Internal Publication: Conveyancing- What you need to know about rates clearance certificates

WHY IS A RATES CLEARANCE CERTIFICATE NECESSARY

A rates clearance certificate (RCC) is a document received from the City Council that certifies that the Seller does not owe any money to the City Council. When the Purchaser becomes the owner of the property, no money will be owed by the Seller. The Registrar of Deeds acts as a policeman on behalf of the City Council and will not transfer a property from the Seller to the Purchaser unless the conveyancer presents a RCC when lodging the documents in the Deeds Office.  In other words the Registrar of Deeds is ensuring that the Purchaser does not become responsible for any of the Seller’s outstanding debts for municipal accounts on the property.

RATES CLEARANCE CERTIFICATES ARE NEEDED FOR FREEHOLD PROPERTY AND SECTIONAL TITLE PROPERTY

From 1 August 2008 Sectional Title Properties are treated the same as freehold properties and each sectional title property owner will receive a rates account from the City Council.  This means that a RCC must be obtained before Sectional Title properties may be lodged and registered in the Deeds Office.

PAYMENT OF RATES BEFORE TRANSFER

The conveyancer calls upon the City Council for rates clearance figures.  The figures are worked out by the City Council and not the conveyancer.  The RCC will include arrears for rates and taxes, electricity and water and will also include an advance portion, discussed below.  It is important to note that the Seller will be responsible for all accounts opened in respect of the property sold, even if accounts were opened by tenants.  Once the rates clearance figures are received, the conveyancer will present them to the Seller and ask for payment.

WHOSE RESPONSIBILITY IS IT TO OBTAIN A RATES CLEARANCE CERTIFICATE

It is the Seller’s responsibility to pay all amounts needed to obtain the RCC.  The Seller must pay the conveyancer who will pay the City Council.  The RCC must be obtained and paid for before the lodging of transfer documents in the Deeds Office.

Sellers should let the conveyancer have copies of accounts and account numbers to expedite the process of application.

Once the conveyancer has paid for and obtained the RCC, the Seller’s account at the City Council will be in credit and the Seller can discontinue paying monthly rates as a result of the credit.

WHY MUST THE SELLER PAY IN ADVANCE

The City Council will claim rates and taxes, electricity and water for a period of 90 -120 days in advance.   The law related to the RCC says that a RCC must be valid for a period of 60 days from the date of issue of the RCC by the City Council.  The City Council gives the Seller 1-2 months to pay and thereafter the RCC is valid for the 60 day period.

WILL THE SELLER BE REFUNDED BY THE CONVEYANCER ON REGISTRATION

The conveyancers will not refund any funds to the Seller on registration.  The conveyancers have been instructed by the City Council of Johannesburg not to refund the Seller for any amounts paid past the registration date.

WHEN DOES THE SELLER GET A REFUND FROM THE CITY COUNCIL AND HOW

After registration and once the charges are transferred to the Purchaser’s accounts there is usually still credit left on the Seller’s municipal accounts.  This means that the Seller is owed a refund by the Council.  The Council usually takes approximately 6 to 9 months to reconcile the Seller’s and Purchaser’s accounts and make out a refund cheque.

The Seller should complete a Refund Application wherein the Sellers banking or postal details are specified.  The Council will thereafter provide the Seller with payment of the refund in due course.

The Conveyancing Attorneys do not calculate the refund and are not advised as to how this is determined.

CITY OF JOHANNESBUG:

OPENING OF NEW ACCOUNTS BY THE PURCHASER

RATES ACCOUNTS

  • After transfer the conveyancers send a letter to the City Council notifying them that the transfer has taken place. 
  • The City Council will automatically therafter open a rates account for the Purchaser and will transfer the rates charges from the Seller to the Purchaser. 
  • This takes about 3 months to become effective and Purchasers should make provision for funds for payment in the interim

SERVICES (Water / Pikitup / Electricity supplied by City Power)

