Clearance certificates: Municipalities MAY NOT charge forward projections
The Supreme Court of Appeal has declared that municipalities’ forward projection of rates as being invalid. This emerged in the case of Nelson Mandela Bay Municipality v Amber Mountain Investments 3 (Pty) Ltd (case (576/2016)  ZASCA 36).
“In order to transfer a property, one of the requirements is that the registrar of the deeds office requires a municipal clearance certificate in terms of Section 118(1) of the Municipal Systems Act,” says Peter Livanos, MD of the Municipal Debt Specialist. “Municipalities have forced sellers to pay the forward and/or future projections prior to the issuing the clearance certificate in addition to paying for all debts incurred on the property for the past two years.”
Examples of clearance certificates from the cities of Ekurhuleni, Johannesburg and Tshwane
What this new ruling does is effectively gives the right to sellers to refuse to pay for the forward projection of rates on a property in order to obtain a clearance certificate.
“The intention of the legislator was to ensure that the past two years debt was fully paid when the said clearance certificate is issued by a local municipality; not future debt,” he says.
The court further held that: “To the extent that the municipality‘s policy is inconsistent with s 118(1), it is ultra vires and void.”
This new judgment may force municipalities to correct their procedures and policies. This might also eliminate the stress of people trying to get their refunds back from a municipality.
For the full judgment, visit The Municipal Debt Specialist