A seller's guide to bond cancellation

Are you in the process of cancelling the bond over your property? Whether you're intending to sell or are finalising the details of your sale agreement, there are various legal requirements and costs associated with formalising bond cancellation.

In accordance with section 125(2) of the National Credit Act, a seller is typically required to provide the bank (or other financial institution that lends money) with at least 90 days' notice of their intent to cancel the mortgage bond over the property. Failure to adhere to this requirement may attract penalty interest, which equates to approximately one month's bond instalment for each completed month of notice not given (or the pro rata share thereof). Penalty fees, however, are generally waived if the property has been sequestrated, is part of a deceased estate, or if the seller is registering a new bond with the same financial institution.

Once the seller notifies the bank of their intent to cancel, the bank appoints a conveyancer on its panel of attorneys to proceed with the cancellation of the mortgage bond. The legal basis for this is clear: Transfer of ownership cannot occur if there is still a bond registered over the property. Pursuantly, the bank issues cancellation instructions to the conveyancer, which includes cancellation figures. This is required to ascertain the total amount required to settle the outstanding debt, including the balance owing, any interest due thereon, and service fees.

In financially-linked transactions, such as the simultaneous transfer of ownership of the property and or the registration of a new bond, the conveyancer (bond cancellation attorney) will liaise directly with the transferring attorney and bond attorney to ensure a smooth process for the seller, purchaser, and agent, respectively.

As soon as the cancellation figures have been received, the seller must settle all outstanding amounts, including any interest on the balance owing from the date the figures were issued until the date of registration. Generally, this settlement is paid from the proceeds of the sale of the property. In addition, the bond cancellation fees, which typically vary between R5 500 and R6 500, are payable by the seller (or bondholder) to the conveyancer.

Upon receipt of a guarantee for payment of the outstanding balance and fees, the conveyancer will draft a Consent to Cancellation of the Mortgage Bond to be signed by the bank - or its duly authorised representative - confirming that the bond is settled.

Once the conveyancer receives a Proceed to Lodge from the bank (if applicable), the consent, along with the original title deed and mortgage bond, is lodged at the relevant Deeds Office. On registration, the title deed and mortgage bond are endorsed to reflect that the bond over the property is cancelled. Within a few weeks (or months, depending on the Deeds Office) of registration, the new homeowner receives a new title deed.

AUTHOR: Samantha Smith