Express real security right: Mortgage Flashcards
Definition of Mortgage bond according to section 102 the Deeds Registries Act
‘a bond attested by the registrar specially hypothecating immovable property’.
List the aspects of a mortgage bond
It is a written instrument that, through registration, creates a real security right
(mortgage or hypothec) in specific immovable property.
Registration of a mortgage bond
is also the only way in which immovable property can expressly be given as security for
the payment of a debt.
A mortgage is a non-possessory form of real security in that it does not require that
physical control of the property pass from the debtor/owner (mortgagor) to the creditor
(mortgagee).
A mortgage bond can never cover movable property. Movable property must be given
in security through delivery or through the registration of a notarial bond
Describe the accessoriness principle
Real security rights are accessory to the underlying debt
(secured debt)
– RSR cannot exist in a vacuum
– Meaning: when the debt is extinguished, the security right terminates
* Exception: Covering bonds
– Authority: Kilburn v Estate Kilburn (AD) until p506; Thienaus NO v Metje & Ziegler Ltd (A) until p35
What’s the main purpose of registration as a key element of a mortgage bond?
To give publicity to the creditor’s right and thus render it a limited real right enforceable against outsiders to the transactions.
List the elements of a mortgage bond
- a debt that the mortgage is intended to secure
- a specific immovable asset over which the mortgage is to be created
- a mortgage agreement in terms of which the parties agree to constitute the relevant
security right - a real agreement, which involves the intention to create the security right (the animus
element) and, most importantly, the outward expression of this intention through
registration of the mortgage bond (the corpus element).
What is a real security right usually used for?
To fulfil an obligation
but to secure the repayment of a monetary debt created in a loan agreement
Describe the secured debt
Can be an existing or future debt
What the effect of including the debt in the bond document itself?
the bond is a liquid document that allows the mortgagee the procedural benefit of
being able to apply for provisional sentence.
How should the extent of the debt covered be determine?
It must be determined with reference to the wording of the bond and of the underlying
credit agreement, but it is usually accepted that, in addition to the principal debt, incidentals like interest, insurance premiums and legal fees are also covered.
Describe the controversy on liability of interest regarding whether the agreement may permit the bank to change the interest rate unilaterally
Initially, there were cases in favour of
and against the creditor’s power to change the interest rate unilaterally.
The Supreme Court of Appeal subsequently clarified the position by confirming that a bank may indeed unilaterally amend the interest rate since such amendment is in line with modern banking practice but stressed that the bank must reasonably exercise its discretion.
Typical way in which the banks would amend the interest rate
in accordance with changes made by the South African Reserve Bank to the prime interest
rate.
