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Sectional mortgage bonds

9 December 2004

The question that has arisen is whether the sectional mortgage bonds have to be lodged for endorsement in respect of the release of a portion of the common property being transferred. Section 18 of the Sectional Titles Act 95 of 1986 ("the Act") provides that sections 56 and 57 of the Deeds Registries Act shall apply mutatis mutandis, with reference to the transfer of any mortgage unit or undivided share in a unit, the cession of any mortgaged lease of a unit or undivided share in a unit, the cession of any mortgaged real right in or over a unit of an undivided share in a unit, and the transfer under section 17 of this Act of any mortgaged common property or land or an undivided share therein. (This would therefore, also apply to sectional mortgage bonds).

Section 56 of the Deeds Registries Act No 47 of 1937, among others requires that the holder of the mortgage bond consent to the cancellation or release of such land, lease or right from the operation of such bond. Regulation 39(1)(b) of the Deeds Registries Act requires the consent to release to be in the prescribed form each upon a separate sheet or sheets.

The schedule of fees of office, prescribed under the Deeds Registries Act, in terms of item 8(c), carries a R60,00 fee for the cancellation of, or release of a person or property from the operation of a registered mortgage bond.

In order for the Deeds Office to charge the R60,00 registration fee, an SBC code is required on each consent to release. As an SBC code is required, an endorsement has to be affected on each sectional mortgage bond, therefore, where a portion of the common property is transferred in terms of section 17 of the Act, all sectional mortgage bonds have to be lodged for an endorsement.

The above is one view put forward.

However, another view has surfaced, that the sectional mortgage bonds need not be lodged for endorsement, but that all consents to release should be filled in the main file. With the documents that are going missing out the main file in the office, and to ensure that the office keeps an accurate record of all registrations. This view seems risky. Documents in the main file of a sectional title scheme are not microfilmed.

However, there is an argument in section 17(3)(a) of the Act that states that "Provided that is a portion only of the land comprised in the common property and on which no section or part of a section is erected, is so transferred, no endorsement shall be made on the sectional title deeds of the owners of units.

Clarity is urgently required on this matter.

This aspect will be referred to the Sectional Titles Regulation Board for a possible amendment to the Act. - Editor. It must be mentioned that the procedure alluded to above is not the practice in all deeds registries, e.g. Pietermaritzburg Deeds Registry.

Republished with permission

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