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A third party entered into an instalment sale agreement with a bank customer for the purchase of a property, over which a mortgage bond was registered in favour of the bank. The Bank was in possession of the original title deed to the property.
The third party requested that the instalment sale agreement be endorsed on the title deed to the property. The Bank refused to consent to the endorsement on the basis that the decision fell within the Bank’s commercial discretion and that it would impede the Bank’s rights to foreclose on the property if such action became necessary.
The facts showed that a contract was concluded between the third party and the bank customer as contemplated in terms of the relevant sections of the Alienation of Land Act 68 of 1981 (“the Act”) for payment of the purchase price by means of more than two instalments. No instalments could be paid prior to the instalment sale agreement being endorsed on the title deed to the property. The third party also communicated all the relevant information to the Bank as contemplated in the Act.
The OBS found that the refusal by the Bank to consent to the endorsement of the instalment sale agreement on the title deed was contrary to the provisions of the Act. The Act provides that the owner of land and any person in possession of the owner's copy of the title deed concerned shall render all necessary assistance to enable a seller or purchaser of that land to cause a contract to be recorded in terms of the Act.
It was our recommendation that the Bank consent to the endorsement as the processes in terms of the Act did not impede the Bank’s rights to foreclose on the property if needed. The Bank agreed to our recommendation, subject to certain conditions being adhered to by the third party.
Principle: A property over which a mortgage bond is registered can be purchased in terms of an instalment sale agreement despite no mortgage finance being obtained or the purchase price being paid over immediately.