  • The Purchaser must attend either the City Council’s premises at Thuso Property, 61Jorrisson Street, Braamfontein, or his/her nearest local municipality to open a service account with the Council.
  •  Details of your nearest local municipality are available online at www.joburg.org. 
  • The City Council will after the opening of accounts start billing the Purchaser and sending accounts, this process can take up to 3 months before an account is received and again Purchasers should make provision for this.
  • The Council will only allow the Purchaser to open accounts once the rates have been transferred.  (Unfortunately there is no way at present to ascertain when this will be done).  
  • The parties can log a service request to have these rates transferred. 
  • The alternative is for the Seller or Purchaser to employ the services of a consultant to assist in this imperfect process.
  • The council no longer allows for tenant accounts to be opened and accounts can only be opened in the registered owners name.  (Thus the councils reason for insisting the rates account be first transferred to the Purchaser before new service accounts be opened.)
  • The Purchaser will need the following in order to open an account:

INDIVIDUAL APPLICANT

-Copy of an Identity Document of applicant or copy of an Identity Document of the owner if the applicant is a tenant

-Copy of spouse’s Identity Document and spouses details

-Applicant’s bank account details, spouses employer details and monthly income

Next of kin details

-Meter readings and numbers

-A letter from the Conveyancer stipulating the registration date

-Sufficient funds to pay a deposit which will be equal to the average of the Seller’s service charges for the 3 (three) months immediately preceding the opening of the account (cash or cheque only)

-An Application form for the service (available at the municipal offices)

COMPANY, TRUST OR CLOSE CORPORATION

Pty, CC or Trust documents and Identity Documents of all directors/trustees/members as well as a letter/resolution authorizing the signatory to open the account and sign all the necessary documents

CLOSING ACCOUNTS

  • For rates accounts, the Seller is not required to do anything.
  • For service accounts the Seller must complete a ‘Cancellation of Consumer Agreement form’ at the local municipality or Jorrisson Street
  • Provided that the rates have been transferred and the Purchaser has paid a deposit and opened an account, all charges will be transferred to the Purchaser’s account and any credit owing to the Seller will be refunded. 
  • The City Council can only start billing the Purchaser (and finalise the Seller account) once the Purchaser has opened new accounts with the City Council. 
  • Until the Purchaser has opened new accounts all charges on the account, for example, for water and electricity, will be billed to the Seller’s municipal accounts and the Seller will continue to receive monthly statements. 
  • These statements often incorrectly reflect the status of the Seller’s account as in debit (when it should be in credit).
  • Once the Purchaser has opened his own accounts, the City Council will transfer all of the charges billed after date of registration from the Seller’s municipal accounts to the Purchaser’s municipal accounts.
  •  The Purchaser is liable for rates and taxes from the date of registration of transfer and is liable for other charges such as electricity and water from date of occupation

ESKOM

  • There are certain defined areas where properties are billed by Eskom for electricity supply and not City Power.
  • The Seller is required to close his/her account with Eskom.  To do this the Seller can either phone the national Call Centre number on 0860037566 and advise Eskom of the date of termination of electricity supply together with banking details for any refunds due, or go to his/her nearest Eskom Service Centre.
  • Eskom will stop electricity service supply from the date of moving out and closing of the account.
  • Whether the Seller goes to the Service Centre or calls the National number, they will need to provide the following:

-Property description;

-Meter numbers;

-Final meter readings (these can be jotted down by the Sellers – no further proof is necessary); and

-Bank details (in the case that a refund is due).

  • Purchasers are required to open a new account with Eskom for electricity supply.  Purchasers can either phone  the  national Call Centre number  to open this account and arrange to effect payment of the required deposit, or they can visit their nearest Eskom Service Centre.
  • Eskom will require the following information:

-Property description;

-Identity Document;

-Offer to Purchase or letter from the Attorneys confirming that transfer has taken place;

-Meter numbers and meter readings as at date of occupation;

- Funds for a deposit:  R 1 400 if the property is supplied with 16 or 25 KVA and R 3 400 if the property is supplied with R 50 KVA.

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