02 Sep SELLING YOUR PROPERTY AND CANCELLING YOUR BOND?
When selling your property, there is often a registered bond that needs to be cancelled with the financial institution that originally granted the bond. Even if you are purchasing a new property, the bond will need to be cancelled and a new bond registered.
The cost for cancellation and early termination is for the account of the seller and therefore it is important for the seller to understand exactly what costs are due and what is required to reduce their risk.
In terms of the National Credit Act, financial institutions are entitled to charge an early termination penalty if the seller cancels their bond before the agreed term of the bond. The charge or penalty depends on the specific terms of the credit agreement – but it is usually 90 days.
Remember – giving notice to the bank of your intention to cancel and the actual cancellation of the bond are two different things. Giving notice only starts the process of calculating the penalty interest but the bond must still be cancelled physically in the Deeds Office by the bank’s appointed conveyancing attorney. The bond cancellation is registered at the same time as the transfer.
If registration takes place after the 90 day notice period, the penalty will fall away. If registration of the transfer of the property falls within the 90 day time period, the penalty will be reduced pro-rata to the time left on the notice period.
WHAT STEPS DO YOU NEED TO TAKE TO CANCEL YOUR BOND?
- As soon as you put your property up for sale, give written notice to your bank of your intention to sell and to cancel your bond. The notice can be done telephonically but written confirmation (by e-mail) is advisable in case the date of the notice is disputed.
- Confirm with your bank what their exact process is regarding notice i.e. do you give a once-off notice and after the 90 days no penalties are charged or do you need to give notice every 3 months if the property hasn’t sold yet?
- The bank will instruct an attorney to cancel the bond. If the bond is on a R0,00 balance and not linked to a transaction, the attorneys will contact you and proceed with the cancellation. If there is still a balance outstanding and the cancellation is linked to the sale of your property, the attorneys will be in contact with your transferring attorneys for a guarantee to settle the balance.
- Remember that once you give notice to the bank, most banks put a hold on your access facility (if applicable). So, it is advisable to withdraw any access funds that you may need prior to cancellation of the bond before same are frozen.
- Bond cancellation attorneys’ fees need to be paid and are approximately R5,000 (depending on how many bonds you have registered). These costs can usually be paid from the proceeds of the sale by your transferring attorney.
If you need help cancelling your bond, contact us and we will notify the relevant bank accordingly – gillian@erasmuslaw.co.za or 0604816891.
