Property Law: Shortfall on the seller’s finances – what now?
We all know that property prices have in the last couple of years shown little or no growth in Rustenburg. Especially in the price class above R2m prices have even fallen in a number of cases in my experience. There are consequently quite often these days transactions where the proceeds of the sale are not enough to cover the cancellation figure of the bank, holding a bond over the property, as well as the clearance figures from the municipality.
Here are a couple of options that can be considered to still salvage such a deal:
1. The purchaser could pay more. Because of the property market being what it is, the chances of this happening are, however, fairly slim.
2. The estate agent could reduce his commission. This he would normally be unwilling to do.
3. The municipality could be convinced or even forced to reduce the clearance figures:
a. They are often prepared to write off the interest amount due if the full balance in arrears is settled immediately;
b. They can be forced to write off any amounts due for services, in other words water and electricity as well as refuse, which became do more than three years ago. These amounts would have prescribed in terms of the Prescription Act, 1969;
c. They can also be forced to reduce the clearance figures to the amounts due in respect of a period of two years prior to the issuing of the figures only. This is stipulated in section 118(1) of the Local Government: Municipal Systems Act, 2000. The seller would still be liable for the balance. At least the transfer can and such a case, however, be commenced with.
4. The bank could be convinced to reduce the cancellation figure. This they would often be prepared to do if the seller signs an acknowledgement of debt to pay the shortfall in monthly instalments within a reasonable period of time. We recently attended to the transfer of a property where the bank was prepared to reduce the cancellation figure with more than R100 000.00. Not too long ago, we had one where a discount of for more than R200 000.00 was approved.
It should therefore be clear that not all is lost if there is a shortfall on the seller’s finances. We would therefore suggest that estate agents and sellers keep the abovementioned options in mind where the purchase price is indeed insufficient to cover the balance due to the bank.
Credit: Provided by Volker Krüger, Director Van Velden-Duffey Attorneys
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