The question addressed in the Nelson Mandela Bay Municipality vs Amber Mountain Investments 3 (Pty) Ltd (576/2016)  ZASCA 36 judgment was whether, for purposes of issuing a rates clearance certificate, the seller of immovable property can be held liable to pay the full annual rate on the property or only the rates calculated until the property is transferred.
According to a local property lawyer, Amber Mountain Investments 3 (Pty) Ltd (AMI) was the previous owner of immovable property which it sold to another company. Before transfer of the property, AMI required a rates clearance certificate, in terms of section 118 of the Local Government: Municipal Systems Act 32 of 2000 from the Nelson Mandela Bay Municipality (the Municipality).
The Municipality required payment of rates until the end of its financial year, being 30 June 2010, as a condition for furnishing the certificate, and presented AMI with an account for the sum of R2,281,014.68.
“This was in accordance with the Municipality’s rates policy which required that in the case of an application for a certificate in terms of s 118 of [the Systems Act], the full amount which remains unpaid, inclusive of all instalments, for the remaining financial year shall be payable”
He noted “AMI paid the amount, under protest, in order to obtain the certificate and to effect transfer. At the time of payment, AMI’s actual indebtedness to the Municipality was R1,214,482.68.
AMI therefore claimed that this constituted an overpayment of its obligations to the Municipality and successfully claimed reimbursement thereof in the High Court. (The judgment did not indicate whether or not the ‘overpaid’ amount was reimbursed to the seller by the purchaser or if any such arrangement was in place between the parties to the sale agreement.”
In this case, the Municipality’s appeal to the Supreme Court of Appeal, the issue was the validity of the Municipality’s rates policy. The Municipality contended that in terms of sections 12 and 13 of the Rates Act, an owner was obliged to pay one annual property rate and that such liability arose, and was fixed, on the first day of the Municipality’s financial year, namely 1 July. It was thus entitled to claim the full year’s rates upfront, as per its policy.”
- Section 13(1) (a) of the Rates Act provides that “(a) rate becomes payable . . . as from the start of the financial year”.
- The words “as from” denotes a commencement period, as opposed to the word “on” which would have denoted a particular date for payment. (The use of the singular noun, ‘a rate’, so the argument went, in these sections and other sections of the Rates Act, is indicative that a single rate, for the entire financial year, is payable at the start of such financial year.)
- The section in the Rates Act must be interpreted to mean that the rate was payable within the period of the financial year and not at the beginning thereof as contended by the Municipality. The word “payable” only fixed the rate for the financial year, but did not mean that rate was also due at the same time.
The Rates Act distinguished between what was “due” and what was is “due and payable”. Section 26 of the Rates Act empowers a municipality to determine when the rate was due. If it were payable in instalments, then (in terms of section 27 of the Rates Act) the municipality would be required, by way of written accounts, to advise the payee of the date on which the rate would be due, and the obligation to make payment would only then arise.
The argument advanced on behalf of the Municipality, that the determination of an annual property rate was indicative of an intention that a single rate for the entire year was payable at the start of each financial year therefore could not be sustained.
- The clear intention of the legislature was to limit the period in section 118(1) to two years preceding the date of application for the certificate. Section 3 of the Rates Act empowers a municipality to make a rates policy that was ‘consistent’ with the Act. The lawyer concluded by stating, “The appeal was therefore dismissed with costs.”