Article written by S’negugu Dlamini, Candidate Attorney, checked and released by Chantelle Gladwin-Wood, Partner at Schindlers Attorneys
18 November 2021
What are “Rates Clearance Figures”?
When a seller sells a property, he/she/it is required by law to obtain a rates clearance certificate (“RCC”) from the local municipality, which certifies that all rates and other municipal charges (like water, electricity, refuse and/or sanitation) are paid up in full.
Because it can take anywhere from 3 to 6 months to transfer a property in the ordinary course, the law provides that when a conveyancer requests that the municipality issue such certificate, the municipality is entitled to demand, before issuing same, that the seller make payment of any/all arrears in connection with the property, and also make payment in advance of at least 5 to 6 months of the average of the monthly municipal charges in respect of the property. The document that the municipality issues that contains the amounts payable to obtain the RCC, is known as the rates clearance figures.
This allows the clearance certificate to be valid for 5-6 months (because the City has been paid in advance for 5 to 6 months’ worth of the average of the monthly municipal charges). This is necessary because sometimes property transfers take longer than expected, and if the certificate was valid for a shorter period, it would be necessary for the seller’s conveyancer to apply for and pay for the issue of a certificate twice, which would be an unnecessary duplication of effort and costs.
How is application made?
The seller’s conveyancers will make an application to the municipality on the prescribed form, for the municipality to advise them of the amount payable to obtain the RCC. There is a nominal fee payable for the issue of rates clearance figures, which in Joburg is R171. The municipality usually takes between 7 and 14 days to issue the figures.
What happens once the rates clearance figures are received?
Once the figures are received, and payment has been made of the required amount, it usually takes another 7 days or so for the municipality to issue the RCC to the conveyancer.
What happens once the RCC is received?
The conveyancer then submits the RCC to the Deeds Office with all of the other transfer documents, when the transfer is lodged (submitted. Without the RCC, the document cannot be lodged.
Why does it sometimes take longer to get the figures or the certificate?
There are many problems that can arise during the process described above, that can delay the issuing of either the figures or the certificate. Most times the conveyancers are unable to get the rates clearance figures or the RCC because there is a problem with the municipality’s records, in relation to the charges billed to the property. Common problems include:
• Where one service is not being charged for, where it should be;
• Where the meters have not been read in a very long time;
• Where the meter numbers reflecting on the seller’s accounts are incorrect;
• Where there has been an illegal reconnection of supply, that was terminated by the municipality;
• Where there are other accounts incorrectly linked to the property (such as the old owner’s account, or a body corporate or developer’s account);
• Where a rezoning application has been approved but the engineering contributions due to be paid to finalize the rezoning, have not been paid;
• Where the seller disputes the amount claimed by the municipality (this could be the case for a variety of reasons) and/or;
• Where the seller has lodged an objection/appeal to the municipal property valuation or requested a change of tariff, which has not yet been processed.
What can I do if I have a problem getting figures, or getting correct figures?
If the municipality is refusing to issue the figures or correct the figures or is taking an unreasonably long time to issue the figures, then you may need the assistance of an attorney to compel the municipality to do so.
Alternatively, you can log a query with the municipality (which in Joburg, is done through their call centre). But the turnaround time for the resolution of such queries in general, will usually be too long and this may place the sale in jeopardy as the purchaser may not be willing/able to wait for the query to be resolved in the ordinary course before taking transfer.
Another option is to use council correspondents or runners to resolve the problem, but there is no guarantee that this will work, or that the query will be resolved soon enough.
If, after trying alternative methods of resolving the query, the municipality has not done so in 30 days, we would recommend taking legal action. Taking longer than this to resolve the problem may jeopardize the sale of the property.
A last option is to pay the incorrect figures under protest (if these figures have been made available), and then to liaise with the municipality after the transfer to have the account adjusted and a refund of amounts overpaid, refunded to the seller.
How will legal action help me?
Your attorney will start the process by sending a letter of demand, which must contain certain important pieces of information, in order to be valid in law. This letter of demand will call upon the municipality to resolve the problem and either issue the figures, or adjust the account and then issue corrected figures.
If the municipality has not resolved the problem within the time frame set out in the letter of demand, your attorney might advise you to go to court. If this is the case, your attorney will draft the documents that will commence legal proceedings in court, and will serve them on the municipality. The municipality must be given a certain period of time within which to decide if it will defend the matter, and thereafter, if it defend, to answer to your claim and file papers explaining it defence.
Depending on how the litigation goes, after the municipality has filed its defence, you get another chance to respond to those papers, and thereafter the matter is set down for hearing in the courts.
How long will it take?
It can take up to three months (or longer) for the exchange of papers to take place, and a further 2-4 months to get a date for the court to hear the matter, so it Is best to begin legal proceedings as soon as is reasonable to do so.
How much will it cost?
If the municipality does not defend the matter, or settles the matter early in the proceedings, it may cost as little as a few thousand rand from start to finish. However, if the matter is lengthy or complicated the costs will be much more. It depends on the attorney you use, how much work is required, whether counsel is briefed and several other factors. Ask your attorney for an idea, as it depends on the facts of each case at the time that the matter is ready to proceed to court.
Could I reclaim any of the legal costs?
Ordinarily, the courts will order that the successful party be compensated for their legal expenses, the other party. Normally the amount that a successful litigant will recoup is between 50% and 60% of that litigant’s actual legal costs. If the court is especially displeased with the municipality’s conduct during the matter, the successful litigant may recoup up to 100% of his legal costs.
The Seller’s conveyancer can make an application to the Municipality for Rate Clearance Figures. There is a nominal fee payable for the issue of rate clearance figures.