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1
Introduction
2
Who is the Mortgagor
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What is a bond
4
What property can be mortgaged
5
Consequences of failure to pay
instalments
6
The “additional sum”
7
The process
8
Non Residents
INTRODUCTION
| A creditor who
advances money to a debtor usually
requires the debtor to provide some form
of security for the repayment of the
debt. Two main forms of security can be
distinguished, namely: |
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Personal
security: An individual can bind
himself/herself personally as surety for
the repayment of another’s debt in the
event of non-payment by the debtor
himself. Should the debtor not pay, the
surety will be called upon to pay on
behalf of the debtor. |
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Real security: A
borrower (Mortgagor) can offer his
immovable property to a lender
(Mortgagee) as security for the
repayment of a debt. The Mortgagee
(normally a bank) will cause a mortgage
bond to be registered over the immovable
property as security for the fulfilment
of the Mortgagor’s obligations. |
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WHO IS THE
MORTGAGOR AND WHO IS THE MORTGAGEE? |
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The Mortgagor is
the individual, company, close
corporation, partnership or trust who
has borrowed money to finance the
purchase of an immovable property and
mortgages his/her property as security
for repayment of the loan. |
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The Mortgagee is
the Bank, Financial institution,
employer or individual who lends the
money to the Mortgagor and in whose
favour the mortgage bond is registered. |
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WHAT IS A
MORTGAGE BOND?
A mortgage bond
is based on an agreement in terms of
which the Mortgagor borrows money from
the Mortgagee and agrees to pass a
mortgages bond over a specific immovable
property in favour of the Mortgagee as
security to the Mortgagee for the
repayment of money.
WHAT PROPERTY
IS CAPABLE OF BEING MORTGAGED?
All immovable
property, improved or unimproved, which
is registerable in a Deeds Office can be
mortgaged. This includes a flat as well,
if it is held under sectional title and
is owned by the Mortgagor.
WHAT ARE THE
CONSEQUENCES OF FAILURE TO PAY
INSTALMENTS?
Foreclosure is
the term describing the procedure
followed in this event, if the Mortgagor
fails to fulfil his/her obligations
towards the Mortgagee, the latter can
enforce his/her rights against the
Mortgagor by calling up the bond and
obtaining a Court Order which authorizes
a sale in execution after due notice has
been given to the Mortgagor. A Bank
therefore cannot immediately cause a
property to be sold in execution merely
because a Mortgagor failed to pay an
instalment.
WHAT IS THE
“ADDITIONAL SUM” AS PRESCRIBED IN THE
MORTGAGE BOND?
The mortgage
bond secures not only the principal
obligation of the debtor, but also
ancillary expenses which the Mortgagor
may incur in respect of the property
such as insurance, maintenance expenses,
the legal cost of pursuing the claim and
arrear interest. Thus in a bond document
provision is made for an “additional
sum” over and above the amount borrowed,
being the amount intended to cover the
aforementioned items in the event of the
Mortgagee having to foreclose on the
bond.
THE PROCESS
A QUICK GUIDE
TO THE BOND REGISTRATION PROCESS
Step 1 -
RECEIPT OF INSTUCTIONS FROM BANK
Receipt of
instructions from the Bank to register
the bond.
Usually the
instructions are received
electronically.
Step 2 -
PREPARATION OF DOCUMENTS
If a transfer
is involved request a flysheet from the
transferring attorney, guarantee
requirements and relevant FICA documents
from the client.
Obtain a deeds
office printout for the property and the
client to check for any interdicts,
insolvencies or other caveats that may
be registered against the client or the
property.
If a further
advance is to be registered, obtain the
title deed from the bank and prepare the
bond documents for signature.
Step 3 -
SIGNATURE OF DOCUMENTS
If a transfer
is involved the Bond Attorneys request a
flysheet from the transferring attorney,
guarantee requirements and relevant FICA
documents from the client.
On receipt of
the flysheet and other documents,
prepare the bond documents for
signature.
Contact the
client and arrange for signature of the
documents and payment of costs.
Step 4 -
GUARANTEES AND FICA
After
signature, the bond attorneys will
advise the transferring attorneys that
the bond documents have been signed.
Send guarantee, if requested, or advise
of the amount available under the bond.
Advise of position to lodge upon request
or advise the transferring attorney of
what is preventing lodgement.
Step 5 -
LODGMENT OF BOND DOCUMENTS
Upon receipt of
the bank’s instruction to proceed with
lodgement, the following is done:
i) If a
further bond is to be registered,
proceed with lodgement. If a transfer is
involved,
lodge on request of transferring
attorney.
ii) The deeds
take 12-15 days to examined in the deeds
office, whereafter they come on preparation for registration.
iii) The
conveyancer has 5 days in total to
register the bond.
iv) If a
further bond is to be registered, and
there are thus no linked transactions,
the bond is handed in for registration
and registered on the following day.
v) If a
transfer is involved, then the transfer
and bond attorneys must both be ready
and will hand in simultaneously for
registration the following day.
Step 6 -
REGISTRATION
On the day of
registration, the bond with the other
linked transactions are registered at
the Deeds Office. The bond attorneys
advises the bank and client of
registration and arranges with the bank
to pay the bond proceeds. The
transferring attorney presents the
guarantee for payment after registration
has taken place.
In the case of
a further bond, the bond proceeds are
paid in terms of the client’s payment
instructions.
Step 7 -
DELIVERY OF BOND DOCUMENTS
Once the bond
has been numbered and micro-filmed, it
is delivered to the bond attorney from
the deeds office. This can take up to 5
months.
The bond
attorney then obtains the title deed
from the transferring attorney, if
applicable, and delivers the title deed,
bond and other security documents to the
bank. If no bond is involved, the title
deed is delivered to the purchaser.
NON RESIDENTS
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There
are certain restrictions on
non-residents wanting to
purchase property in South
Africa. The non-residents may
borrow up to a maximum of 100%
of his/her borrowing base. The
‘borrowing base of a
non-resident individual is the
sum introduced into South Africa
to fund the purchase of a
property, i.e. 50% of the
purchase price EG.”A
non-resident wishes to purchase
a property in South Africa for
R600,000.00. Provided
R300 000.00 is introduced into
South Africa to effect the
purchase he/she would be able to
apply to the South African
Reserve bank for permission to
avail himself of a bond of
R300 000.00.
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Such
non-resident loans are however subject
to foreign exchange approval from the
South African Reserve bank. Financial
assistance is granted in the form of a
loan secured by a mortgage bond to be
registered in favour of the bank
granting the loan.
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In other words
banks will lend up to 50% of the
purchase price, subject to their normal
terms and conditions, which would
include a valuation of the property.
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Technically, if a non-resident
has consistently brought funds
into the country over a number
of years, he/she may borrow up
to a maximum of 100% of the
total funds invested in South
Africa theoretically this could
also be more than 50% of the
purchase price of the property
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Such
non-resident loans are however subject
to foreign exchange approval from the
South African Reserve bank. Financial
assistance is granted in the form of a
loan secured by a mortgage bond to be
registered in favour of the bank
granting the loan.
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Should
you require any further
assistance, we invite you to
contact any of our conveyancers
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