What Happens If a Property Has Unpaid Municipal Rates? | Barter McKellar

When buying or selling a property in South Africa, one critical aspect that can delay or even block a property transfer is unpaid municipal rates and taxes. Before a property can be legally transferred to a new owner, the municipality requires all outstanding rates and utility bills to be fully paid.

At Barter McKellar, we specialize in property law and conveyancing, assisting buyers and sellers in navigating the legal implications of unpaid municipal rates. This guide explains how outstanding rates affect property transfers, who is responsible for payment and how to avoid delays.

1. Why Are Municipal Rates Important in a Property Transfer?

Municipal rates are taxes imposed by local municipalities on property owners. These rates cover services such as:
✔ Water and electricity supply
✔ Sewerage and refuse removal
✔ Road maintenance and infrastructure

When a property is sold, the municipality requires all outstanding rates to be cleared before issuing a Rates Clearance Certificate, which is a mandatory document for the property transfer process.

Tip: A property cannot be transferred at the Deeds Office without a valid Rates Clearance Certificate from the municipality.

2. Who Is Responsible for Paying Outstanding Municipal Rates?

A. The Seller’s Responsibility

✔ The seller is legally responsible for settling all outstanding municipal accounts before transfer.
✔ The seller must apply for a Rates Clearance Certificate from the municipality.
✔ The seller is typically required to pay rates in advance (often for 3–6 months) to obtain the certificate.

Tip: If the seller fails to settle the outstanding rates, the property cannot be transferred to the buyer.

B. Can the Buyer Be Held Liable for Outstanding Rates?

While the legal responsibility rests with the seller, buyers must be cautious because:
✔ Some municipalities attempt to recover historical municipal debt from new owners (even though this practice has been ruled unconstitutional in some cases).
✔ If the seller disappears or is insolvent, the municipality may refuse to provide services to the new owner until debts are settled.

📌 Tip: Always ensure that a Rates Clearance Certificate is obtained before paying the purchase price to avoid inheriting unpaid debts.

3. What Is a Rates Clearance Certificate & Why Is It Required?

A Rates Clearance Certificate is an official document issued by the municipality, confirming that:
✔ All municipal accounts on the property are paid up to date.
✔ The property has no outstanding rates, taxes, or utility bills.

How to Obtain a Rates Clearance Certificate

✔ The seller (or their conveyancer) applies for the certificate at the municipality.
✔ The municipality calculates the outstanding rates and advance payments required.
✔ The seller pays the amount due, and the certificate is issued.
✔ The certificate is lodged with the Deeds Office for property transfer registration.

Tip: Rates Clearance Certificates are valid for 60–90 days, so timing is crucial.

4. What Happens If the Seller Refuses or Cannot Pay?

If the seller cannot afford or refuses to settle outstanding rates, the property transfer cannot proceed. The following may occur:

✔ The buyer can negotiate for the purchase price to cover the outstanding rates.
✔ The sale may be delayed or cancelled due to the legal requirement for clearance.
✔ If the seller is insolvent, the buyer may need to deal with liquidators or creditors.

Tip: Buyers should request a municipal rates account statement before signing an Offer to Purchase to assess potential risks.

5. How Unpaid Rates Affect Different Types of Property Transfers

A. Buying a Property in a Private Sale

✔ Ensure the seller provides proof that municipal rates are paid.
✔ Insist that a Rates Clearance Certificate is obtained before transfer.

B. Buying a Property from a Deceased Estate

✔ The estate executor must settle all outstanding rates before transfer.
✔ If the estate has no funds, heirs may need to cover the costs before inheriting.

C. Buying a Property in a Sheriff’s Auction or Foreclosure

✔ Properties sold through auctions may have unpaid municipal debt.
✔ Buyers should check if they will be liable for municipal arrears before bidding.

Tip: Work with a property attorney to investigate hidden municipal debts before buying.

6. How to Avoid Delays in Property Transfers Due to Municipal Rates

✔ Sellers should apply for a Rates Clearance Certificate early to avoid delays.
✔ Buyers should request proof of up-to-date municipal accounts before signing an Offer to Purchase.
✔ Conveyancers should check the validity of the Rates Clearance Certificate before proceeding with registration.
✔ If outstanding rates exist, negotiate responsibility before finalizing the sale.

Tip: If in doubt, consult a property attorney to ensure the transaction complies with municipal regulations.

7. How Barter McKellar Can Help with Property Transfers & Municipal Rates

At Barter McKellar, we assist buyers and sellers in navigating municipal clearance requirements by:
✔ Ensuring Rates Clearance Certificates are obtained promptly.
✔ Liaising with municipalities to resolve outstanding rates issues.
✔ Negotiating solutions for properties with unpaid municipal accounts.
✔ Providing expert conveyancing services to ensure a smooth property transfer.

Whether you’re buying, selling, or inheriting a property, our legal team ensures that unpaid municipal rates do not delay or block your property transfer.