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Clearance Certificate(s) question

11 October 2017

My question is the following (everybody seems to have a different opinion on this): -

WHO HAS TO PAY FOR THE LEVY CLEARANCE CERTIFICATE (HOME OWERS ASSOCIATION/BODY CORPORTATE) & RATES CLEARANCE CERTIFICATE (LOCAL AUTHORITY)?

Some people argue that the certificate is to certify that the seller’s levies/rates are up to date so the seller must pay for it (including costs for clearing agents), others argue that the purchaser must pay for it because it is an administrative disbursement for which the purchaser is generally liable, unless specifically agreed to otherwise by the seller and purchaser.

Most of the sale agreements make no mention of this so to me it can be a grey area but for the sake of consistency in the conveyancing practice I think we need to clarify this.

Noëlene van der Wal

Reader Comments: 18
Allen West 28/09/2017:

Noelene, where the contract provides that the purchaser is liable to pay the transfer costs, such purchaser will be liable for the costs involved in the obtaining of such certificates.

maryke 28/09/2017:

Mr West, while this is certainly what happens in practice with levies (and I only refer to the levy certificates) this is strictly speaking not legally correct due to the following reasons:

1. There is no relationship between the body corporate and the buyer until he is the owner and as such he/she/it as buyer cannot be bound by an agreement in terms of which the managing agent's services and fees were agreed to by the body corporate of which he is not a member yet;

2. Many managing agents simply allocate the fee for the issue of a levy clearance certificate to the sellers levy statement and that is that.; and

3. The costs of transfer should not include the sellers obligation to assure full and free title is given by assuring that its levy and rates are up to date as it surely is part and parcel to the maxim that you cannot transfer more than you have which should include the warranty of the levy and rates claims as an indemnity at the very least.

While I know we all apply this issue as costs of transfer there is very good argument to be made that it does not fall within the ambit of costs.

Alida Hartzenberg-Mabeya 29/09/2017:

Point 1 above could also apply to the Rates Figures and Clearance certificate but it is considered a part of the transfer costs.

Point 2 - The amount for the levy clearance certificate can very easily be identified and then added to the purchaser's transfer costs and the seller will be refunded same.

Point 3 above - the actual rates and levies are charged to the seller and the purchaser is only liable for same from date of transfer. The obtaining of the rates certificate and levy clearance certificate, in my opinion is a part of the transfer costs payable by the Purchaser.

Sara Scheiner 29/09/2017:

I think the person who is liable for the costs in terms of the contract must pay for clearance certificates, because obtaining the certificates is a necessary cost of transfer.

Adrie 29/09/2017:

Definitely the SELLER in order to have the property and owner meet the compliance requirements under laws and by-laws and his personal contractual obligations for transfer of such property. 

LIORA BAMBERGER 30/09/2017:

The clearance certificates form part of the Seller's obligations and as such are payable by him, including the cost of obtaining same. It is an obligation equivalent to the obligation to furnish the electrical, gas and other compliance certificates. It would be nonsensical to place this burden on the Purchaser.

Jan - MBAT Attorneys 03/10/2017:

Unless the agreement very specifically makes provision for payment of these costs by the Purchaser, I am also of the opnion that these costs are for the Seller's account. Furthermore, if one experiences problems in obtaining i.e. the Rates Clearance Figures (and this happens quite often) and have to incur additional costs to have the problem resolved, who will then be liable. Surely the purchaser could not be held responsible for payment of these costs? Why then must the Purchaser be held responsible for the costs under normal circumstances?

MARK SCHÄFER 05/10/2017:

The purchaser pays all costs of transfer solely because it is a contractual obligation stated in the Deed of Sale. If it is not so stated, the Seller would be required to pay the costs of transfer since he has the obligation to deliver the merx. But try and let the Seller pay the costs and see how quickly the bank withdraws the bond.

Lucia Peters 06/10/2017:

The purchaser pays the cost of the rates and on registration you apportion the rates correctly so that the seller pays to date of registration and the balance is for the purchaser

HEIDI 06/10/2017:

I'm also of the opinion that these costs should be for the SELLER for the Seller wants to sell his property and needs to make sure that all certificates are in place for registration.

John Christie 06/10/2017:

The position to me has always been clear: These, in my view, are the principles involved:

It is the common law duty of the seller in a purchase and sale agreement to give delivery of the merx.

Delivery of immoveable property is given by registration in the deeds registry. The seller is therefore liable for all costs of transfer - excluding transfer duty, of course, because the TD Act places this liability on the purchaser.

