Transfer Guarantees

GENERAL

When a Conveyancer is appointed to attend to the transfer of property, one of the most important functions of a conveyancer is to secure the purchase price of that property.

To secure the purchase price ,the conveyancer must either have received payment of the purchase price in cash, and have the actual funds in his trust account. Alternatively, the conveyancer must have received a guarantee for the payment of the purchase price issued by a registered South African Bank.

All standard offers to purchase property contain a clause that obliges the purchaser to either pay the purchase price in full in cash. Alternatively, to secure the purchase price by means of a guarantee issued by a registered South African bank. The guarantee must set out the value of the guarantee and must be payable upon the registration of the property from the Seller to the Purchaser in the Deeds Registry.

The guarantee is usually to be delivered within a specified period of time.

WHAT IS A GUARANTEE ?

In other words, the guarantee is a document issued by a registered South African Bank that guarantees the payment of funds upon the happening of certain events.

Guarantees are signed by a representative of the issuing bank, or an authorised agent who signs the guarantee by virtue of a power of attorney.

On registration of transfer of the Property from the Seller to the Purchaser in the Deeds Registry, the conveyancer will notify the issuer of that guarantee of the registration. The guarantee is then payable and funds are paid in terms of that guarantee into the nominated trust account.

THE SOURCE OF THE GUARANTEE ?

The source of the guarantee depends on the terms of the individual agreement entered into. If the purchase price is to be secured by a mortgage bond, the guarantee will be issued by the bank who granted the mortgage bond. This is done with the assistance of the attorneys appointed to register the mortgage bond.

If the purchase price is to be secured in cash, there are two ways to issue the guarantee. The first method would be for the purchaser to pay the funds into the conveyancers trust account, and allow the attorney to issue the necessary guarantee. Most attorney’s do not charge for the issue of this guarantee. The Purchaser will further receive interest on the funds in the conveyancers account.

The second method would be for the Purchaser to leave the funds in his banking account, and request his bankers to issue the required guarantee. The conveyancers would provide the guarantee requirements. The disadvantage in this method is that the banks do charge a fee for the issue of this guarantee. The fee varies from bank to bank.

A MATTER OF TRUST?

Purchasers often enquire whether they can effect payment of the purchase price on registration, without the issue of a guarantee. The answer to this question is no. The reason being that the conveyancer has a duty to the Seller to secure the purchase price, such that on registration the payment of that purchase price is guaranteed. This is not possible without a valid guarantee.This is not a matter of trust but rather one of practicality and contractual compliance.