My partner and I want to dissolve our joint bonds over our two properties, what is the process?
Category Advice
A Property24 Reader and her current partner own two properties and now want to dissolve their joint bonds over the properties.
"We have reached an agreement between the two of us that he gets to remain with the apartment and I remain with the stand alone house. We agreed that we do not have to buy each other out. All we want is to transfer the properties to each other and release each other of the property bonds and title deeds," says the reader.
The readers want to know how they can go about dissolving their joint bonds.
Simone Da Camara and Farzanah Mugjenkar, attorneys and conveyancers at Abrahams & Gross attorneys responds:
Dissolving your existing joint mortgage bonds:
In order to "dissolve" the existing joint mortgage bonds, you would need to formally have the mortgage bonds cancelled. Your first step would be to give notice to your respective Bank that granted you the mortgage bonds, of your intention to cancel the mortgage bonds. It is important to note that you must give your bank 90 days notice of your intention to cancel the mortgage bond, in order to avoid the bank charging any penalties. Secondly, you will require attorneys to be instructed to formally cancel the mortgage bond at the Deeds Office.
Your bank will issue the attorneys with cancellation figures, which is essentially the amount that is still owing on your bond plus any interest and fees, which is required to be paid to the bank in order to settle what you owe on the mortgage bond. This amount must be settled by a bank issued guarantee, in order for your existing mortgage bonds to be cancelled. In light of each of you not exchanging any funds for the properties, you will need to pay the amount owing into the trust account of the Attorneys in order for them to issue the guarantee to the bank.
Alternatively, should you not have the required capital to settle the mortgage bond upfront. You may apply to your mortgage bond for a "substitution of debtor" instruction. What this means, is that her partner will apply to "substitute" himself as the only debtor for the mortgage bond on the Apartment, and she will apply to substitute him on the bond of the house.
It is important to note that the bank will do a credit assessment in order to see whether you both will be able to afford the respective property on your own. It is also important to note that attorneys will need to be instructed to attend to this substitution of debtor at the Deeds Office. As a result, attorneys fees will be payable on the cancellation of the bond or the substitution of debtor instruction.
Transferring the properties:
In order to transfer the apartment to her partner and the house to herself, a formal transfer will need to be attended to by the Transferring Attorneys. In light of the properties not being "sold", you would need to enter into an "exchange agreement", as opposed to an "Offer to Purchase". This can be drafted by our offices.
It is important to note that attorney costs will be payable, as well as costs relating to obtaining a Rates Clearance Certificate and any Home Owners Association Consent fees (if applicable), but more importantly, depending on the value of the properties, transfer duty may be payable to SARS in order to obtain a Transfer Duty Receipt.
Author: Property24