Notarial bonds are not permanent fixtures of a debtor's legal landscape. There are many legitimate reasons why a bond may need to be cancelled or its terms amended — from the full repayment of the underlying debt to a refinancing arrangement that replaces existing security.
Understanding the process for cancelling or amending a notarial bond is essential for both debtors seeking to release encumbrances on their assets and creditors managing their security positions. This guide explains the requirements, procedures, and potential pitfalls involved.
When to Cancel a Notarial Bond
A notarial bond should be cancelled when the underlying purpose for the security no longer exists or when the debtor's circumstances change in a way that makes the bond unnecessary or inappropriate.
Debt Fully Repaid
The most common reason for cancellation is the full settlement of the debt that the bond was intended to secure. Once a debtor has repaid the loan or facility in its entirety, the creditor has no further claim to the security and the bond should be cancelled. The debtor is entitled to demand cancellation upon full repayment, and the creditor is obliged to consent.
Refinancing with New Security
When a debtor refinances an existing facility with a new lender, the old notarial bond must be cancelled to make way for new security arrangements. The incoming lender will typically require that the existing bond be cancelled before — or simultaneously with — the registration of the new bond. This process requires careful coordination between the outgoing and incoming creditors.
Settlement Agreement
Where a debtor and creditor reach a settlement agreement — whether for the full or a reduced amount — the terms of the settlement may provide for the release and cancellation of the notarial bond. The bond cancellation is often a condition of the settlement and forms part of the compromise reached between the parties.
Asset Disposal (Special Notarial Bonds)
In the case of a special notarial bond, where the bond is registered over specific identified assets, cancellation becomes necessary when the debtor disposes of the bonded asset. The debtor cannot transfer unencumbered title to a purchaser while a special notarial bond remains registered over the asset. The creditor's consent to cancellation — or substitution of alternative security — is required before the sale can proceed.
Cancellation Process
The cancellation of a notarial bond is a formal legal process that must be carried out in accordance with the requirements of the Deeds Registries Act 47 of 1937. The process involves several sequential steps, each of which must be properly completed.
Written Consent from the Bondholder
The creditor (bondholder) must provide written consent to the cancellation of the bond. This consent is an acknowledgement that the debt has been settled, or that the creditor agrees to release the security for another reason. Without the bondholder's consent, cancellation cannot proceed through the ordinary course — the debtor would need to obtain a court order.
Preparation of Cancellation Documents
A notary public or conveyancer prepares the formal cancellation documents. These typically include the consent to cancellation, a power of attorney to cancel the bond, and the original bond document (or a certified copy if the original has been lost). The documents must comply with the prescribed format required by the Deeds Office.
Execution of Consent to Cancellation
The creditor (or an authorised representative) signs the consent to cancellation before a notary public. If the creditor is a company or close corporation, the signatory must be duly authorised by way of a board resolution or equivalent corporate authority. Identity documents and proof of authority are verified at this stage.
Lodgment at the Deeds Office
The cancellation documents are lodged at the Deeds Office where the notarial bond was originally registered. The Deeds Office examiner reviews the documents for compliance with all statutory requirements. If any deficiency is found, the documents are returned for correction, which can delay the process.
Registration of Cancellation
Once the Deeds Office is satisfied that all requirements have been met, the cancellation is registered. The bond is marked as cancelled in the Deeds Office records, and the security over the debtor's movable assets is formally released. The typical turnaround from lodgment to registration is 2 to 4 weeks, depending on the workload of the particular Deeds Office.
Amending a Notarial Bond
Unlike cancellation, amending a notarial bond is not always straightforward. South African law imposes strict requirements on the content and registration of notarial bonds, and not all aspects of a bond can be freely amended after registration.
Can You Amend the Amount?
In practice, increasing the bond amount is generally not possible through a simple amendment. The Deeds Office treats a change in the secured amount as a material alteration that requires a fresh registration.
The standard approach is to cancel the existing bond and register a new bond for the increased amount. This involves the full cost of both a cancellation and a new registration, but it ensures legal certainty and compliance with the Deeds Registries Act.
Can You Change the Assets?
For special notarial bonds — which are registered over specific, identified assets — substituting one asset for another cannot be done by way of a simple amendment. The specificity requirement means that the assets described in the bond must match the actual assets securing the debt.
If the debtor wishes to replace a bonded asset with a different one, the existing bond must be cancelled and a new bond registered over the substitute asset. General notarial bonds, which cover all movable assets, do not require amendment when individual assets change.
Practical Reality
In the overwhelming majority of cases, it is easier, faster, and legally more certain to cancel the existing notarial bond and register a new one reflecting the amended terms. While this involves additional costs, it avoids the risk of a bond being challenged as defective due to improper amendment.
Costs of Cancellation
The good news for debtors is that the costs of cancelling a notarial bond are generally significantly lower than the costs of registering one. Cancellation does not involve the same sliding-scale fee structure that applies to registration.
Typical Cost Components
- Attorney or notary fees: A flat fee for the preparation and lodgment of cancellation documents, typically ranging from R3,000 to R8,000 plus VAT depending on the complexity
- Deeds Office fees: A prescribed fee payable to the Deeds Office for registration of the cancellation, which is nominal compared to registration fees
- Disbursements: Petty costs including Deeds Office searches, copies, and courier charges
Who Pays for Cancellation?
In most commercial arrangements, the debtor bears the cost of cancellation. However, this can be negotiated as part of the loan agreement. Where cancellation is required as part of a refinancing, the costs are sometimes absorbed by the new lender as part of the refinancing package. Always check your original loan agreement for provisions relating to cancellation costs.
Common Issues
While the cancellation process is generally straightforward, a number of practical issues can complicate matters. Being aware of these potential obstacles allows parties to address them proactively.
Creditor Refusing to Consent
A creditor may refuse to consent to cancellation if there is a dispute about whether the underlying debt has been fully settled, or if the creditor claims that additional amounts are owed. In such cases, the debtor has two options:
- •Negotiation: Resolve the dispute directly with the creditor to obtain the necessary consent
- •Court application: Apply to the High Court for an order compelling the creditor to consent to cancellation, usually on the basis that the debt has been fully settled
Lost or Destroyed Bond Documents
The Deeds Office ordinarily requires the original notarial bond document for cancellation. If the original has been lost or destroyed, the applicant must first obtain a certified copy from the Deeds Office and then apply for an order authorising cancellation without the original. This involves additional costs and delays but is a well-established procedure that notaries and conveyancers handle regularly.
Company Name Changes
If either the debtor or the creditor has changed its name since the bond was registered, the cancellation documents must reflect the name change and be accompanied by proof of the change (typically a Companies and Intellectual Property Commission certificate). The Deeds Office must be satisfied that the entity consenting to cancellation is the same entity that holds the bond, despite the name change.
Related Reading
For a deeper understanding of the notarial bond lifecycle, explore these related guides:
- Registration Process — Step-by-step guide to registering a notarial bond at the Deeds Office
- Costs and Fees — Understanding the fee structure for notarial bond registration and cancellation
Need to Cancel or Amend a Notarial Bond?
Whether you need to release security after settling a debt or restructure an existing bond arrangement, our notarial practice can guide you through the process efficiently.