Bond Cancellation: 90 Days
When the Seller of a property has a bond registered against his property, this bond should be cancelled when the property is sold, and the bank must be notified about the cancellation. The cancellation of the bond takes place in the Deeds Office, with consent from the bond bank, and simultaneously with the registration of the Sellers property.
The National Credit Act allows the financial institution or bank [In terms of Section 125(2)(c)] in whose favour the bond has been registered, to charge the Seller an early settlement fee if the Seller wishes to settle and cancel a bond account earlier than the agreed period.
This early settlement fee is equal to three months of the monthly bond payment amount. The notice period will usually start running from the time that the Seller or attorney requests the bank for a settlement amount on the bond.
It is possible to avoid the cancellation penalty as long as the bank has been given the sufficient 90 days’ written notice of the Sellers’ intent to cancel the bond. Sellers should therefore make sure they address this matter as soon as possible after their property has been sold.
A Seller may not demand the transfer of his property to be delayed until the 90 days’ notice period expires, if the sale agreement does not provide for such a delay in registration. An addendum should be signed by both the Seller and the Purchaser if the Seller requests a delay of transfer, but the Purchaser has the right to refuse such a postponement.
Please take note that the Seller will never pay the full settlement or penalty fee, because this fee is calculated on a pro rata basis.
For example: If the early settlement fee was calculated at R15 000.00 and the bond is cancelled after 2 months, the Seller will only pay R5000.00 as an early settlement or penalty fee and not the full R15 000.00.