A recent case between a developer and municipality threw up – and answered – the question of who is liable for the rates of newly subdivided land.

The legal case officially pitted EM and EM Engineering (Pty) Limited (a developer and property owner) against KwaDukuza Municipality and Others.

The property owner/developer registered a general plan that subdivided the property (the mother property) into 91 subdivisions. A dispute arose between the developer and the municipality when the developer applied for a rates clearance certificate in order to transfer two subdivisions from the mother property to a third party.

The developer contended that a rates clearance certificate is required only in respect of the two subdivisions of the mother property being transferred. But the municipality argued that on the basis that the two subdivisions still formed part of the mother property, the rates and charges payable (before a rates clearance certificate could be issued) are those relevant to the mother property as a whole.

The developer submitted that if the municipality’s view was adopted, all rates and charges due in respect of the mother property should be paid on each occasion before any transfer of any individual subdivision would be allowed.

Dylan Bradford, junior associate in the Commercial Department at Garlicke & Bousfield Inc, unbundled the reasoning behind the court’s judgement. The court held that:

• there had been no change of ownership by the creation of subdivisions through the registration of the general plan over the mother property.

• that future transfers of the subdivisions from the mother property would be recorded in the Deeds Office in a dedicated register. Until such time that the subdivisions have been transferred to a new owner or a certificate of registered title has been issued in respect of the subdivisions, the subdivisions will be held by the same title deed as the mother property.

• Section 118(1) of the Act prohibits the registration of transfer of property without the production of a rates clearance certificate with regard to “that property”.

• the reference to “that property” in section 118(1) of the Act refers to the subdivision concerned and not the mother property, which has by virtue of the registration of the general plan, been sub-divided into multiple erven.

As a result, the court held that a rates clearance certificate need only be issued in respect of the subdivision/s being transferred and not the mother property as a whole.