Understanding the Bond Cancellation Process

Understanding the Bond Cancellation Process

When selling a property with an existing bond, it’s important to understand the process of cancelling that bond.
Here's an easy-to-follow guide for buyers and sellers:

What is Bond Cancellation?
A bond is essentially a loan taken out to buy a property, and it is registered against the property as security for the bank. When you sell your property, the bond must be canceled so the bank can release its hold on the property.

Step-by-Step Process
Inform Your Bank
The first step is to notify your bank in writing that you plan to sell your property. Most banks require a 90-day notice period before you can cancel your bond without incurring penalties. If you don’t provide the required notice, you may be charged an early cancellation fee.

Appointing Cancellation Attorneys
Once the sale of your property is underway, the bank will appoint cancellation attorneys to handle the legal process of removing the bond from the property’s title deed. This ensures the bank’s claim is cleared before the transfer to the buyer.

Outstanding Amounts and Fees
The cancellation attorneys will request a cancellation figure from your bank. This includes:

The outstanding bond amount.
Additional fees, such as interest or cancellation costs.
If the property is sold for more than the bond amount, the bond will be settled in full, and the remaining proceeds will go to you. If it is sold for less, you will need to settle the shortfall directly with the bank.

Bond Cancellation Registration
The cancellation attorneys will deregister the bond at the Deeds Office, legally removing it from the property’s title deed.

Transfer and Final Settlement
Once the buyer’s bond (if applicable) is registered, and the transfer process is complete, the bond cancellation is finalized. The property is officially transferred to the buyer, and the sale proceeds are used to settle the bond.

Who Pays for the Bond Cancellation?
The seller is responsible for the bond cancellation fees, including any penalties and the costs charged by the cancellation attorneys. These fees are deducted from the proceeds of the property sale.

What Happens if the Original Title Deed is Missing?
If the original title deed is lost and the bank cannot locate it, a replacement deed must be issued. This process involves obtaining a certified copy from the Deeds Office through an attorney, which requires a court application.

The seller is responsible for all costs associated with replacing the lost deed, as the title deed is part of the seller’s legal responsibility to provide during the sale.

Key Points for Sellers

• Notify your bank early to avoid penalties.
• Understand your cancellation figure, fees, and responsibilities.
• Ensure all documents, including the title deed, are available for a smooth transfer.

Key Points for Buyers

• The seller’s bond must be fully canceled before the property is transferred to you.
• Work with your attorneys and bank to ensure a smooth process.

By understanding these steps and responsibilities, both buyers and sellers can avoid delays and unnecessary expenses, ensuring a seamless property sale. If you have further questions, your estate agent or conveyancing attorney can guide you!