Private Bond Registration FAQ: 20 Questions Answered

A private bond (also called a private mortgage bond) is a bond registered over immovable property to secure a loan between private individuals or entities, rather than a loan from a registered bank or financial institution. The bond is registered at the Deeds Office in the same manner as a bank mortgage bond, giving the lender a real right of security over the property. Private bonds are governed by the Deeds Registries Act 47 of 1937 and must be prepared and registered by a qualified conveyancer.

Learn more in our comprehensive guide to private bonds.

The fundamental difference is the identity of the lender. A bank mortgage bond secures a loan from a registered bank or financial institution, while a private bond secures a loan from a private individual, family member, trust, or non-banking entity. Both are registered at the Deeds Office and create a real right of security over the property. However, private bonds are often more flexible in their terms, and the parties have greater freedom to negotiate interest rates, repayment periods, and other conditions.

See our detailed comparison of private bonds vs bank mortgage bonds.

Any natural person or legal entity may act as creditor under a private bond, provided the transaction complies with applicable legislation. If the lender is lending money in the ordinary course of business or to the general public, they may need to register as a credit provider under the National Credit Act 34 of 2005. Private lending between family members or in isolated transactions may fall outside the scope of the NCA, but legal advice should always be obtained to confirm compliance.

A kustingsbrief is a specific type of private bond that secures the unpaid balance of a purchase price on immovable property. When a seller allows a buyer to take transfer of property without paying the full purchase price, the outstanding amount is secured by a kustingsbrief registered simultaneously with transfer. This instrument has deep roots in Roman-Dutch law and remains a commonly used mechanism in South African property transactions where seller financing is involved.

Read our full article on kustingsbrief bonds in South Africa.

Registration of a private bond follows the same conveyancing process as a bank mortgage bond. A qualified conveyancer prepares the bond documents, obtains FICA documentation from both parties, and lodges the bond at the relevant Deeds Office together with the prescribed fees. The bond is examined by the Deeds Office and, if in order, registered against the title deed of the property. The conveyancer will also ensure that the underlying loan agreement is properly drafted and executed before registration.

See our step-by-step guide to the private bond registration process.

The full process typically takes between 3 to 6 weeks from instruction to registration. Preparation of the bond documents, FICA compliance, and execution takes approximately 1 to 2 weeks. Lodgement and registration at the Deeds Office takes a further 2 to 4 weeks, depending on the specific office's workload and whether any requisitions are raised by the examiner. If the bond is registered simultaneously with a transfer, the timeline is linked to the transfer process.

Yes, a private bond can be registered as a first bond over a property that is unencumbered by any existing mortgage bond. The bond will rank first in priority, giving the private lender the same level of security that a bank would enjoy as first bondholder. If there is an existing bond on the property, the private bond will rank as a second or subsequent bond unless the existing bondholder consents to a change in ranking.

The key documents include the signed loan agreement between the parties, FICA documentation for both the borrower and the lender (proof of identity and proof of address), the title deed of the property or a copy thereof, and the rates clearance certificate from the local municipality. If a company or trust is involved, the entity's registration documents and a resolution authorising the transaction are also required. The conveyancer will prepare the bond instrument and all Deeds Office lodgement forms.

View the complete list of documents required for private bond registration.

Private bond registration costs are calculated on the same statutory tariff scale used for bank mortgage bonds, based on the value of the bond. The costs include the conveyancer's professional fees (calculated on the bond amount), Deeds Office registration fees, FICA compliance charges, electronic lodgement fees, and sundry disbursements. For a bond of R500,000, total costs typically range from approximately R15,000 to R25,000 inclusive of VAT.

See our detailed breakdown of private bond costs and fees.

The borrower (mortgagor) is generally responsible for paying the bond registration costs, as is the convention in South African property practice. However, since a private bond involves a negotiated arrangement between private parties, the allocation of costs can be agreed upon differently in the loan agreement. In kustingsbrief transactions, the parties often agree that the purchaser bears the costs as part of the purchase arrangement.

