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Paying Rates and Utility Costs in Advance

15 June 2017  |  by Raksha Mahabeer

The Supreme Court of Appeal case between Nelson Mandela Bay Municipality v Amber Mountain Investments 3 (Pty) Ltd, a private investment Company, has made a significant change in the transfer of property process which change affects the Sellers of property.

To register a transfer of an immovable property in South Africa, the Deeds Office require a rates clearance certificate which confirms that all rates and utility charges due to the Municipality have been paid as at date of transfer.  This clearance certificate will enable the Registrar to effect transfer of the property. Prior to issuing the rates clearance certificate, the Municipality will provide the transferring attorney with an assessment which includes advance payments in respect of rates and all other utility charges, this advance can be charged up to one year.

In the matter between the Nelson Mandela Municipality and Amber Mountain Investments, Amber Mountain Investments was made to pay at least 1 million rand in advanced rates for a year in order for the transfer to be registered.  This payment was made in duress as the Company wanted the sale to go through. 

The court was tasked with deciding whether the municipality was within its rights to request advance payments for the year.

The court held that a rates clearance certificate was issued in respect of debt which has become due and payable in the two years preceding the date of the application for the certificate, not future municipal debt.

The court further held that the municipality's policy was inconsistent with section 118(1) of the Systems Act and such policy was void as it was in conflict and invalid.

Attorney Chantelle Gladwin said the municipality believed it was entitled to the rates and taxes, not just up to the date of transfer, but up until the end of the financial year in which the transfer had taken place.

"The court applied the law of interpretation of statutes and found that the municipality's interpretation was not sustainable and ruled in favour of the applicant, Amber Mountain," Gladwin added.’ (Anna Cox – The Star 12^th May 2017).

The outcome of this case is that Sellers could now refuse to pay rates and charges in advance or pay any amount that is called for by the Municipality which goes beyond the date of the certificate.

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