CLEARANCE CERTIFICATES AND THE PRACTICAL APPLICATION OF SECTION 118 OF THE MUNICIPAL SYSTEMS ACT 32 OF 2000 (“the Act”)

May
06

CLEARANCE CERTIFICATES AND THE PRACTICAL APPLICATION OF SECTION 118 OF THE MUNICIPAL SYSTEMS ACT 32 OF 2000 (“the Act”)

WHAT IS A CLEARANCE CERTIFICATE
this is a supporting document lodged by the transferring attorneys which ensures that all amounts due in connection with that property for municipal services during the two years preceding the date of the application have been fully paid.

WHAT DOES THE ACT SAY
Section 1: Section 118 and its Practical Effect
Section 118 of the Act reads:
“(1) A registrar of deeds may not register the transfer of property except on production to that registrar of deeds of a prescribed certificate –
(a) issued by the municipality or municipalities in which that property is situated; and
(b) which certifies that all amounts that became due in connection with that property for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties during the two years preceding the date of application for the certificate have been fully paid.
(1A) A prescribed certificate issued by a municipality in terms of subsection (1) is valid for a period of 60 days from the date it has been issued.
(3) An amount due for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties is a charge upon the property in connection with which the amount is owing and enjoys preference over any mortgage bond registered against the property.”

CAN THE SELLER PAY THE FULL OUTSTANDING DEBT OR ONLY A PORTION OF THE DEBT
The Seller may owe a large amount to the municipality and may only be able to pay a portion of the debt. In this instance, the seller may pay the debt outstanding incurred “during the two years preceding the date of application for the certificate.”

PRACTICAL EFFECT OF SECTION 118
Practically speaking municipalities issue two types of clearance certificates. A 118(1) or “two year” or “abridged” clearance, and a s 118(3) or “historical” or “full” clearance. The two year clearance is the minimum required by law to pass transfer, and this kind of certificate certifies that all charges incurred in the two year period prior to application for same, have been paid in full. The historical clearance is a certificate that certifies that all amounts owing, no matter when they were incurred, have been paid in full. There is no requirement in law that a property owner obtain a historical clearance when passing transfer of a property, where logically it is preferable that this be obtained in all cases.
The manner in which a municipality is entitled to recover amounts owing form property owners (and potentially purchasers), has been the subject of much legal debate over the years.

WHAT HAPPENS TO THE HISTORICAL DEBT
The question of whether the historical debt survives the transfer of the property was raised in the Constitutional Court in Jordaan and Others v City of Tshwane Metropolitan Municipality and Others [2017] ZACC 31 whereby the court found that the debt will not survive the transfer.
Therefore the Purchaser will not be liable for historical debt.

This article should not be construed as legal advice and has been produced for marketing purposes.
This article was written by M Van Heerden Attorneys, Notaries and Conveyancers.

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