Mortgage Bonds and Conveyancing

The following are defined as immovable property, and include:

Vacant land for sale (plots), houses for sale, apartments for sale, flats and townhouses for sale which form part of a sectional title scheme in terms of The Sectional Titles Act 95 of 1986:

Houses which form part of a group housing scheme flats and townhouses forming part of a share block scheme in terms of the Share Blocks Control Act 59 of 1980; Accommodation in a housing development scheme as defined in the Housing Development Schemes for Retired Persons Act 65 of 1988.

All who enter into financial transactions should take note of the recently established Financial Intelligence Center Act (FICA), which calls for them to disclose all their personal particulars.

Before signing an offer to purchase, any clauses in the contract which are not completely understood by the buyer should be referred to an attorney for clarification.

In all property for sale transactions, the property buyer is responsible for the following costs:  Conveyancing fees which include transfer duty and fees, deeds office levies, stamp duty if applicable, pro-rata rates and taxes, and rates clearance certificate costs. In conjunction with these fees, if a mortgage bond is required, the bank will charge the buyer (mortgage) the following costs:

Initiation fee, valuation fee and administration fee, while the attorney will charge a fee to register a mortgage bond.

Unless another arrangement is made, the seller of the property is required to cover the following costs:estate agents commission (not applicable through Private Property Sales), entomologist certificate, electrical compliance certificate, cancellation fees for any bonds registered over the property.

Usually the Seller of the property nominates the Conveyancing Attorney.

Mortgage Bonds

A mortgage bond is an agreement whereby the buyer (mortgage) borrows funds from the bondholder or mortgage, and agrees to pass a mortgage bond over specific immovable property in favor of the mortgagee as a security for the repayment of the money.

The purchases or mortgage then repays the capital amount plus interest back to the mortgage in terms of the loan agreement.
In most cases the mortgagee will be a bank or financial institution.  The mortgage bond is registered in the Deeds Office against the Title Deed, and a conveyancing attorney must be appointed by the buyer to handle the registration of the mortgage bond in the deeds office.

The Conveyancing Process

Conveyancing refers to the legal process during which a person, company, close corporation or trust is appointed the legal owner of fixed property and ensures that such ownership cannot be challenged, and also incorporates the process of the mortgage bond registrations.

The conveyancer is an attorney who by law is the only one permitted to register fixed property transfers. This is necessary to ensure the protection pf the various interests of the parties involved in the transaction, and to maintain the high standard applicable to land registration.

The first requirement in this process is that there be a valid agreement of sale, which is a written agreement signed by both the property buyer and sellers(and the seller’s spouse in cases of marriage in communion of property, or account to the laws of a foreign country). A written offer to purchase, signed by buyer and accepted by a seller also constitutes a binding agreement. A verbal agreement for the sale of fixed property is considered to be invalid.

Once the appointed conveyancer is provided with a valid agreement of sale/offer to purchase, they will continue by drafting the necessary documents which will require signing by both the purchaser and the seller, at the offices of the conveyancer.

The above mentioned documents to be signed include:
A Power of Attorney to Pass Transfer,
Declaration in respect of Marital Status, Identity Number and Insolvency,
Transfer Duty and Value Added Tax (VAT) Declaration,
FICA Documents,
Bond Documents, if a Mortgage Bond is to be registered.

Please contact us if you require any further information or would like to apply for finance:

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011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

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Sectional title – check the finances

Anyone who is considering buying a flat or a complex under sectional title should carefully check the financial status of the scheme before going ahead with the purchase according to Johan Le Roux, marketing director of Propell a company that funds 330 local sectional title schemes with 15 000 units.

Le Roux says that all too often an unsuspecting buyer may buy a unit in a sectional title scheme and may be told that the levy is, say, R700 a month. When the sale is concluded, the buyer discovers that a special resolution was passed by the body corporate increasing that levy by a factor of two or three.

“There is always a danger that people can buy a unit in a sectional title scheme without examining the financial standing of that scheme,” says Le Roux. “Estate agents are sometimes guilty of selling units without doing the necessary research and homework and without advising their clients about the dangers that surround inefficiently-managed section title schemes,” he says.

Le Roux stressed that if a scheme raises a special levy, this does not necessarily mean that its trustees for the managing agent have been incompetent.

Referring to the role of Propell in sectional title schemes, Le Roux says that the company is able to provide funds and assist in a sectional title scheme’s monthly cash flow requirements and can collect levies from owners on behalf of the managing agent or the trustees.

In a separate development, sectional title specialist, Mike Spencer warns that trustees of a body corporate must work within the rules of that body corporate and often make a mistake when it comes to properly maintaining the buildings.

“One area where trustees frequently make a bad mistake is on the exterior maintenance of a building or complex. Rule 37 says that the body corporate (and therefore the trustees) must establish a fund sufficient for the repair, upkeep, control, management and administration of the common property,” says Spencer.

He says that over the years, some trustees have tried to lower the levies by insisting that owners repaint the outside of their own units but this is outside of the provisions of Rule 37 and must not be allowed.

“Trustees have to set a budget, used to calculate the levy repayments, that is sufficient to cover the repainting or other maintenance costs of the outside of all the units. They do not have a choice,” he says.

“Recently, when visiting a unit owner by a foreigner, we noticed that the outside of this property was in a poor condition but all the other units had been freshly painted. Looking at the financial statements for the past year, it was clear that no money had been spent on maintenance by the body corporate.

“I suggest that the trustees for this scheme had been grossly negligent and should be held personally liable because Rule 37 clearly states that the body corporate must maintain the exterior of all units in the complex,” says Spencer.

“Trustees have to be very careful when making decisions to cut corners on the levies charged. It can only be done if everyone agrees to the changes. Otherwise trustees need to stick to the rules,” says Spencer.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

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Email: morne@mortgagepluscc.co.za

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