September 6, 2017
September 6, 2017


Since the inception of the credit crisis in 2007/2008, the sale of immovable property on instalments has become a popular mechanism to purchase property. This type of transaction is often used where a purchaser cannot find assistance from a third party such as a bank to finance the transaction.

The purchase price is paid in instalments over a certain period and transfer only takes place on receipt of the full purchase price by the seller.  If the property is used mainly for residential purposes and payment takes place in more than one instalment the provisions of Chapters II and III of the Alienation of Land Act 68 of 1981 (“the Act”) will apply to the agreement. (Please take note that this is but one of the Acts that may regulate this type of transaction and the provisions of other Acts as such as the National Credit Act 34 of 2005 and the Consumer Protection Act 68 of 2008 must also be kept in mind.)

Section 20(1)(a) of the Act places an obligation on the seller to record the contract against the title deed of the property, to protect the interests of the purchaser.

Some of these instalment sale agreements have matured into the transfer of property to the purchaser, after the full payment of the purchase price. However not all purchasers know that in terms of section 27(1) of the Act a purchaser who has paid 50% of the purchase price may insist on earlier transfer of the property, if the property is registrable.  The seller will then receive, as security for the payment of the balance of the purchase price and interest, as provided for in the sale agreement, a first mortgage bond over the property. This is also called a “kustingsbrief” – a bond that secures the balance of the purchase price, in favour of the seller.

The right of the purchaser to insist on transfer against registration of a bond, on payment of 50% of the purchase price, was confirmed in Botha and Another v Rich NO and Others 2014(4) SA 124 (CC). The court also discussed the purchaser’s remedies if the seller fails to tender transfer within three months of the purchaser’s demand. One of these remedies would be the right to cancel the agreement in terms of section 27(3) of the Act and the recovery of all payments and interest as set out in section 28(1) of the Act.  Although section 27(3) does not refer to other remedies, the court found that cancellation is not the only remedy left for the purchaser. The court confirmed that the common-law right of specific performance remains available to the purchaser.  In terms of this remedy the purchaser can insist on the transfer and registration of the bond as set out in section 27(1) of the Act.  Following this argument, the court ordered the seller to effect the transfer of the property and registration of a first mortgage bond by signing all the necessary documentation.

Transfer can only take place if any existing mortgage bond (if applicable), in favour of a third party over the property, is first paid up and then cancelled. It is therefore crucial that the purchaser insist on receiving bank statements on the current state of any existing bond to monitor payments to the third party by the seller.

If you are a purchaser in an instalment sale agreement, regularly calculate if you have not paid more than 50% of the purchase price, as you may already be in a position to insist on transfer of the property.

For more information regarding this topic, NVS Inc will be offering an information session on the 27th of September 2017 at the NVS offices in Pretoria. Only 10 real estate agents will be accommodated per session, therefore booking is essential. To book please contact Melanie Enslin at

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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