“ PROTECTING THE PURCHASER OF LAND ON INSTALMENTS “
In this instance we are talking about buyers who want to purchase a property but who do not necessarily fit the bill for a bond even though their financial health is secure and in good standing. Although not always recommended, an instalment sale can in some instances be a useful option for completing a property transaction. But what happens after the buyer and seller have agreed on the purchase price and monthly instalments? What happens after a conveyancing attorney has drafted the necessary contract that meets the requirement of the Alienation of Land Act, 69 of 1961? What protection is offered to the purchaser as to prevent the seller from selling the property to a third party?
The answer sought lies within the framework of Section 20 of the Act 69 of 1961.
WHAT DOES SECTION 20 ENTAIL
Broadly the said section provides for the recording within the Deeds Office of instalment sale contracts that being contracts in respect of land intended mainly for residential purposes, sold for an amount of money, payable in more than two instalments, over a period exceeding one year.
WHO MUST BRING THE APPLICATION FOR RECORDING A CONTRACT
According to Section 20(1) (a) of Act 69 of 196, the seller irrespective as to whether he is the owner of the land or not, shall cause the contract to be recorded by the Registrar of Deeds in the prescribed manner.
WITHIN WHAT TIMEFRAME SHOULD THE CONTRACT BE RECORDED
It is required of a seller to record a contract within 90 days from the date (a) of the contract, if the land is registerable, or (b) upon which the land becomes registerable .or (c) upon which the land is registered in the name of a purchaser in terms of a preceding contract which was or was required to be recorded in terms of Section 20.
If the seller fails to record the said contract within 90 days from the date aforementioned the purchaser shall be entitled to cancel the said contract within 14 days, i.e after the 90 day period or at any time thereafter apply to the Registrar of Deeds concerned to record the contract. It is however important to note that prior to the lapsing of the 90 day period the purchaser has no authority to apply for the recording of the said contract.
THE EFFECTS OF RECORDING A CONTRACT
Protection afforded to the purchaser relates to:
1. Mortgage bonds: If the purchaser should demand transfer a mortgagee in whose favour a mortgage bond over the land concerned is registered subsequent to such recording is deemed to have consented irrevocably and unconditionally to the discharge of the mortgage bond or the release of the land from the operation of the said bond.
2. Transfers: The Registrar of Deeds shall not registrar a transfer of land in respect of which a contract has been recorded, unless: the transferee is the purchaser under the contract, or the transferee is in an intermediary relation to the purchaser, or such recording has been cancelled.
3. Preferent claim: The purchaser has a preferent claim in respect of the sale, if (a) the land concerned is sold in execution, or (b) the owner of that land is insolvent.
As the subject of recordal of contracts is widely neglected it is imperative that every potential purchaser familiarise themselves regarding the effect a recorded contract has on land as it widely restricts/prohibits certain transactions from being done by the owner thus affording protection to the potential purchaser.
Written by : Yolandi Vosloo (LL.B)