The conveyancer's professional fees and Deeds Office registration fees are calculated on the same statutory tariff scale regardless of whether the creditor is a bank or a private party. However, private bond transactions may involve lower overall costs because they typically do not include the initiation fees, valuation fees, or life insurance requirements that banks impose. The total cost to the borrower is therefore often lower in a private bond transaction.

Yes, the conveyancer's professional fees for preparing and registering the bond are subject to VAT at the standard rate of 15%. Deeds Office registration fees, however, are not subject to VAT as they are government-prescribed charges. The total invoice to the client will therefore include VAT on the professional fees component and the Deeds Office fees as a separate disbursement without VAT.

It depends on the nature and frequency of the lending activity. The National Credit Act 34 of 2005 requires registration as a credit provider if you are in the business of providing credit or if you have more than a prescribed number of outstanding credit agreements. Single or occasional private loans between family members or associates may fall outside the scope of the NCA, but the exemptions are narrowly construed. Legal advice should be obtained before entering into any private lending arrangement to determine whether NCA registration is required.

Read our full guide on the National Credit Act and private lending.

Non-compliance with the NCA can have severe consequences. A credit agreement entered into by an unregistered credit provider who was required to be registered may be declared unlawful and void by the National Consumer Tribunal. If the agreement is declared void, the creditor loses the right to collect interest and fees, and may be required to refund amounts already paid by the debtor. The creditor may also face administrative penalties and criminal prosecution for reckless lending.

Learn more about NCA compliance for private lenders.

If the loan falls within the scope of the NCA and you are not registered as a credit provider, charging interest above the prescribed rate or at all may expose you to the penalties of non-compliance. For loans that fall outside the NCA (such as certain juristic person loans above the threshold or loans secured by a pledge of property), interest may be charged at any rate agreed between the parties, subject to the in duplum rule. The current maximum interest rates for NCA-regulated agreements are prescribed by the Minister of Trade, Industry and Competition.

The in duplum rule is a common-law principle, now also codified in section 103(5) of the NCA, which prevents unpaid interest from exceeding the outstanding principal debt. Once the accumulated arrear interest equals the amount of the outstanding capital, interest stops running until a payment is made that reduces the total amount owed. This rule protects borrowers from being overwhelmed by compounding interest and applies to all credit agreements, including private bonds. It is an important consideration when structuring the terms of a private loan.

Yes, a private bond can be cancelled once the underlying debt has been fully repaid. The creditor (lender) must sign a consent to cancellation, which is then lodged at the Deeds Office by a conveyancer together with the original bond document and prescribed cancellation fees. The cancellation process typically takes 2 to 3 weeks at the Deeds Office. Until the bond is formally cancelled, it remains registered against the property even if the debt has been settled.

See our guide on private bond cancellation.

If the borrower defaults on the loan agreement, the private bondholder has the same remedies as a bank bondholder. The creditor may institute legal proceedings to obtain a court order for the sale in execution of the property. The NCA imposes certain procedural requirements before enforcement, including sending a section 129 notice and allowing the debtor an opportunity to remedy the default. The property is then sold by the sheriff at a sale in execution, and the creditor is paid from the proceeds according to the bond's ranking.

Yes, it is entirely permissible to register a second or subsequent mortgage bond over a property that already has an existing bond registered against it. The second bond ranks behind the first bond in priority, meaning the first bondholder will be paid first from the proceeds of any sale in execution. The consent of the first bondholder is not required to register a second bond, but prudent lenders will assess the equity available in the property above the first bond before advancing funds.

Read more about second bond registration.

The choice depends on the type of asset being offered as security. A private mortgage bond is registered over immovable property (land and buildings) and provides strong security through a real right over the property. A notarial bond is registered over movable property (vehicles, equipment, inventory) and is appropriate where the borrower has no immovable property to offer as security. In some transactions, both instruments are used together to provide comprehensive security across all asset classes.

Compare the two instruments in our guide to notarial bonds in South Africa.