A landmark SCA ruling has freed property sellers from the obligation of paying a full year’s rates in advance to obtain a rates clearance certificate. According to a Fin24 report, Greg Parker, one of the directors of Greyvensteins Attorneys, which successfully appealed on behalf of a client contesting the Nelson Mandela Bay Municipality’s (NMBM's) right to claim a full financial year’s worth of rates before issuing a rates clearance certificate, said the precedent-setting case centred on the sale of a property in Port Elizabeth.

Parker said that, prior to the transfer date of 25 February 2010, the seller had requested a rates clearance certificate. The NMBM insisted he pay rates until the end of its financial year (30 June 2010) rather than the date of transfer before it would furnish the certificate, which is essential for a legal property sale. ‘The seller paid, albeit under protest,’ Parker said, adding: ‘Then, believing he had overpaid the municipality, he instituted legal action against it, claiming repayment based on unjust enrichment.’

The court agreed with the seller, finding that he was only obliged to pay rates on the property until the date of transfer, after which he would no longer be the owner and could then not justifiably be expected to pay any additional rates. Before the ruling, Port Elizabeth sellers were held responsible for the payment of rates until 30 June every year, despite having transferred their properties to new purchasers.

‘The ruling is therefore a win-win situation now for everyone: the purchaser no longer has to pay their pro rata share of the rates in full and in advance but rather monthly; the seller is no longer responsible for full rates payment in advance, and the estate agent doesn’t have to fear the sale collapsing as a result of the seller not being able to come up with the money,' said Parker.

Full Fin24 report

Nelson Mandela Bay Municipality v Amber Mountain Investments