Phased mortgages

Phased development of sectional title schemes is becoming the norm rather than the exception. Although beneficial to most parties, it can lead to some registration difficulties. One of these being, how does one mortgage both the unit in a scheme and the exclusive use area under one bond when the unit and exclusive use area are created in separate phases?

Banks are adamant that both the unit and the exclusive use area be tendered as security under the loan and rightly so. The apparent option would be to pass a collateral bond over the exclusive use area when it is registered in the subsequent phase.

This does however create concerns as regards costs. On closer investigation of the costs involved, one area was identified where costs could be cut - Deeds Office fees.

It appears that the current practice is for the Deeds Office to charge fees on collateral bonds in accordance with Item 8(b) of Regulation 84 of the Deeds Registries Act 37/1937. This means that a fee of between R200 and R1000 can be charged on the registration of collateral bonds, depending on the amount of the bond.

It could be argued that the Deeds Office should be charging fees on collateral and surety bonds in accordance with Item 8(d) of Regulation 84. This would be a mere R95.

The rationale behind this argument is that no "new" money is advanced under collateral and surety bonds. The amounts reflected in these bonds are mere references to money already advanced under the principal bond. A collateral and surety bond should therefore be classified as "Any other registration or annotation in the registers or records," as set out in Item 8(d) of Regulation 84.

Further impetus for this argument can be taken from the stamp duties that were formerly payable on these bonds - namely R5 for a collateral bond and 5 cents per R100 for a surety bond as opposed to 20 cents per R100 for a normal bond.

Clarity from the Chief Registrar on this practice would greatly assist conveyancers in determining the correct fees for their clients.

Warren Hamer