South African banks have not been “particularly diligent” in warning bondholders of the cancellation charges they face if they terminate a bond agreement without giving three months’ notice.
Before selling property make sure you inform the bank of your intention to cancel the bond, otherwise you risk paying penalty charges.
This is according to Lanice Steward, Managing Director of the Cape estate agency Anne Porter Knight Frank. As a result, she says, people selling their homes all too often find themselves facing cancellation charges of which they were simply unaware of.
Nedbank, says Steward, exclude bond deals with a fixed interest rate from this three months’ notice stipulation and one or two other banks have been known to waive the cancellation fee in particular circumstances, for example in the case of impoverished pensioners. However, in general, she says, the banks ‘pounce’ when faced with the opportunity of earning extra revenue in this way.
“As many homes in the Greater Cape Town area are sold in the first two to three months of being on the market, the number of people charged in this way could be fairly high,” says Steward.
Immediately sellers put up their homes for sale, she says, they should also inform the banks of their intention to cancel their bonds.
If, however, the three month notice expires without a sale taking place, it is then essential to renew the bond prior to cancelling it again. This, too, says Steward, is often not known, or forgotten by, homeowners who will then pay another penalty for leaving the renewal a month or more.
It also sometimes happens, says Steward, that a home on which a sale document is signed might not actually be transferred by the attorneys for two or three months. Here again, if the bond has not been renewed in the interval, penalties will be payable and transfer will be delayed until they are paid.
“The moral of the story is that bondholders simply have to be aware and take full responsibility for the rather complicated arrangements surrounding bond cancellations and renewals,” says Steward, “and they must discuss the matter directly with their banks as each bank has different criteria.”
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