TRANSFER OF PROPERTY – MUNICIPAL DEBT / CLEARANCE CERTIFICATES
In order to effect a transfer, the Deeds Office requires that a Municipal Clearance Certificate is issued by the respective local Municipality. Many people do not understand the true meaning and intentions behind Clearance Certificates and their wording can be very misleading to laymen, consider the following: “THIS CERTIFICATE IS TO CERTIFY THAT ALL AMOUNTS DUE IN TERMS ON SECTION 118(1) HAVE BEEN PAID IN FULL.”
EXAMPLES OF CLEARANCE CERTIFICATES
Ekurhuleni / City of Johannesburg / City of Tshwane
Most people would assume that the wording above indicates that all the debts owing to a Municipality have been paid in full… but this is not the case!
The Certificate must be read more carefully, as the wording says that it has been paid “in full in terms of Section 118”. What many people do not realise, is that the Clearance Figures need to “marry” the Certificate. That is, when transferring attorneys apply for Clearance Figures, they may or may not be aware, that they are applying for a breakdown of the last 2 years debts… NOT THE FULL ARREARS.
SECTION 118 OF THE MUNICIPAL SYSTEMS ACT 32 OF 2000
(Please click here to view the full wording) In laymen’s terms, all that it means is that if the last 2 years debts that were owing to a Municipality, “have been paid in full”, the relevant Municipality must issue a Municipal Clearance Certificate, in order for the transferring attorneys, to transfer the property at the Deeds Office.
The amounts older than the 2 years, have to be dealt with, as those debts do not dissolve and/or disappear. Unfortunately, the transferring attorneys have been given the task to transfer the property with all of its complications.
Rightly or wrongly, many transferring attorneys, feel that they are not Debt Collectors for the Municipality and only want to focus on settling the debts in order to effect a transfer.
To add “fuel to the fire”, many of the Municipalities Clearance Figures, are ambiguous and sometimes difficult to decipher unless one is an expert.
We are however strongly of the opinion, that whenever possible, all debts owing to a Municipality should be settled in full at the transfer stage. If the correct debts are settled at this stage, the issue of the Municipality trying to transfer old owners’ debts to current owners will become academic and literally a “storm in a teacup”.
Many transferring attorneys have been criticised, post transfer, for not informing their clients of the true meaning of Clearance Certificates when the Municipalities subsequently refuse services to the new owners.
Therefore to avoid such a situation arising it is vital for transferring attorneys to explain to their clients, the purpose of a Clearance Certificate as well as the ramifications of the debts outside of the 2 year period when transfer is effected.
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