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Property sellers: Advance payments for clearance certificates scrapped

Property sellers no longer need to pay municipalities in advance for utilities in order to obtain rates clearance certificates.

In a landmark decision, the Supreme Court of Appeal has ruled that municipalities can no longer demand that sellers of property pay for rates, fees and charges for months in advance before a rates clearance certificate can be issued.

Until now the deeds office in South Africa needed a rates clearance certificate to prove that outstanding municipality bills had been paid before the registrar could transfer a property. 

The landmark case dealt with Nelson Mandela municipality and a private investment company, Amber Mountain Investments.  The municipality demanded that Amber Mountain Investments pay R1 million in advance for rates before the sale of their property could go through.

The seller argued it was liable only for rates and taxes up to the date of transfer and not thereafter.

Sellers can now refuse to pay rates and charges in advance beyond the date of the certificate when applying for a rates clearance certificate.


New rules around SA property owners and utility bills

  • If a consumer receives a utility bill with charges older than three years, they cannot be held liable for these amounts, as the charges have prescribed. Prescribed means that the law considers the charges that have prescribed as being too old to enforce the creditors’ right to collect.
  • It is not the duty of the consumer to read meters and determine their actual consumption. As a result a consumer will not be considered to have acknowledged a debt when the municipality has failed to provide details.
  • The prescription period of three years starts when the municipality should have taken actual readings and invoiced the consumer.
  • The municipality has a duty to carry out such readings and invoice consumers at its convenience, but at reasonable intervals.
  • Where no records of regular actual readings are available to ascertain how much of a bill for several years has prescribed, the industry standard should be applied. This is done by averaging out the consumption over the months between the two readings and then using that average to calculate the consumer’s liability for the remaining period.

Source: BusinessTech

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