WHY IS A RATES CLEARANCE CERTIFICATE NECESSARY
A rates clearance certificate (RCC) is a document obtained from the City Council that certifies that the Seller does not owe any money to the City Council. When the Purchaser becomes the owner of the property, no money will be owed by the Seller. The Registrar of Deeds acts as a policeman on behalf of the City Council and will not transfer a property from the Seller to the Purchaser unless the conveyancer presents a RCC when lodging the documents in the Deeds Office. In other words the Registrar of Deeds is ensuring that the Purchaser does not become responsible for any of the Sellerâ€™s outstanding debts for municipal accounts on the property.
RATES CLEARANCE CERTIFICATES ARE NEEDED FOR FREEHOLD PROPERTY AND SECTIONAL TITLE PROPERTY
From 1 August 2008 Sectional Title Properties are treated the same as freehold properties and each sectional title property owner will receive a rates account from the City Council. This means that a RCC must be obtained before Sectional Title properties may be lodged and registered in the Deeds Office just as in the case of freehold properties.
PAYMENT OF RATES BEFORE TRANSFER
The conveyancer calls upon the City Council for rates clearance figures. The figures are worked out by the City Council and not the conveyancer. The RCC will include arrears for rates and taxes, electricity and water and sewerage and refuse and will also include an advance portion which is discussed below. It is important to note that the Seller will be responsible for all accounts opened in respect of the property sold, even if accounts were opened by tenants. Once the rates clearance figures are received, the conveyancer will present them to the Seller to ensure the correctness thereof and ask for payment.
WHOSE RESPONSIBILITY IS IT TO OBTAIN A RATES CLEARANCE CERTIFICATE
It is the Sellerâ€™s responsibility to pay all amounts needed to obtain the RCC. The Seller must pay the conveyancer (and not the City Council directly) who will pay the City Council as the City Council requires rates figures to be paid with a trust cheque. The RCC must be obtained and paid for before the lodging of transfer documents in the Deeds Office.
Sellers should let the conveyancer have copies of all municipal accounts to expedite the application process.
Once the conveyancer has obtained funds from the Seller and paid for and obtained the RCC, the Sellerâ€™s account at the City Council will be in credit and the Seller can discontinue paying monthly rates as a result of the credit.
WHY MUST THE SELLER PAY IN ADVANCE
The City Council will claim rates and taxes, electricity, water, sewerage and refuse for a period of 90 -120 days in advance. The law related to the RCC says that a RCC must be valid for a period of 60 days from the date of issue of the RCC by the City Council. The City Council gives the Seller 1-2 months to pay and thereafter the RCC is valid for the 60 day period. Should the amount not be paid in time and the figures expire, new figures will need to be obtained.
WILL THE SELLER BE REFUNDED BY THE CONVEYANCER ON REGISTRATION
The conveyancers will not refund any funds to the Seller on registration. The conveyancers have been instructed by the City Council of Johannesburg not to refund the Seller for any amounts paid past the registration date.
WHEN DOES THE SELLER GET A REFUND FROM THE CITY COUNCIL AND HOW
After registration and once the municipal charges are transferred to the Purchaserâ€™s accounts there is usually a credit left on the Sellerâ€™s municipal accounts. This means that the Seller is owed a refund by the Council. The Council takes approximately 6 to 9 months to reconcile the Sellerâ€™s and Purchaserâ€™s accounts and pay the refund. The Seller has to expressly request a refund from the municipality, it does not happen automatically.
The Seller should complete a Refund Application wherein the Sellerâ€™s banking or postal details are specified. The Council will thereafter provide the Seller with payment of the refund directly in due course.
CITY OF JOHANNESBURG
OPENING OF NEW ACCOUNTS BY THE PURCHASER
Should the property transferred be a sectional title unit, no action need to be taken and the city council will transfer the rates account in the ordinary course.
There are different types of accounts at the city council, these being the rates account and the service accounts.
Purchasers will not receive rates or services accounts for some time after registration of the transfer and as such need to make provision for these anticipated costs.
On registration of transfer the conveyancers send a letter to the City Council notifying them that the transfer has taken place. The conveyancers will advise the city council of all relevant information relating to the transfer and the date of registration.
The Deeds Registry also independently notifies the city council of the transfers that have taken place.
After transfer the city council will transfer the rates account from the Seller to the Purchaser. The transfer of this account should be done by the city council without the need for any intervention from the parties. This process should take approximately 30 days from registration of transfer but could take several months.
Prior to the transfer of the rates account from the Seller to the Purchaser, the Purchaser will not be permitted to open any services account.
To check when the rates account has been transferred Purchasers can call 011 375 5555 and log a service request to have the rates account transferred.
As an alternative Purchasers can visit the city councilâ€™s premises at Thuso Property, 61Jorrisson Street or any Regional Service Centre.
Details of the nearest regional service centre are available online at www.joburg.org.za
. There are over 20 options available for the greater Johannesburg area. Purchasers can visit the centre most convenient regardless of where the property is situated.
Note that service levels and advice given by the city council will vary.
Once the rates account has been transferred from the Seller to the Purchaser the Purchaser can open up the applicable service accounts.
