Levy Clearance Certificates in the Transfer Process
In all property transfers where a property is transferred that is in an estate, whether it is a Sectional Title unit, or a freehold property subject to Home Owners Association conditions, the transferring attorney will require a Levy Clearance Certificate from the Body Corporate or the Home Owners Association, as the case may be, before they are able to transfer the property.
The transferring attorney will request, from the managing agent, a levy clearance figure reflecting the amount due to the Body Corporate or Home Owners Association, to enable them to issue a Levy Clearance Certificate valid to a particular date. The date is usually the end of the month following the expected date of transfer.
In essence, the Levy Clearance Certificate will certify that all amounts due have been paid for that particular property up to the validity date of the certificate, and if there are funds still due to the Body Corporate or Home Owners Association. The issued figure may include levies, water and electricity charges in advance, arrear amounts due in respect of levies, water, electricity, interest and legal costs, special levies and other administrative charges.
In the case of Levy Clearance Certificates issued by Body Corporates for Sectional Title Properties, the Levy Clearance Certificate must be valid to the end of the financial year of the Body Corporate, which can of course be up to 11 months in advance. In practice however, Body Corporates are willing to enter into tri-partite agreements, to include the purchaser, which acknowledges that the purchaser will be liable for levies from the date of transfer’ this will enable the Body Corporate to issue the certificate valid to a date that is requested by the transferring attorneys, rather than the financial year end.
As mentioned above, the figure issued will include any special levies, even if the special levy is raised for a project to be completed in the future. To avoid a cash flow nightmare, it is important to be aware of any special levies that are raised by the trustees, whether it is a lump sum or a monthly instalment added to your usual levy statement. The full amount of the relevant special levy will have to be included in the amount due to obtain the Clearance Certificate.
The Cost of obtaining the Levy Clearance Certificate will be included in this statement as an administrative charge, and is for the account of the purchaser. This cost varies considerably from one managing agent to the next. If a second or third certificate is required, if the transfer process is taking longer than expected, a new statement will be requested, and the managing agent will charge for the re-issue of these certificates too.
Most managing agents will provide forms to be completed and signed by the seller and / or purchaser, before they issue the Certificate, and in some cases, this will include a debit order facility for the monthly levy amount.
After the date of transfer, the transferring attorney will notify the managing agent of the date of transfer.
The managing agent may request that the transferring attorneys apportion the whole amount that was payable to obtain the Certificate to the seller, in which case, the managing agent will reconcile the seller’s and purchaser’s ledger accounts, and handle any refunds due to either party.
Other managing agents will expect the transferring attorneys to apportion the levy amount as at date of transfer, in which case the transferring attorneys will account to the seller and purchaser after transfer, and each will be charged the pro rated portion of the monthly levy. Where water and electricity charges are included, this becomes difficult for the transferring attorneys, as they are not in possession of meter readings or other insights that the managing agent has. In this case, the attorneys will usually provide the managing agent with a breakdown of how they have apportioned the charges, so that similar entries can be made in the ledgers of the managing agent.
This article was prepared by:
Incorporated Attorneys, Notaries & Conveyancers
50A Seventh Avenue
(Off Jan Smuts Avenue)
Parktown North, 2193
P O Box 2710, Parklands, 2121
DOCEX 534, Jhb
Tel : (011) 442 9045
Fax : (011) 327-2681