Among the documents required by conveyancers before they can submit an application to the Deeds Office for a property transfer, is the rates clearance certificate (RCC). Issued by a city council, this key document ensures that all rates and services attached to the property have been paid for, and that the municipal account is up-to-date. This is regardless of whether a tenant on the property has defaulted on such payments to the owner.
This process is undertaken by a property conveyancer, who during the course of compiling the paperwork relevant to a property transfer, makes an application to the local municipality to issue rates clearance figures, which is a breakdown of outstanding debt.
To facilitate the closure of an account, the seller or conveyancer needs to ensure the following three documents are provided to the council: A letter from the conveyancing attorney confirming registration A copy of the rates clearance figures and proof of payment Closing or final meter readings for services such as water and electricity.
The conveyancer will approach the seller to provide any outstanding amounts, and only once that bill is settled in full, will a RCC be issued to the purchaser.
Rates arrears
What the council examines is arrears on a property over the previous two years, specifically electricity, water, sewage, refuse, municipal taxes and other sundries. But be warned, the council also includes an amount to cover the period whilst the transfer is underway.
Also to be noted, is that any debt preceding the two years remains a debt owed by the seller to the municipality, but this does not affect the transfer. Instead it becomes the municipality’s burden to collect the outstanding amount from the seller, even after the property has been transferred to the purchaser.
Once issued, the RCC is valid for 60 days which is more than enough time for the transfer to take place. Incidentally, once transfer occurs, the new owner needs to register the property in their name at the municipality, and it can take some time - an average of six weeks - before the new account is registered. This is also dependent on when the municipality receives notice from the Deeds Office that registration of the property into the new owners name, has been actioned.
New owners are warned to record meter readings on the day of ownership to ensure they align with their first municipal account. The new owner should also ensure that they make provision for these anticipated costs.
On the day that seller’s vacate a property, they should also note meter readings. It is often a good idea for the seller and the buyer to record these simultaneously. Only once the registration of the transfer has taken place, will the city council attend to the seller’s refund, including any deposit paid at the time of the seller’s deposit. That refund is paid over to the transferring attorney’s trust account, who will pass it onto the seller at the appropriate time.
Effects of occupation after transfer
Should a new buyer and seller agree that the purchaser will take occupation before registration of the transfer, the seller remains liable for water and power consumption. The parties will need to agree how the purchaser will reimburse the seller for those charges.
Conversely, should the seller remain in occupation after registration, the seller should pay over consumption costs to the new owner, and this is regardless of whether the seller has paid for costs in advance.
Although it is expected that all local municipalities follow the same process in the issuance of a RCC, it is best left to a conveyancer to process the claim according to the directives of the local city council.