Municipalities Tightening Up on Rate Collection

The City of Cape Town announced recently that as of the 1st May 2013, a new system has been implemented for the collection of all arrear rates when a seller of a property applies for a rates clearance certificate. 


In the past, said Lanice Steward, managing director of Knight Frank Anne Porter, the account went back only two years, as provided for in section 118 (1) of the Municipal Systems Act, but now the City will be enforcing Section 118 (3) of the Act.


This states that "an amount due for the 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 owing and enjoys preference over any mortgage bond registered against the property". 


In most cases, said Steward, this would not affect anyone to the contrary but for the few whose rates might be seriously in arrears, it is best to think about working out some sort of payment plan with the municipality to pay the account off and eventually in full. 


This is of particular importance if your plan is to sell either to upscale or downscale, where in order to sell your home and get a rates clearance certificate you will now need to have the whole account with them settled, she said.


Another factor that should be borne in mind is that there is now case history, as mentioned in a recent Smith Tabata Buchanan Boyes newsletter, where a municipality cut the electricity supply to a ratepayer's home when the ratepayer refused to settle the arrear account. 


In this case, Rademan v Moqhaka Local Municipality, the municipality's by-law allowed for accounts to be consolidated and electricity supply suspended if the account went into arrears. 


In this case Rademan argued that it was the rates account that was in arrears and not the electricity account, therefore, they should not have been allowed to disconnect the electricity, but according to the Local Government: Municipal Systems Act, they are entitled to consolidate the various accounts and in one person's name. This is provided for in section 102 (1) of the Systems Act which allows the municipality to "consolidate any separate accounts of persons liable for payments to the municipality; credit a payment by such a person against any account of that person; and implement any of the debt collection and credit control measures"


"If municipalities all adopt the same systems and tighten their controls to get bills settled, it will be all the more important to keep all the amounts owed to them in check or to pay arrears amounts as soon as possible," said Steward. 

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