WHAT CAN SERVE AS SECURITY UNDER A MORTGAGE BOND?
A mortgage bond is defined in section 102 of the Deeds Registries Act, 47 of 1937, (the Act) as “a bond attested by the registrar specially hypothecating immovable property”. Immovable property on the other hand is defined as including inter alia long term leases and leaseholds. The definition is not all exhaustive and lends itself to further investigation and interpretation.
It is trite law that any immovable property which is a res in commercio can serve as security under a mortgage bond (see Smith v Farrelly’s Trustee 1904 TS 949). Obviously land, inclusive of shares in land, can serve as security under a mortgage bond, as well as sectional title units and the rights defined in the Sectional Titles Act 95 of 1986 as immovable property; viz Exclusive Use Areas and Real Rights of Extension.
Not only corporeal immovable property, but also real rights in immovable property that has a monetary value or benefit can serve as security under a mortgage bond. In this regard the section 69(4) of the Act provides that a personal servitude can serve as security under a mortgage bond, but would appear to be limited to usufruct (see Estate Grabe v Bornman 1938 OPD 127). It is doubtful whether a usus can serve as security given the absolute personal nature thereof. A habitatio could possibly serve as security (see Arend v Estate Nakiba 1927 CPD (8)).
Praedial servitudes on the other hand cannot be mortgaged separately from the dominant tenement as they cannot be detached from it and be transferred to another piece of land.
It is thus evident that immovable property is a very wide concept and no comprehensive definition exists for it. However, it is trusted that the above has shed a bit more clarity on what can serve as security under a mortgage bond. The case law alluded to only allows for a usufruct and possibly a habitatio to serve as security, but any other personal servitude which is a res in commercio could also possibly serve as security. It is not certain how a registrar of deeds will determine whether a personal servitude has a monetary value, but let us cross that bridge when we get there.
Head of Deeds Training
Readers’ views on this issue will be appreciated. - Editor