rates the account in the final statements to the Seller and the Purchaser.

2. It is also quite common for the body corporate managing agents to themselves apportion and refund between seller and purchaser on registration. Invariably managing agents attend to the reconciliation of water and electricity accounts, as only they are in possession of the meter readings.

The cost of issuing the clearance certificate is always for the account of the Purchaser.

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