In most instances the parties to the agreement of sale vary the common law liability of the seller to pay the transfer costs, and place this liability on the purchaser. (Even the liability of the purchaser to pay the TD can be varied contractually by making the seller liable for this - as occurs on occassions).

The costs of obtaining a RC or a levy certificate are clearly part of the costs of transfer. Where the liability for the transfer costs has been placed on the purchaser by contractually altering the common law position, then it stands to reason that those costs include all the costs of transfer which are required to effect transfer, and this includes the two disbursements under discussion - unless of course the agreement provides otherwise.

It simply does not make sense to assert that the purchaser must pay the transfer costs in terms of the agreement of sale, but that the costs of obtaining the RC and levy certificate still rest on the seller.

It has nothing to do with any contractual nexus between the seller and the BC, or anybody else, for that matter.

Marissa Smit 06/10/2017:

In agreement with Mrs Bamberger: if it's the Seller's obligation to furnish a certificate, regardless of the nature thereof, the cost pertaining thereto should also be for the Seller's account.

Nicole Sauli-Koren 06/10/2017:

I am fully in agreement with Allen West and John Christie.

Andrew Murray 06/10/2017:

John Christie is spot on. This has always been my firms practice. Another interesting question in Estates transfers, who is liable for the Sec 42(2) fee of R3200 +Vat? Does the same principle apply? Contractually, all costs are for the buyer?

Nicole Pagel 06/10/2017:

I fully agree with Mr West and Mr Christie. One must follow the provisions of the Sale Agreement and the cost of clearances are included in the 'costs of transfer'.

MARK ROBERTSON 06/10/2017:

Allen West and John Christie are correct. Follow the Sale Agreement. Nothing grey about this!

Marianne Dijzel 06/10/2017:

In my humble opinion the seller who signs the power of attorney to transfer authorizing the conveyancer to do all that is necessary to effect transfer of the property to the purchaser, should stand in for “incidental” costs such as the requirement to have a HOA consent issued since it’s on behalf of the seller that the HOA issues a certificate confirming that all moneys owing to the HOA have been paid by the seller, to ensure a “clean bill” to the purchaser on date of transfer. The cost of obtaining such HOA consent can surely not be for the purchaser’s account, even if the sale agreement stipulates that the purchaser is responsible for the payment of transfer costs.

Very few real estate agents even include the words “including bond costs” in the relevant clauses in their sale agreements, let alone the wording “costs incidental thereto”. This causes much frustration when purchasers sign their bond documents, and have to learn from the conveyancer that there are bond costs involved, when the sale agreement simply refers to “transfer costs.” Ideally, every sale agreement should make specific reference to transfer costs, bond costs and all costs incidental thereto including costs pertaining to specific requirements such as HOA consents.

I hasten to add that I am not au fait with common law in this regard and shall bow to the superior knowledge of qualified conveyancers in this regard. In a broader context, if there is a restrictive condition e.g. a condition imposed by a local authority that a house of a certain value must be built within a certain period of time, the condition has been complied with and a Section 68 application must be lodged for the upliftment of the condition, could it still be argued that the purchaser should stand in for the costs of the application to remove same, simply because the sale agreement stipulates that the purchaser is responsible for the (or all the) “transfer costs”?

Similarly, if the seller’s title has been lost, and a Reg 68(1) copy must be applied for, should this also be for the account of the purchaser, keeping in mind that the seller has to sign the VA application, since the sale agreement stipulates that the purchaser has to pay (all) the transfer costs? An absurd consequence could be that the purchaser should also then pay for the bond cancellation costs?

The problems initially, originate with vague wording and terminology in estate agents’ sale agreements and lack of knowlegde and/or information on the part of the agent as well as the purchaser who signs the sale agreement, whilst not being made fully aware of what “transfer costs” entail.

Educating agents would be a good place to start, but I wouldn’t hold my breath. I also realize and accept that ignorance of the law is not an excuse… This is merely my opinion as a former principal of my own estate agency and now senior conveyancing secretary at LGR Incorporated. Tom Dijzel will no doubt do much more research and give a legally more sound evaluation of the situation once he’s had the opportunity to apply his legal mind to the issue.

Melanie Dalla Pria 06/10/2017:

Is there a Body (similar to EEAB) which controls managing agents? The fees charged by managing agents to issue levy clearance certificates are becoming excessive, in some instances as high as R1 950,00. CSOS have been unable to assist.

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