Unpaid rates can stop the sale of a property
YOU want to sell your property but there have been a few hassles with the rates payments. Your dissatisfaction resulted in a prolonged debate with the municipality?
Obviously, you think you are in the right, or you would not be arguing with the officials. And, you may be.
However, right or wrong, until you cough up what the municipality perceive is owing, you will be on the losing side, because you will not be able to sell.
The reason is that without a municipal issued Rates Clearance Certificate, available only to those whose rates are up to date, attorneys cannot submit papers to the Deeds Office, which in turn cannot authorise the transfer of the property.
In the case of a dispute a seller has to pay for the minimum of the past two years to get a certificate if rates are deemed delinquent. In theory the rule seems simple, advises attorney Grant Berndt, a partner at Abdo and Abdo. However, what happens to rates deemed unpaid prior to the two years?
“It is a contentious issue,” says Berndt. “Take the case of a seller who has not paid for 10 years. Before the sale goes through two years has to be paid, no arguments about that. However, the tricky bit is that the eight-year balance can be claimed against the property after transfer. This puts the liability on the new owner. Buyers should consider making full disclosure of the rates situation a condition of the offer to purchase.”
That is all very well, but what of the buyers who have not been billed for rates over a long period? On East London’s eastern boundary is the Great Kei Municipality, which controls the east coast villages, from Glen Eden up to Cefani. The rates situation is chaotic, with no clear picture of who pays what, when, and what for.
Some homeowners have elected to pay a provisional monthly amount, others have a “wait and see” attitude and the diehards refuse to pay for nonexistent services. The result is sales are being blocked by the municipality’s refusal to issue clearances, despite not sending out invoices.
“It is quite simple; no rates clearance, no sale,” says Sue Brownlee, principal of Landvest.
Service delivery protests are the current rage in township areas, often accompanied by violence. In the affluent suburbs, protests are more subtle, involving withholding municipal rates. Rates are paid into an interest-bearing trust fund. How does this impact on the clearance certificate?
No problem, says Judy Sanan, chairwoman of Beacon Bay Ratepayers’ and Civic Association. She points out that in Beacon Bay “withholders” accept they have an obligation to pay rates, and they do, but not to the municipality.
“The equivalent amount is paid directly into a trust account managed by an attorney. It is not the ratepayer association’s money. If a property is sold the seller is reimbursed the monies paid into the trust account, pays the outstanding amount to BCM and gets the certificate.”
If you are considering selling, check your rates are up to date, or you could, at best, wait a long time for the transfer, and at worst, lose the deal.
– Ted Keenan’s background is financial journalism. He is a director of AST MultiMedia, which creates broad media and communication strategies for clients. His focus is primarily on property developments, with a specific interest in seniors’ villages.