Service accounts include Water, Pikitup, Electricity supplied by City Power. Should electricity be supplied by Eskom please refer to the Eskom procedure to open and close an account. In some instances water will be supplied directly by the properties home owners association or body corporate in which case the home owners association or body corporate must be referred to.
In order to open the service accounts Purchasers can visit the city councilâ€™s premises at Thuso Property, 61Jorrisson Street or any Regional Service Centre. (as above)
Note that the city council no longer allows for tenant accounts to be opened and accounts can only be opened in the registered ownerâ€™s name. (Thus the city councilâ€™s reason for insisting the rates account be first transferred to the Purchaser before new service accounts be opened).
The Purchaser will need the following in order to open an account:
- An application form for the service (available at the municipal offices)
- Copy of the Identity Document of the applicant
- Next of kin details
- Meter readings and numbers (please remember to take these on registration of transfer and on occupation if different)
- Copy of spouseâ€™s Identity Document and spouses details
- Applicantâ€™s bank account details, spouses employer details and monthly income
- A letter from the Conveyancer stipulating the registration date
- Sufficient funds to pay a deposit which will be equal to the average of the Sellerâ€™s service charges for the 2 (two) months immediately preceding the opening of the account (cash or cheque only). Obtain this estimate from the information given to you by the conveyancer or ask your conveyancer for this amount.
Company, Close Corporation and Trusts
The information above for individuals as may be applicable:
- Company, close corporation or trust documents
- Identity Documents of all directors/trustees/members
- A letter/resolution authorizing the signatory to open the account and sign all the necessary documents
For rates accounts, the Seller is not required to do anything. For service accounts the Seller should complete a â€˜Cancellation of Consumer Agreement Formâ€™ at the regional service centre or Jorrisson Street.
Provided that the rates have been transferred and the Purchaser has paid a deposit and opened the services account, the city council will bill the Purchaser for rates and services from the date of registration of transfer and debit the Purchasers new account accordingly.
Until this point in the process the Seller would still be receiving accounts from the City Council and would have noted that the credit on the account is being used up by the Purchasers rates and consumption charges. In other words until the Purchaser has opened new accounts all charges on the account, for example, for rates, water, electricity, sewerage and refuse will be billed to the Sellerâ€™s municipal accounts and the Seller will continue to receive monthly statements. When the city council debits the Purchasers new accounts, the Sellerâ€™s accounts will be credited. It is at this stage that the Sellers refund is processed and paid out.
OCCUPATION BEFORE REGISTRATION OF TRANSFER
Should the Purchaser occupy the property prior to registration of transfer, the Purchaser is liable for electricity and water consumed. These individual arrangements are not accounted for by the city council and as such the parties should make provision for the Purchaser to reimburse the Seller directly for any consumption charges incurred prior to registration of transfer.
OCCUPATION AFTER REGISTRATION OF TRANSFER
Should the Seller likewise remain in occupation of the property after registration of transfer the Purchaser will be liable directly to the city council for these charges. As such the Seller should pay to the Purchaser the consumption costs even though the Seller may have paid his own account in advance.
In order to draft this article the City of Johannesburg was approached for information as were various city council consultants and other sources. The information offered by the City of Johannesburg varied from person to person. It is to be understood that in dealing with the City of Johannesburg sellers and purchasers are not going to always find consistency. The various time periods and procedures are going to vary to some degree.
Should a satisfactory result not be achieved it is recommended that the services of a city council consultant be utilised. Please contact us for recommendations in this regard where necessary.
EKURHULENI METROPOLITAN MUNCIPALITY
The requirements of the Ekurhuleni Metropolitan Municipality are the same as that of the City of Johannesburg above, save that:
It is not a requirement that the rates account be transferred from the Seller to the Purchaser before the Purchaser can open the services account;
The contact details for Ekurhuleni are as follows:
Call centre no: 0860 543 000
Web site address: www.ekurhuleni.gov.za
Each customer care centre has its own email address, direct number and physical address listed on the above website.
There are certain defined areas where properties are billed by Eskom for electricity supply and not City Power.
The local Eskom service Centre can be located at the corner of Kort and Rivonia Road, Johannesburg and the call centre number is 086 003 7566 and the website address is www.eskom.co.za.
CLOSING OF SELLERS ESKOM ACCOUNT
The Seller is required to close his account with Eskom. To do this the Seller can either phone the national Call Centre number on 0860037566 and advise Eskom of the date of termination of electricity supply together with banking details for any refunds due, or go to his/her nearest Eskom Service Centre.
Eskom will stop electricity service supply from the date of moving out and closing of the account.
Whether the Seller goes to the Service Centre or calls the National number, they will need to provide the following:
Final meter readings (these can be jotted down by the Sellers â€“ no further proof is necessary)
Bank details (in the case that a refund is due)
OPENING OF PURCHASERS ESKOM ACCOUNT
Purchasers are required to open a new account with Eskom for electricity supply.
Purchasers can either phone the national Call Centre number to open this account and arrange to effect payment of the required deposit, or they can visit their nearest Eskom Service Centre.
Eskom will require the following information:
Offer to Purchase or letter from the Attorneys confirming that transfer has taken place
Meter numbers and meter readings as at date of occupation
The Purchaser will be required to pay a deposit of:
- R 1 400 if the property is supplied with 16 or 25 KVA;
- R 3 400 if the property is supplied with R 50 KVA.