A NUMBER of property investors are finding themselves in a tricky situation where they incur huge outstanding municipality bills after purchasing immovable properties without conducting any due diligence exercise to check the properties’ standing with local authorities.
Investigations by this newspaper revealed that many property buyers find themselves in a situation where they are unable to complete the transfer of properties they would have bought either privately on the market or through public auctions in their names because of the outstanding municipal bills for rates that by law become their burden the moment they purchase the properties.
In some cases, so huge are the outstanding bills that they do not make the investments worthwhile.
A recent visit by the Financial Gazette’s Companies & Markets to an immovable properties auction sale conducted by the Sheriff of the High Court of Zimbabwe revealed that many buyers only discover the extra cost after they have made a purchase.
When an immovable property is sold, it becomes the responsibility of the purchaser to meet the costs related to the transfer of the property into their name.
When the purchase is made through a public auction, these costs include the auctioneer’s fees (five percent of the purchase price), conveyances charges (three percent) payable to lawyers handling the transfer, government’s stamp duty (four percent) and all outstanding municipal arrears related to the property before transfer of ownership is concluded.
It is this strict condition that the buyer should settle all outstanding municipal bills before the transfer process is concluded that has seen many investors who buy properties at public auctions being stranded after doing so in a hurry without doing any background checks with the local authorities.
At an auction conducted by a real estate agent recently, , the Sheriff of the High Court, Macdoff Madega, took his time to explain the risks that some property buyers take when they just bid for properties whose standing with local authorities they do not know.
He said the moment an investor buys a property, it becomes their responsibility to pay for all the outstanding rates due to council, which arrears have to be cleared in full before transfer is done, unless they make some sort of arrangement with the local authority.
This resulted in some prospective bidders insisting on knowing the properties’ outstanding rates bills before making their bids.
The same applies to properties sold privately on the market.
One of the buyers whose US$350 000 bid won Tanaka Power’s industrial complex in the Workington industrial area which was attached by the Infrastructure Development Bank of Zimbabwe, only discovered that the property owed the Harare City Council a whopping US$97 000 in unpaid rates. Realising that this amount, when added to the bid price and other costs would end up costing not less than US$500 000, after the end of the sale, the buyer started making enquiries about how he could withdraw his bid, but it was too late.
At the same auction, FBC Holdings —whose representative had done his homework — made a winning bid of US$445 000 for troubled Trinidad Industrial Private Limited’s factory in Msasa, after factoring a US$20 000 municipal bill that the property owed to the City of Harare.
City of Harare spokesman, Michael Chideme, confirmed that it was a legal requirement for rates to be paid in full before ownership of an immovable property changes hands.
“Before title can be passed there is need for rates clearance certificate, which can only be granted if debt is cleared. It would be in the interest of the buyer to clear debt if they want title,” Chideme said.
The Bulawayo City Council is suing Amakhosi Theatre Productions after it failed to pay service rates for more than two years, resulting in the bill ballooning to US$86 000.
In the event that Bulawayo’s former cultural home—which is now being used as a bus terminus—is sold to an unsuspecting buyer before the outstanding bill is settled, that bill becomes the buyer’s burden, making it more costly to the purchaser.
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