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Municipalities throughout South Africa utilise a well known debt-collection mechanism known as “clearance” to collect arrear debt from its customers. When the customer wants to transfer the property (for example, when they sell it, or when they die and their executor wants to transfer it to the heirs of the deceased) that customer’s conveyancing attorneys need to obtain a document known as a rates clearance certificate from the municipality before transfer of the property will be allowed to pass in the Deeds Office.
There have been many instances in which municipalities have claimed amounts as part of the debt due to obtain a clearance certificate, in which the court has disagreed with the municipality’s interpretation and made a ruling that those amounts are not supposed to be included in the calculation of how much needs to be paid to obtain the rates clearance certificate.
The law that regulates clearance certificates is section 118 of the Local Government: Municipal Systems Act, and unfortunately it is relatively misunderstood by the layperson because it is written in very old fashioned language in a convoluted way that requires much interpretation, or “unpacking” to understand.
Some people assume that the point of the clearance certificate system is to ensure that all amounts owing by the seller are paid before transfer. This is not entirely correct. The municipality is only allowed to refuse to issue the rates clearance certificate if certain amounts – which is not all amounts owing – are not paid.
The amounts that the municipality is permitted to refuse to issue clearance for if not paid, include:
- all utility service charges (electricity and water, and sometimes gas, which have not prescribed)
- property rates which have not prescribed
- refuse and sewer charges which have not prescribed
- sundry charges, in the case of business customers
However, the municipality is only entitled to demand payment of the portion of these amounts incurred in the period of two years before making application for clearance figures.
Unfortunately, often municipalities ask for higher amounts in their clearance figures documents, and consumers pay them thinking that it is lawful for the municipality to be requiring payment of those amounts. If you are aware of what a municipality can and cannot lawfully claim, you can protect yourself from being a victim of a municipality’s unlawful conduct in attempting to coerce you into making payment of amounts you do not need to pay at the time of clearance, in order to obtain a clearance certificate.
This does not mean – however – that you can forget about or escape liability for amounts that remain owing after you have obtained your clearance certificate. These amounts remain due and payable as they always had been and the municipality could chose to take credit control action (disconnection or summons) to recover these amounts.
Contine reading the full article on the hbgschindlers attorneys website here.