Using a Notarial Bond to provide security for the repayment of money lent and advanced

notarial bondSecuring credit is a very sensitive subject as most South Africans have fallen into the trap of loaning money to a friend, family members, a colleague or a business partner with the promise of receiving the full amount plus interest back, in no time. However, the real world is not that simple, and it is becoming more important in these financially trying times to ensure you are protected for money lent and advanced, no matter what the reason.

To incentivise the Debtor to repay the loan on time and in full, a Creditor might want to insist on the Debtor providing some sort of security for the repayment of the loan. These so-called “credit security arrangements” gives the Creditor a right to claim possession of and sell the Debtor’s property and use the proceeds thereof for the repayment of the loan.

In South African law, the most common types of security taken over immovable property, include a house, an office building or a farm, covering and surety mortgage bonds. For movable property, it is special or general notarial bonds.

By registering a notarial bond, the Lender obtains a very strong form of security, but these bonds are widely misunderstood and under-utilised by the general credit providing public.

It is however important to note that there are strict formalities to adhere to when drafting and registering such bonds and a Notary Public should be approached to assist herein. If the formalities are not adhered to, the Creditor loses the abovementioned protection in terms of the said bond.

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