Many homeowners have been caught off guard with extra charges and additional processes when it comes to selling a home. Additional legal fees, notices of bond cancellation and penalty charges for non-compliance have all been bugbears for the unwary.
Canceling an existing bond - the law
The law states that any person wishing to sell their home needs to give their bank or bond originator written notice of their intent to cancel a bond. The notice period may differ from bank to bank but as a general rule, your bank will require 90 days’ notice. The bank will advise your attorney to attend to the cancellation of the outstanding capital amount and interest, plus any other costs that are required to settle the account.
Canceling a bond will incur a number of fees including homeowner's and life insurance, interest, retention amounts, legal and other fees. Failing to give notice will result in penalties being added to the cancellation fees. You will also pay penalty interest if you cancel a bond that is less than two years old.
Canceling a bond - exceptions
There are some exceptions: no notice period is necessary if the bond forms part of a deceased estate. The notice period will also be waived in the case of sequestrated estates or if a new bond is being registered with the same bank.
Cancellation regulations do have some flexibility. If you notify your bank of your intent to cancel your bond as soon as you put your home on the market but then struggle to find a buyer, you are able to renew your bond. Once again, it becomes important to notify your bank otherwise penalties will be incurred.
Here is a simplified look at the process:
- You notify your bank of your intention to cancel, giving 90 days notice
- The bank advises your attorney to attend to the cancellation of the outstanding capital amount and interest, plus any other costs that are required to settle the account.
- The title deed and bond documents will be sent to the bank’s attorney.
- The attorney issues guarantees. Guarantees are issued to ensure that there are funds available to cover the bond on the date of cancellation.
- Your bank will sign and give consent for the bond to be cancelled.
- Refunds are paid after cancellation.
The Standard Bank website has a detailed description of all the processes to follow when cancelling an existing bond on the sale of a property.