Nailing your responsibilities as a Mortgagor

There are several important milestones that people experience throughout their lives. One of the most significant, exciting, and often daunting milestones is purchasing immovable property. As property ownership is a substantial financial commitment, many purchasers do not have sufficient cash available and therefore apply for a mortgage bond through a financial institution.

A mortgage bond is a document based on an agreement wherein the mortgagor borrows money from the mortgagee and agrees to pass a mortgage bond over a specific immovable property in favour of the mortgagee as security to the mortgagee for the repayment of money.

All immovable property, improved or unimproved, which is registrable in a Deeds Office can be mortgaged. This includes a flat, if it is held under a sectional title and is owned by the mortgagor.

Amid the excitement and stress of the property acquisition process, a mortgagor is required to sign numerous documents containing important terms and conditions at the bond attorneys’ offices. What many property owners do not realise is that their responsibilities extend far beyond simply paying the monthly bond instalment.

Below are some of the key responsibilities that every mortgagor should be aware of:

1. Maintaining the Property

A financial institution grants a mortgage bond on the understanding that the property will be properly maintained during the loan term. Regular maintenance helps preserve the property's value and protects the bank’s security. If the property falls into disrepair and its value decreases, the risk to the bank increases, particularly if the property is sold for an amount that is insufficient to settle the outstanding bond balance.

2. Property Insurance

A mortgagor is required to ensure that the property is adequately insured at all times. Maintaining suitable homeowners’ or building insurance is a fundamental condition of the mortgage bond. Proof of insurance is typically required before registration of the bond and must remain in force until the bond has been paid in full. Adequate insurance protects both the homeowner and the financial institution against unforeseen losses or damage to the property.

3. Valid Compliance Certificates

A mortgagor must ensure that all required compliance certificates remain valid and up to date. These certificates play a crucial role in protecting property owners and occupants, ensuring the safety of installations and structures, and supporting insurance and bond-related claims.

Many insurance companies require valid compliance certificates when processing claims arising from incidents such as electrical fires, gas leaks, or other property-related damages. Failure to maintain these certificates may result in an insurer rejecting a claim or limiting coverage.

Owning property is a rewarding investment, but it also comes with ongoing responsibilities. Understanding and complying with these obligations can help protect your property, your investment, and your financial future.

Sharon Honiball

LLB

Partner at Le Roux Vivier Attorneys

Disclaimer: The views expressed in this article are those of the author(s) and do not necessarily reflect the views of the firm. This content is provided for general information only and does not constitute legal advice. While every effort is made to ensure accuracy, the law may change and its application depends on the specific facts of each matter. Readers should seek professional legal advice before acting on any information contained herein. The firm and the author(s) accept no liability for any loss or damage arising from reliance on this content.