Help - my bond has been withdrawn

We have now had a few transfers where the banks have withdrawn bonds that were approved prior to lockdown because of a change in the buyer’s financial position. Flowing from this, the questions on everyone’s lips are:

  1. If the deed of sale was conditional on a bond being granted, is the sale still binding after the bond has been withdrawn; and, if so,
  2. If the purchaser cannot then pay the purchase price, and the contract is cancelled as a result of this, will the purchaser be liable to pay damages, for example, the agent’s commission?

The short and sad answer to both of these questions is yes.

A large percentage of deeds of sale are subject to the grant of bonds and these bonds must usually be granted on the bank’s standard terms and conditions. In their standard T’s & C’s, all the banks we deal with reserve the right to withdraw the bond, right up to the date of registration.

A bond that is granted which includes this right of withdrawal is therefore granted on standard T’s & C’s and will be sufficient to meet the requirements of the bond clause in the deed of sale. Furthermore, once the bond has been granted and the condition in the deed of sale has been met, the later withdrawal of the bond will not turn back the clock. The sale will remain binding and it is the purchaser who bears the risk of the consequences of such a withdrawal.

After a purchaser has accepted a bond on these terms, the position is even clearer, as the purchaser has then accepted the bond on the T’s & C’s set out in the letter of grant. The purchaser has therefore given up the right to allege that the bond was not approved on standard T’s & C’s, and the purchaser again bears the risk that the bond might be withdrawn.

In closing then, it is our view that if a purchaser cannot afford to go ahead with the sale as a result of the withdrawal of a bond that was properly granted, the seller can use this default to cancel the agreement, and the purchaser will be liable for damages. These damages might include the estate agents commission, wasted attorney’s costs and the difference in the purchase price if the property is then sold for a lower purchase price. If there is a deposit, this will be used towards covering these losses.

The bottom line is that this is a risk every buyer must assume if he wants to buy property and finance it with a bond.

Deon Welz & Robert Krautkramer
Miltons Matsemela Inc
May 2020

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