Legal Lingo Your right to know!
Many documents are involved in a property transaction and many of us are a little bewildered by the legal lingo used. Here is a handy explanation, in plain language, of some of the main terms used.
This is the document you sign with an estate agent, giving him/her to exclusive right to market and sell your home. It means that you may not use another estate agent to sell your property during the time the sole mandate is valid. Things to check before you sign include the commission payable (you have a right to negotiate this with the estate agent), the right of the estate agent to claim commission for periods (often indefinite periods) from the Seller for any sale where the estate agent introduced the Buyer during the Sole Mandate.
Offer to Purchase
This is the document the estate agent provides for the Buyer and the Seller to sign when the Buyer has made an offer to buy the property. Things to check before you sign include the sale price and how it is payable, the estate agents commission, the arrangement for the bond to be taken out by the Buyer, and the periods in which things may happen – the most important of which is the presentation of guarantees. These guarantees provide certainty to the Seller that he/she will be paid.
It is important to check the arrangement for the Buyers bond, as many Buyers simply use the this as the means to escape the transaction at a later stage, by having the bond declined by the bank. This wastes the Sellers time.
Perhaps the most important of all is the conditions or subject to clauses. These range from plants to be left in the garden, to fixtures, to the sale of an existing house to receipt of legacies.
The Mortgage Bond
This is the document you sign at the attorneys office for the money you are lending from the bank to buy the property. Things to check before you sign include the amount of the home loan (yes, you will be surprised how often in the complicated home loan process someone gets it wrong), the interest rate (you should have been informed of this in the quotation letter from the bank), the repayment details and what will happen if you cannot meet your bond repayments.
These are the documents you complete and sign in terms of the Financial Intelligence Centre Act (FICA). They are cumbersome and invasive, but it is the law and part of the effort to stamp out money laundering in South Africa. So be patient with your attorney as you wade your way through these documents.
Surety and co-principal debtor
Surety means that you agree to be responsible for the debt if the person who took out the loan cannot repay it. The term, co-principal debtor, means that if anything goes wrong you are like the debtor and will be called on to pay the debt. In fact, in most cases, the bank can decide to simply claim the money from the strongest financial party without even worrying about the financially weaker party. Read the whole document and reconsider your decision before signing in solidum as though you are one!
Three types of attorneys
Simply, three types of attorneys are involved in the transaction, the transferring attorney, the registration attorney, and the cancellation attorney.
The transferring attorney handles the transfer of ownership of the property from the Seller to the Buyer. The registration attorney takes care of the registration of the mortgage bond in favour of the bank. The cancellation attorney attends to the cancellation of the bond for the bank. As the Seller, you have the right to choose the transferring attorney, however, the bank prefers to choose the registration attorney and the cancellation attorney (who is a different person than the conveyancer so as to remain objective). In the past, these choices were strictly applied but today, the estate agent and the originator have much influence and the banks even allow the same attorney to do both. What is important is that the attorney you choose is on the Panel of the major banks to avoid conflict and delays down the line in the home loan process.
Occupational rent is paid by the Buyer to the Seller when the Buyer has moved into the house before the Seller has received his/her money from the bank. It is payable monthly in advance and is refundable on a pro-rata basis once the registration occurs.