Municipal accounts – rates and refunds – before and after a property sale transfer registration

Many first-time home buyers (and sellers) think that the final step in the process of selling or buying a property is the registration of the transfer of sale. Sadly, this is not the case; more paperwork and admin await. Once a property is sold, the buyer must open their own account with the municipality in their own name and the seller must have cleared and closed their account. Here’s what you need to know on both sides of the transfer.
What is required before a property transfer can take place?
To register a property transfer at the Deeds Office, a Rates Clearance Certificate is required to show all outstanding rates have been paid to the municipality.
- To get this certificate, the conveyancer requests the outstanding amount from the municipality and informs the seller of the payment required.
- Once payment has been made, the conveyancer can request the certificate and register the transfer on reception.
This means that existing municipal debt is the seller’s responsibility.
- If there is a delay between clearance payment and transfer registration, the seller is also responsible for these rates until the transfer date.
- If the validity period of the rates clearance certificate expires then an extended rates clearance certificate will be required for the seller’s cost.
- A rates clearance certificate is valid for the time period set out on such certificate, usually 3-4 months from the date of application.
- Registration of transfer has to take place before this period expires.
At the point of registration, the conveyancer is no longer involved in any calculation of refunds, or the payment there, by the municipality to the seller, except for the fact that the municipality will pay the refund to the conveyancer, which will then be paid to the seller.
What to do as the property purchaser:
When you have bought a property and you have received confirmation from the conveyancer that the sale has been registered in your name, you must go to your nearest municipal office to open your new utilities account to ensure that there is no service interruption.
Although it differs from municipality to municipality, in general, you will need to provide the following when applying for your new municipal account:
- Proof of registration: usually a letter from the conveyancer or transferring attorney confirming the property transfer. This is often sent to the municipality on your behalf but it’s worthwhile taking a copy with you.
- Your ID document: it’s always advisable to bring certified copies with you.
- Service Deposit: This is usually an amount equivalent to two months of average municipal expenses and is required as a buffer against late payments.
- Water and electricity readings: Taken at the time of property registration in your name.
This makes the transition from billing the previous owner to billing you a smoother process. Your new account number will be issued to you once your account is open.
What to do as the property seller:
When you have sold a property and you have received confirmation that the property has been registered in the purchaser’s name, you will need to go to the municipality to close your municipal account and request any refund due to you. Failure to do so will result in the municipality billing you despite the property being transferred.
What you will need to close your account:
- Proof of transfer: a letter from the transferring attorneys stating that the property has been transferred into the name of the buyer.
- Utility bill: for the relevant property to show the account number.
- ID documents.
How to claim a refund from the municipality as a seller:
The deposit you paid when you bought the property and opened your municipal account, as well as any credit due to you when you paid for the rates clearance figures will be credited when the account is closed. It will first be used to offset any amounts owing, and the remaining credit balance is then refunded upon your request. It is not automatically issued to you when your account is closed. As the seller, you will need the following to obtain a refund from the municipality:
- Your written refund request: A letter addressed to the municipality requesting that such a refund be paid out to you, the seller.
- Include names of both parties, property description, transfer date and the bank account details into which the refund must be paid.
- Include names of both parties, property description, transfer date and the bank account details into which the refund must be paid.
- Payment receipt for clearance figures: The EFT receipt or a printout that reflects that the municipal account has been cleared.
- Bank account verification: A (stamped) bank statement that shows your account details.
- Your ID documents.
Once you have lodged your request, the municipality should then refund the amount due to you, as the seller. How long this takes will depend on the relevant municipality. While your account will be closed within two to three weeks; the refund process itself can take months to be resolved.
The rates refunds are paid back to the attorney who paid for the rates clearance, and they will then credit receipt the payments and then pay same over to you. It is common practice for an administrative fee to be charged for the process of receipting the payments and facilitating payment of the refund.
For more information contact Hammond Pole Attorneys:
Brendan Michie – BrendanM@hammondpole.co.za