Most sales of property require the purchaser to obtain finance by way of a loan. The sale agreements, which are generally subject to the purchaser obtaining a loan, usually from a bank or other financial institution, almost always provide that payment of all or portion of the purchase price must be secured by one or more guarantees, which will probably be issued by the entity that has granted the loan. Many of these guarantees are payable on the fulfilment of certain conditions. Always included is the transfer of the property, cancellation of any existing mortgage bond/s over the property and registration of a new mortgage bond over the property in favour of the lender.
The issuing of a guarantee does not mean that the transaction will be finalised and that the seller will be paid. A lender could for example withdraw from the guarantee if:
- any new or previously undisclosed fact emerges; and/or
- there is a change of circumstances that might prejudice its rights; and/or
- any security condition mentioned in the approval advice is not fulfilled; and/or
- the borrower fails to provide the lender with required documentation such as valuation and insurance certificates, pledges and cessions, etc mentioned in the approval advice; and/or
- the loan agreement and other documents such as suretyships by a third party are not signed within a stipulated period.
Also, the seller may die or become insolvent.
The conveyancer acting for the seller is not usually told of these conditions by a lender or its attorney. If you are a seller you should ask your conveyancer to find out if there are any and what they are. If you are buying a new property and intend to use finance from the sale of your property, make sure your purchase agreement gives you adequate protection. Lawyers do this better than estate agents.
By the way, a borrower gets a loan; he does not get a bond. The latter is merely the means for securing the former.
South Africa applies the abstract theory for the bona fide passing of ownership. This requires delivery, which in the case of immovable property, is effected by registration of transfer in the deeds office, coupled with a so-called real agreement. The essential elements of this vague term are an intention on the part of the owner to transfer ownership and the intention of the transferee to become the owner of the property. Broadly stated the principles applicable to agreements in general apply also to real agreements. Although the abstract theory does not require a valid underlying contract eg sale, ownership will not pass despite registration of transfer if there is a defect in the real agreement.
This implies that the transferor must be legally competent to transfer the property, the transferee must be legally competent to acquire it, and the transferor cannot transfer more rights than he himself has. This means that a thief cannot validly transfer ownership of a property or any stolen asset. Nor of course can any subsequent possessor, even if he acquired it bona fide.
Readers of Law News will be aware of the theft by Dries and son, Tobias Marais, of the Kini Bay property. The arbitration/litigation has been ongoing since 2006 and will reach its conclusion, hopefully, in the SCA early in 2014.
Both are now being charged with the theft of EP's property at Kini Bay. It has taken a long time to persuade the authorities to take on the prosecution.
The matter has already been called in court. Dries was there. He had no option because he is now living in Pollsmoor prison, serving his eight year sentence for other fraud relating to EP's property. It was not surprising that Tobias was not there.
Charges were laid over a year ago. Very disappointing is the conduct of SAPS and the prosecution in bringing this matter to court. It is alleged that Tobias cannot be found. It is difficult to understand how SAPS, with the facilities available to it, cannot find him. Law News thinks they are not trying very hard. Reports are that Dries has briefed five counsel. This is unlikely. It would be surprising if he has any money to brief even one.
Readers will remember a recent Law Byte we sent. It asked whether you can be sure you own your property. The answer is no. In some circumstances it is a result of fraud; in other cases, not. We give a few examples.
The Kini Bay property is registered in the name of Tobias. An arbitrator and a judge have found that he is not the owner.
A fraudster forged the signature of the owner of a property and obtained a copy of the owner's title deed by filing an affidavit to the effect that the original was lost and could not be found. This is the usual way for applying for a copy of a title deed to replace a lost original. There was a mortgage bond registered over the property. He did not obtain a copy of it. There was nothing owing in respect of the loan secured by the bond. He signed a consent purporting to be on behalf of the mortgagee, to the cancellation of the bond. A fraudulent clearance certificate and transfer duty receipt were created.
He then stole the identity of another person and used the information to buy the property in that person's name and to apply for a loan to be secured by a mortgage bond over the property. The non-existent "borrower/transferee" registered a mortgage bond over the property in favour of the bank for about R12 million.
The application for a copy of the lost deed, the cancellation of the existing mortgage bond and the registration of the new mortgage bond reflect that they were prepared by an attorney. The attorney does in fact exist but knows nothing about the transaction and contends that he had nothing to do with the documents. The truth of that is accepted.
An interim interdict has been obtained pending the conclusion of an application that has been instituted to have the existing title deed cancelled, the "true" title deed reinstated. That is the procedure required by the Deeds Registries Act.
There will be no transfer payable because no transfer or transaction as contemplated in the Transfer Duties Act is taking place.
Simultaneously with the cancellation of the "fraudulent" title deed and reinstatement of the "true" one, the mortgage bond registered over the property in favour of the bank will be cancelled.
The loser will be the bank. It has an unsecured claim of approximately R12 million against some unknown person.
A judgment pursuant to a sale in execution carried out by the sheriff was rescinded after registration of transfer to a bona fidepurchaser who sold it to another bona fide purchaser.
The rescission resulted in the underlying sale in execution being declared invalid and the real agreement being defective as the sheriff did not have authority to transfer the property pursuant to the sale in execution. The result of this was that the property had to be restored to the original owner, the judgment debtor.
The sale in execution had been at the instance of a bank that held a mortgage bond over the property. The second purchaser had also registered a mortgage bond, in favour of another bank. The judgment does not deal with the position of the banks or their debtors.
The correctness of this judgment is debatable.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.