Real Security

Introduction
• As indicated in introductory lecture – security may take two forms:
• Personal security
• Real security
• Personal security has been covered above, we now turn to real
security

• Express mortgages and tacit mortgages

• Express mortgages:

• Tacit mortgages:
• Real right

• Property of the debtor.

• Property of third party?

• Aim of real rights?

• Various categories of property.

• A general mortgage is invalid –

• Equally a general clause is invalid.

S53(1) of the Deeds Registries Act 47 of 1937 provides:
Exclusion of general clause in mortgage bonds
…the registrar shall not attest any mortgage bond which purports to bind movable
property or which contains the clause, commonly known as the general clause,
purporting to bind generally all the immovable or movable property of the debtor
or both and shall not register any notarial bond which purports to bind immovable
property.

• A general notarial bond is valid.

• Similarly a composite mortgage bond is valid.

Express mortgages
Mortgage bond
Definition, parties and general
• Definition

• PARTIES:
• Mortgagor
• Mortgagee

• Formalities?

• Content of the mortgage bond is determined by banking, conveyancing practice,

statute and the common law
• If two or more debtors are liable in the same obligation, they may
pass one mortgage bond in favour of the creditor for their
indebtedness, provided that they each have immovable property
secured by the bond – s53(2) of Deeds Registries Act

• A debt owed to more than one creditor may be secured by one

mortgage bond naming all of them as mortgagees/creditors.

• Two or more debts due to more than one creditor cannot be secured
by one mortgage bond – s50(5) of Deeds Registries Act
Creation of a mortgage bond
• A mortgage is created by two distinct juristic acts: agreement to
create a mortgage and a public act.

• Agreement?

• Public act?
Registration of a mortgage bond
• Must be prepared by a conveyancer – reg 43(1) of the Deeds Registries
Regulations

• Must be executed in the presence of the Registrar of Deeds by a

conveyancer or by the owner of the property (s50(1))

• The Registrar must attest the mortgage bond (s50(1))

• The Registrar must then enter details of the mortgage in the appropriate
register and indorse the facts of the bond on the title deed of the property
What property may be mortgaged?
• Any immovable property capable of being privately owned may be
mortgaged provided that it does not belong to the mortgagee/creditor.

• A co-owner of immovable property may mortgage his undivided share in

the property without the consent or knowledge of the other co-owners
(Bonheur 76 General Trading (Pty) Ltd v Caribbean Estate (Pty) Ltd)

• These includes a sectional title unit, a share in land, a limited real right
that is capable of being dealt with separately from the land.
Features of creditor’s
security interest
The mortgagor may not adversely affect the
mortgagee’s security interest
• may not deal in a manner that detrimentally affects the mortgagee’s
security interest.
• E.g. transfer property (sell) – s56 of DRA
• Imposing a personal/praedial servitude - ss65(3) and 75(3) of DRA

• Leasing the property?

• Unless the bond provides otherwise, the mortgagor may pass further
bonds over the property – the general rule is that earlier mortgages take
precedence.
The mortgagee’s right to immediate
execution
• The normal execution process against movables.

• If proceeds against movables are insufficient?

• The special entitlement of mortgagee.

• Mortgagee may not execute on property without reference to the

mortgagor or court.
• ‘buy in’ by mortgagee (Absa Bank v Bisnath No and others 2007 (2) SA
583 (D)) – example below
• If the amount owed is more than the purchase price, the mortgagee has a claim
further against mortgagor (positive balance)
• If amount owed is less than the purchase price, the mortgagor is entitled to
surplus (negative balance)
• E.g. Thobile owes Absa R800 000 under mortgage bond over her house. The
house is sold in execution for R750 000. Absa may buy the property and then
deduct the purchase price from the amount owing. Absa still has a claim of R50
000 against Thobile
• The following clauses are void:
• A parate executie
• A pactum commissorium
• The following provision are valid:
• A ‘conditional sale clause’ –
Constitutionality of immediate execution on primary
residence
• mortgagee’s right to immediate execution in conflict with:
(a) the right to have access to adequate housing and
(b) the right not to have residence demolished or evicted without
a court order
(s 26(1) & 26(3) of the Constitution, 1996).

