Do you have an existing bond on the property you intend on selling?

02/02/2024 - By Tiffany Mare

In order to transfer immovable property, any existing bonds registered thereon will need to be cancelled. A property cannot be transferred from one person to another while the Seller is still indebted to the bank which holds a bond over the property to be transferred. Cancellation of the existing bond is done simultaneously with the transfer of the property and registration of the Purchasers new bond.

90 DAY NOTICE PERIOD FOR BOND CANCELLATIONS
The vital step that most Sellers neglect, is giving their banks 90 days’ notice of intention to sell or cancel their existing bond. This vital step will result in the Seller avoiding unnecessary penalty costs.
If the property does not sell within the 90-day period, the Seller will simply need to renew their letter of intent sent to the bank.
If the Seller has sold their property and has neglected to give the bank their 90-day notice, the bank will regard the letter from the Conveyancing attorney requesting cancellation figures as a “90-day notice letter”. In this case the penalty charge will be reflected on the bond cancellation figures. The charge will however be reduced the further the matter registers into the 90-day period. For example, if the matter registers on the 90th day the penalty charge will drop away completely.
Please keep in mind that the Bank will suspend the Sellers access facility once notice is given. It is therefore, advisable, if required, for the Seller to withdraw any access funds before the bond is placed under cancellation.

HOW ARE CANCELLATION FRIGURES REQUESTED?
The Conveyancing Attorney attending to the transfer instruction will send a request for cancellation figures to the bank holding the existing bond over the property. The Conveyancing Attorney will supply the bank with the bond number, bond account number (received from the Seller), title deed number as well as the full description of the Sellers as well as the property.

WHICH ATTORNEY WILL BE INSTRUCTED TO ATTEND TO THE BOND CANCELLATION?
The banks will allocate the bond cancellation instruction to a firm on their panel. The bank will then send their cancellation instruction, cancellation figures and original title deed and mortgage bond to their allocated attorney. The bond cancellation attorneys will thereafter send their request for guarantees to the transferring attorneys, together with copies of the title deeds, bond cancellation fees, requirements and forms for completion.

SIGNING OF BOND CANCELLATION DOCUMENTS
The transferring attorneys will liaise directly with the bond cancellation attorneys. The Sellers generally do not meet with the bond cancellation attorneys. On signing of the transfer documents, the Seller will in addition to the transfer documents, sign the bond cancellation documents.
The Seller is obliged to continue with the bond instalments up until the bond is cancelled in the Deeds Office. The Seller will need to sign a document allowing the bank to refund any excess amounts in the bond account directly to the Seller.

BOND CANCELLATION ATTORNEY FEES
The bond cancellation fees are for the Sellers account. The transferring attorneys however pay this fee to the bond cancellation attorneys and it is taken off the Sellers proceeds. The fees are in accordance to the recommended tariff issued by the Legal Practice Council. The cancellation of one bond is generally an estimated R5 000.00. The fee would however increase depending on the number of bonds which need to be cancelled.

SIGNING OF CONSENT AND LODGEMENT
Cancellation documents are signed by the bank/person authorised to sign the consent on behalf of the bank and thereafter, the cancellation documents together with the transfer and new bond documents are lodged in the Deeds Office.

DEEDS OFFICE AND PREP FIGURES
In order to ensure that the initial settlement figures issued are still sufficient to settle the existing bond, the bond cancellation attorney will request a final settlement figure from the bank once the documents reach preparation in the Deeds Office. If the guarantee amount is sufficient to cover the settlement figures received, the Bank will authorise the bond cancellation attorneys to proceed to put the matter forward for registration. If the guarantees are however not sufficient, e.g. Insurance has in the meantime been debited to the bond account, this amount should also be secured to the Bank from the Seller’s proceeds before they will authorise registration.

REGISTRATION AND DELIVERY OF DEEDS
Once the matter is registered in the Deeds office, the old bond endorsement on the Title Deed will reflect as cancelled. The guarantees in favour of the existing bond account will be paid out within 24 hours from date of registration. If the owner of the property just merely requested cancellation of the existing bond, the endorsed title deed will be returned to the Owner or inserted into safe custody. However, if the case of the property being transferred, the existing title deed will now be a “dead deed” and will therefore will remain in the Conveyancers file.