Property costs: Rates
As a first-time home purchaser, the hidden costs of a purchase can be crippling unless they are taken into careful consideration. Not only will you have to take on the cost of interest on your home loan and the potential that the interest rates can increase with an increase in the repo-rate. You will also have to calculate your monthly holding costs:
- When buying a property you take on both the benefits and liabilities of that property.
- Benefits include the use of the dwelling or the proceeds from the rental income.
- The liabilities include levies ( if it is a sectional title scheme), rates, and taxes.
Rates are an on-going monthly cost that is payable to the municipality for providing basic services such as water, electricity, refuse, and sewage. A property owner is required to pay these monthly costs.
The cost of rates for a particular property is based on its market value. The city will conduct valuations of all the properties within its region every 5 years, to determine the current market value. The rates will be adjusted to meet the new valuations.
The purchaser is liable for payment of the rates and taxes from the date of registration or any other date agreed upon in the deed of sale.
Rates Clearance in the sale of a property
Fortunately, the law protects home buyers by ensuring that all of the outstanding rates, taxes, duties, and fees have been fully paid on the property before it will allow transfer into the name of a new person. (Properties purchased through auction can have outstanding rates and need to be cautiously assessed.)
Once the rates clearance certificate has been issued, the municipality logs it in their system and the account is automatically transferred into the new owner's name on the registration of transfer. If a rates bill has not been received by the new owner within three months of the transfer, it is advisable to contact the municipality and request a bill. The new owner can ask for bills to be emailed to them monthly for their convenience.
The seller is required to pay their rates and taxes in advance to obtain the rates clearance certificate. Therefore, once the document has been issued, the seller may stop payment of municipal bills. If the seller has overpaid, the town council will issue a credit and pay back the balance when closing the account.