• This limitation of the right must be justified ito s 36(1)

• Prior to Rule 46A, the approach of our courts has been to refuse
immediate execution if, amongst others:
• Execution against primary residence of the debtor is now regulated by
Rule 46A of the Uniform Rules of Court – as of 22 December 2017. (nb
stems from interpretation of s26(3) of the Constitution)
• No execution against primary residence may occur without judicial oversight
• In considering an application for immediate execution against immovable
property, the court must:
(i) Establish whether the immovable property in question is the primary residence of
the judgment debtor.
(ii) Consider alternative means of satisfying the judgment debt that the judgment
debtor may have other then execution against the primary residence.
• The court can only authorise execution against a primary residence, if, after having
considered all the factors, it considers that the execution is warranted.
• The registrar cannot only issue writ of execution against primary residence unless the
court has ordered execution
• Rule 46A applies retroactively.
Factors to take into account in deciding whether a sale in
execution of a primary residence infringes s26(1) (exercising
judicial oversight)
• Will render mortgagor and his family homeless
• The mortgagor is unlikely to own a home again
• The amount of the debt
• Whether the debtor owns sufficient movable property
• The debtor is employed, has movable assets capable of attachment and sale in
execution.
• The mortgagor’s family members includes children
• The mortgagor is a previously disadvantaged individuals and low income earner.
• The mortgagor has acquired equity in the property by reason of having made
regular payments for a longer duration.
• (see BTL pg 792 – 793 for more factors).
NPGS Protection and Security Services CC v
Firstrand Bank Ltd 2020 (1) SA 494 (SCA)
• It is the duty of the judgment debtor to bring before the court
sufficient information to allow the court to exercise judicial oversight.
• In this case the judgment debtor failed (at least four times) to place
before court any relevant information to assist the court in exercising
judicial oversight ito Rule 46A.
• The judgment debtor may provide the relevant information by way of
affidavit.
Preference given to the mortgagee’s claim
• The mortgagee has a preferential claim to the proceeds of the sale of the
property
• This means, should the mortgaged property be sold in execution, the
mortgagee has a right to be paid first before all other creditor.
• Mortgaged property may be mortgaged at the instance of other creditors –
• S66(2) of Mag. Court Act – mortgaged property may not be sold in
execution at the instance another creditor, unless
• The proceeds of the sale are enough to meet the claim of the mortgagee in full; or
• He accepts a compromise.
• Rule 46(5) of Uniform Rules provides that no sale of mortgaged property in execution
may proceed unless the mortgagee has been given 10 days notice to set a reserve price
or agree to sale without reserve.
• If the mortgagor becomes insolvent, the mortgagee has a preferential claim to the
proceeds of the sale of the mortgaged property to the exclusion of all other creditors.
Release of the mortgaged property
• A mortgagor who has discharged the principal obligation may insist
that the Registrar of Deeds cancels the bond.
• Mortgagee may not hold the mortgage as security for another debtor
of the mortgagor
• Right to security is indivisible! Mortgagor may not claim partial
release of the property on the ground that he has partially paid the
principal obligation.
Statutory protection of mortgagor on
eviction
• The Prevention of Illegal Eviction from Unlawful Occupation of Land
Act 19 of 1998 (PIE) provides that eviction order may only be granted
if:
• The court has served written and effective notice of the proceedings as
prescribed in s4(2) – (5) of PIE
• After considering all the relevant factors, including the rights and needs of the
elderly, children, disabled persons and households headed by women (S4(6)
&(7)), the court of the opinion that it is just and equitable to grant the order.
Types of Mortgage bond
• See Sharrock BTL (2017) pg 795 – 796 for some types of mortgage
bonds.
• Not a closed list, some still crystallising due to practice.