For both buyers and sellers, clarity on the fulfilment of the bond (financing) suspensive clause is crucial. Under South African law, and in particular the National Credit Act, knowing whether “grant of bond” or “acceptance by the purchaser” triggers fulfilment can determine whether a sale proceeds - or can be lawfully challenged.
The Bond Clause: Common Pitfalls
Many standard Sale Agreements state that the contract is subject to the buyer obtaining “bond approval” or an “approval in principle.” However, these terms may be insufficient under the NCA, which designs specific steps to ensure fairness to the consumer.
What the National Credit Act Requires
Under the NCA, the mere issuance of a loan offer or quote by the bank does not itself constitute approval of the bond for purposes of the suspensive clause.
Rather, a bond is only deemed granted once both of these occur:
Until both steps are completed, the bond clause cannot be considered fulfilled. In short: the offer ≠ approval; approval = offer + purchaser’s acceptance according to the NCA.
Why Acceptance Matters - and What It Entails
NCA Acceptance Rights
The NCA affords consumers the right to consider a quotation for a minimum of five business days before accepting or rejecting it – which means that any bank’s offer must remain valid for at least a 5-day period. Any clause that attempts to bypass this cooling-off protection may be deemed unlawful.
Court Confirmation
The Western Cape High Court reaffirmed this in Royal Energy Management Services (Pty) Ltd v D F Carse N.O. (2021), confirming that following the quotation’s issuance, the consumer must be afforded (and may use) the right to accept or reject it.
Practical Acceptance Methods
Practically speaking, an email or WhatsApp message from the purchaser accepting the documentation may suffice, even if unsigned, though courts have not definitively ruled on the validity of digital acceptance. To avoid any dispute, having the purchaser sign and return the documents is still the safest route.
Concerns for Sellers and Agents
Due to the above, there is a level of tension the National Credit Act (NCA) created: it protects buyers as consumers, but it can leave sellers and agents exposed when buyers don’t follow through, because:
Risk to the Seller (and Agent):
Suggested Bond Clause (Seller/Agent-Friendly, NCA-Compliant)
Clause X.X: Suspensive Condition – Mortgage Bond
This agreement is subject to the Purchaser obtaining, within [X] days of signature hereof, written approval of a loan in the amount of R [amount] from a recognised financial institution.
For the purposes of this clause:
The above suggested clause will cover many bases, such as:
This clause has bite, but is still in line with the NCA. Courts are much more likely to enforce a seller’s right to keep a deposit if the contract explicitly records that refusal of a valid loan = breach.
Use a reputable mortgage broker
Using a reputable broker will ensure you get more value out of the bank’s offer. By using a broker, you can access multiple offers simultaneously and negotiate on fees and interest rates so you can have the confidence knowing you received the best deal in the market at the time.
Phoenix Bonds is a premium mortgage broker in South Africa, with a proven track record (check out the reviews on Google). For expert advice and personalised service, fill in your details HERE and one of our experienced Consultants will be in touch.
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