PAYMENT OF RATES AND TAXES IN ADVANCE?


– Nadia Burger

 

If you recently sold your property, you would be familiar with the fact that you have to pay rates and taxes in advance, to enable the transferring attorney to obtain a rates clearance certificate from the Municipality. This certificate is lodged at the deeds office as the Registrar of Deeds may not register a property without a rates clearance certificate.

In a recent Supreme Court of Appeal Judgment of Nelson Mandela Bay Municipality v Amber Mountain Investments 576/2017 [2017] ZASCA 36 the court was called upon to establish whether a seller is liable to pay the total calculated rates on a property determined for the financial year or only the rates calculated until the property is transferred.

In this matter, Amber Mountain sold their property and required a rates clearance certificate. The Municipality requested payment from Amber Mountain until the end of the Municipality’s financial year, being 1 July to 30 June the following year, prior to the Municipality issuing the rates clearance certificate. The Municipality requested payment for the amount of R2 281 014.68 and Amber Mountain was forced to pay this amount, even though the amount due to the Municipality was only R1 214 482.68. Amber Mountain argued that it overpaid the Municipality in the amount of R1 066 532.00 and claimed a refund. The Municipality disagreed and argued that it is entitled to claim annual property rates, as rates becomes payable as of the commencement of the Municipality’s financial year.

The Constitution authorises a Municipality to impose rates on a property for services provided and payment is regulated by the Rates Act . The Rates Act specifically states that a rate becomes payable as of the start of a Municipality’s financial year or if a Municipality’s budget is not approved at the commencement of the financial year, rates become payable as of a later date when the Municipality’s budget is approved.

In terms of the Rates Act, payment of the rates is subject to the Municipality determining the amount and the date by which payment must be made. An owner’s obligation to pay rates arises at the commencement of a Municipality’s financial year, when the Municipality determines the rates and becomes payable once the Municipality has determined the date of payment. The Rates Act states that a Municipality may recover rates on a monthly basis or annually as may be agreed upon with the owner of a property . Therefore, the court found that the Municipality is not entitled to claim rates for an entire year at the commencement of its financial year.

It is clear that the Municipality’s requirement for rates to be paid for a full year before issuing a certificate in terms of the Systems Act, adversely affects the right of a property owner to sell their property.

The Court therefore found that the Municipality was not entitled to withhold the rates clearance certificate until it received payment of rates for the entire financial year. Rates becomes payable, but not due at the start of the Municipality’s financial year.

A Municipality may therefore not request payment of rates for a full financial year before issuing a rates clearance certificate.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

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