IEASA National - News

Re-valuation of rates   Article Date :11 Sep 2006 Who is responsible for the re-valuation of rates on sectional title. (Sectional Title) The Law Society of SA is about to tackle one of the thorniest problems facing sectional property buyers and developers – the question of who is responsible for the Council’s revalued rates on a sectional title development after its units have been transferred to the new unit owners. Explaining the background to this in a company press release, Paddy Herbert, Director of Propell Levy Finance Solutions, said that before a developer can sell a newly developed sectional title unit to a buyer, he has to get a Council rates clearance certificate – and this is usually done through his conveyancer. This certificate is based on the undeveloped value of the property. The valuation of the completed project by the Council often takes place six, twelve or even more months after a unit is sold and transferred – but, as indicated, when the unit is transferred to its new owners the clearance certificate will in most cases reflect only the value of the land when bought by the developer. Then, when the Council revaluation takes place, the law requires that it be sent to the erf owners who, by now are the body corporate and the units’ buyers. They are likely to find themselves liable for a rates bill that can be anything up to one hundred times greater than that which was paid by the developer on the undeveloped erf. “The revalued rates bill,” says Herbert, “should, of course, be for the developer’s account even though the Municipality, complying with the law, send it to the unit owner – to whom it will almost come as an unwelcome surprise, especially as it can involve several thousand rand. “Strangely,” says Herbert, “even top legal personnel have been caught by this because buyers are very seldom warned to look out for it.” Shrewd sectional title buyers, he says, will take the precaution of insisting that their purchase agreement contains a clause making the developer responsible for all rates bills related to the development and transfer of the property – but this is not the general practice and the conveyancers, although aware that further rates bills will usually become due, seldom prepare the owners and developers for these municipal fees. Matters are further complicated by the fact that the new payments can become due long after the development company is terminated. Herbert said that the situation he has described has occurred again and again and has cost new owners literally millions of rands. “Exactly what the Law Society can propose as a solution is difficult to imagine,” he said, “but all of us in the sectional title industry are anxious to see this tricky matter settled once and for all – especially now that interest rates are rising and owners will be even more reluctant to pay these fees. CLICK HERE TO RETURN TO THE MAIN NEWS PAGE