Bond Cancellation on Transfer: The Paid-Up Letter Is Only Half the Story

You have signed the offer to purchase and the bond for the new property is approved. It is tempting to assume the transfer will run itself. In most sales the missing piece is not the new bond at all; it is the old one. The bond registered over the property in favour of the seller's bondholder has to be cancelled before ownership can pass, and the paperwork that ends it is surprisingly easy to lose in the process.

What the bondholder needs from you

A mortgage bond is security. It gives the bondholder the right to attach the property if the loan is not repaid. When the property is sold, the seller's loan must be paid off, and the bondholder must then formally release its security. The document that does that is in practice a paid-up letter or cancellation authority from the bondholder, confirming the account is settled and authorising the cancellation.

The letter must be right in its detail: it must name the correct bond, the correct property description, the correct account, and the authority to cancel. A letter with a wrong property description or a wrong bond number stops the lodgement dead.

The route depends on how the bond is registered

Property law gives the security two different homes, and the cancellation route follows the home:

• A separate mortgage bond is its own deed in the Deeds Office. It is cancelled through the formal cancellation process with the bondholder's authority and the bond on file.
• In the older North West townships, many properties are held under a Deed of Grant, and the bondholder's charge is endorsed on the deed itself. Here the bondholder's paid-up letter is the complete authority, and the charge is endorsed off the deed as part of the transfer process.

Knowing which route applies to the property saves weeks. It is one of the first checks a conveyancer runs when a file opens.

What usually holds a transfer up

Practical steps for a seller

How We Can Help

• Cancellation figures arrive late, or arrive with a surprise in the form of interest and cancellation fees.
• The paid-up letter does not come back signed, or comes back with a detail that does not match the deed.
• The seller assumed the bond was arranged through the new bank and never confirmed the old bondholder's requirements.
• Ask your conveyancer to request the cancellation figures at instruction stage, not when the transfer is ready to lodge.
• Confirm the bondholder's exact requirements: a signed authority, the original bond, or a guarantee in a particular form.
• Pay the cancellation account as soon as it is confirmed, and tell your conveyancer the moment you have paid.
• Keep a copy of everything you send, and ask for the paid-up letter the day the bondholder confirms the account is settled.

OM Baloyi Inc handles property transfers across Gauteng and beyond, including Deed of Grant transfers in the North West townships. We open the bond cancellation file early, chase the paid-up letter, and make sure the cancellation papers are lodged with the transfer so the matter registers without a return. If you are selling or buying property and want a conveyancer who watches the old bond as carefully as the new one, speak to us.

OM Baloyi Inc | Attorneys, Conveyancers, Notaries, Properties, Tax, Mining 51 Bouvet Avenue, Bellairspark Ext 5, Northriding, 2162 T: 087 265 1059 | E: info@ombaloyi.co.za | www.ombaloyi.co.za