WHY MUST A SELLER PAY RATES CLEARANCE FIGURES?

When a seller sells a property, he is required by law to obtain a rates clearance certificate from the local municipality, which certifies that all rates and other municipal charges (like electricity, water, refuse and/or sanitation) are paid up in full. Because it can take anywhere from 3 to 6 months to transfer a property, the law provides that when a conveyancer requests that the municipality issue such a 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. This is necessary because sometimes transfer takes longer than expected, and if the certificate was valid for a shorter period, it might be necessary for the seller's conveyancer to apply for and pay for the issue of a certificate twice.

HOW MUCH SHOULD THE SELLER GET BACK?

This will depend on how much was paid in advance, and how much was actually billed to the seller's account by the City during the period between payment of clearance figures, and transfer. This can only be calculated after looking at the accounts for the property from the date of payment of rates clearance figures, to the date of transfer.

WHEN WILL A PERSON BE ENTITLED TO A REFUND?

For example, if a seller's conveyancer applies for rates clearance figures on 1 January, and they are issued and paid on the same day, for the amount of R 6,000 (calculated at Nil for arrears, and an average of R 1,000 per month x 6 months), the certificate will be valid up until 1July. If transfer is passed on 1 April (3 months from date of payment of figures), then (assuming that the seller uses only R1,000 per month for charges actually incurred) the seller has paid R 1,000 per month in advance to the City, but has only used up credit of R 3,000. This means that the seller's municipal account should still contain credit of R 3,000 (being the other 3 out of the 6 months that the seller paid for in advance, that he is not liable for municipal charges in respect of).

HOW LONG SHOULD THIS PROCESS TAKE?

If the City has all the information that it needs to process the transfer and refund the seller, this process should ideally take no longer than 9 weeks. In practice, however, refunds can take anything from 1 day to 5 years, and in some instances, are never processed at all.

Click here to view table.

HOW DOES THE CITY PROCESS A REFUND?

The City needs several documents to process a refund, certain of which (such as the refund of monies form) are not known of by all legal practitioners / rates consultants / runners.

Upon receipt of the required documents, the City reconciles the seller’s and purchaser's accounts. This means that the City will reverse any charges billed to the seller's accounts after the date of transfer, and charge these to the purchaser's account. The City should also reverse any interest, legal fees, or disconnection / reconnection fees billed to the seller's account from the date of transfer onwards.

After making the adjustments referred to above, the seller’s account will usually be in credit. This credit must then be refunded to the seller, by the City drawing a cheque and depositing it into the seller’s bank account, or the seller’s conveyancer's bank account, or (if requested) by the City making an EFT payment into the seller's account.

STILL NO REFUND?

The first step is to log a query with the City's call centre on (011) 375 55 55. If the query is not resolved within 14 days (or another reasonable period of time), you may need to seek legal assistance in compelling the City to process the refund.