In terms of the Local Government Municipal Systems Act 32, 2000 (The Systems Act), the Registrar of Deeds may only register the transfer of a property, if he or she is provided with a clearance certificate. Clearance certificates are issued by the municipality in which the property in question is situated.
A clearance certificate is essential to finalize a property transfer at the Deeds Office, as it confirms that all taxes and fees in connection with the property in question that were due during the two years preceding the date of application for the certificate, have been fully paid.
The matter, regarding the issuing of clearance certificates was dealt with and finalized in the ‘City of Cape v Real People Housing (Pty) Ltd’ case.
The Supreme Court of Appeal (SCA), in the abovementioned case, confirmed that a municipality is obliged to issue a clearance certificate, if the rates and taxes, of the property in question, in respect of two years preceding the application, are settled. This takes place, regardless of the existence of older outstanding debts. Therefore, as a result of this case, payment of amounts that fell due prior to the two-year period is not a pre-condition for the issuing of a clearance certificate.
It is important to note however, payment by a property owner of the rates and taxes that have become due in the two years preceding the application and the issue of a clearance certificate by the municipality, does not absolve the owner of the property of liability for amounts that fell due prior to the two-year period. The fact that a clearance certificate was issued does not deprive the municipality of the right to take legal action against the property owner for recovery of these amounts.