Two common mistakes encountered when a home is sold.

Two common mistakes encountered when a home is sold.

One of the more commonly encountered mistakes made by those selling their homes is to give the banks insufficient warning of their intention to cancel their bonds and this can expose them to high penalty interest payments.

Rowan Alexander, a Director of Alexander Swart Property, reminded his agents recently that it is their duty to tell clients that most bank mortgage contracts contain a clause stipulating that the seller must give three months’ notice to their bank of their intention to cancel their bond.

In practice, said Alexander, this means that it is imperative that the seller should give cancellation notice as soon as he puts his home up for sale.  If then he does not find a buyer or changes his mind about selling, he can at no cost revoke the cancellation order but if the sale takes place and is registered within the mandatory three months notification period the bank is by law entitled to charge interest on the time still to lapse before the cancellation notice becomes official.

The cash sums involved here, said Alexander, can be large.  On a recent sale in his territory, the holder of a R2 million bond allowed the sale to go through a mere two weeks ahead of the final day of the three month notification period and this cost him R10,000 in a penalty interest payment.

In many cases, said Alexander, where the sale takes place within the notification period, the client’s attorneys are able to do a deal with the bank but some form of ‘unnecessary’ payment will still be demanded.  In other cases it may be possible to delay transfer and allow the buyer to occupy the home at a fair rental until the sale is registered or possibly postpone his move until that takes place.

Another difficulty encountered quite frequently, said Alexander, relates to those whose marriage contract has stipulated that they own their property (and all other goods) ‘in community’, i.e. on a 50/50 basis.

It sometimes happens that one or other of the marriage partners has bought the home in his or her own name before the marriage took place.  Then when they marry ‘in community of property’ a half share automatically goes to the other partner, but the original buyer sometimes does not realize this until the time comes to sell the property and he then finds to his or her surprise that half the proceeds have to go to the partner.  Similarly if there is a disagreement about selling the property, one spouse can withhold his or her consent and thereby block the sale.

“Obviously in most instances the ‘in community’ arrangement can be perfectly satisfactory, but should the property be sold as a result of the married pair splitting up it can cause great resentment.  In general, therefore, it is better for the partners to marry ‘out of community of property’ with an ante-nuptial contract and this is the more commonly applied system these days.  It does, however, have the disadvantage that one partner in an annulled marriage can be left with very few possessions while another has the lion’s share.”

For further information contact Rowan Alexander on cell phone number 082 581 3116 or by email rowan@asproperty.co.za.