Securities

Question 1

Discuss the Function of Security

Answer 1

Security can be seen as a type of insurance against unforeseen and unforeseeable circumstances. The bank as lender acquires some right over and above the basic contractual right to sue the customer if repayment is not made according to the terms of the contrac

Question 2

MEANING OF SECURITY

Answer 2

The acquisition of rights over property taken to support a borrower’s personal undertaking to repay the debt. Failure by the borrower to repay the debt will result in the bank (creditor) exercising its rights in terms of the security.

Question 3

Immovable property could be subject to three different types of security,

Answer 3

1. A lien (i.e. a right of retention). 2. A kustingsbrief (a mortgage bond granted by the purchaser in favour of
   the seller for the balance of the purchase price of immovable property sold or a mortgage bond in favour of a third party who has advanced money to enable the purchaser to buy the property. It is essential for the bond to be registered simultaneously with the transfer of the property into the name of the purchaser).
2. A special mortgage bond.

Question 4

Movable property can be subject to:

Answer 4

• A lien
• A pledge
• A landlord’s tacit hypothec (in respect of arrear rentals)
• A general or special notarial bond.

Question 5

COMPLETION OF SECURITY DOCUMENTS

Answer 5

Completion and signing
Backdating
Witnesses
Power of attorney

Question 6

ATTRIBUTES OF GOOD SECURITY

Answer 6

Security should have a value that is stable and easy to determine. The value of the security should be at least that of the advance, but usually a sufficient margin is required where the value of the security can fluctuate, for example, shares. A bank should always be able to check and verify its customer’s title to the asset being offered as security.