Does arrears on your municipality account affect proceeds from the property sale?

When a property is sold, the Conveyancer attending to the transfer will make application to the Municipality for a rates clearance certificate. This certificate is lodged with the documents filed at the Deeds Office for registration of the transfer of the property.

The Municipality will not issue such rates clearance certificate for transfer unless all outstanding rates and services have been paid, including an amount determined by the Municipality for advanced collections.

The amount due to the Municipality for the issue of the certificate must be paid prior to transfer, in order for the relevant certificate to be issued i.e. before the sale proceeds become available. If the Seller of the property does not have sufficient funds available to settle the amount due, he/she can make application for bridging finance to cover the amount due to the Municipality and instruct the Conveyancer to make payment of the bridging finance amount and any costs thereof, directly to the bridging finance company, from the proceeds of the sale of the property on registration of transfer.

TIPS:

1. Bond cancellation fees

Each financial institution will have their own rules and applicable charges for cancelling an existing bond, so sellers will have to enquire with their financial institution to discover what they can expect to pay. Most financial institutions require either a 60- or 90-day notice period, otherwise penalty fees will be charged. To avoid these costs, as soon as a seller puts a property on the market, a written letter should be sent to the bank to alert them of an intention to sell.

2. Municipal accounts

In order for the transfer to go ahead, the seller will need to acquire a rates and taxes clearance certificate from the local municipality. This fee is charged to make sure that rates and taxes on the property will still be paid while the registration process is under way. Consequently, the municipality usually asks for between two to six months upfront. The municipality will later refund you if the registration process is completed within a shorter timeframe than what was billed for.

3. Special levies

Similarly, if you live in a sectional title estate, you could be charged roughly three months' worth of levies upfront before the registration of the sale. Sellers should speak to their HOA or body corporate to find out about these costs.

4. Compliance certificates

Another expense which needs to be covered before the transfer can go ahead is that of the various compliance certificates (electric, plumbing, gas, beetle, electric fence) required during the home inspection process. Sellers will also have to cover the costs of addressing any issues that are pointed out in order for the certificate to be issued.

5. Tenant deposit

If you are renting the property to a tenant, keep in mind that you will need to repay their deposit with interest. You should also make room in your budget to pay for any possible repairs in case there are any damages to the property after they vacate.

Finally

"Selling a property is not a simple process, but, with the right real estate professional by your side, it can be. Real estate agents deal with these kinds of transactions on a daily basis and will be able to guide you through the above-mentioned processes so that you are never left confused or uncertain on how to proceed at any point in the deal,"