A fair amount of legal debate surrounding the application and interpretation of the provisions of section 57 of the Deeds Registries Act 47 of 1937 (the Act) has been published and argued on, over the last few years. However, confusion still reigns given the hidden implications of the section.
For completeness sake the relevant portions of the section, causing the confusion, are quoted:
“57 (1) If the owner (in this section referred to as the transferor) of land which is hypothecated under a registered mortgage bond other than a mortgage bond to secure the obligations of a surety (not being a person referred to in paragraph (b) of sub-section (1) of section fifty six) transfers to another person the whole of the land hypothecated there under, and has not reserved any real right in such land, the registrar may, notwithstanding the provisions of sub-section (1) of the said section, register the transfer and substitute the transferee for the transferor as debtor in respect of the bond: Provided that there is produced to him, in duplicate, the written consent in the prescribed form of the holder of the bond and the transferee to the substitution of the transferee for the transferor as the debtor in respect of the bond for the amount of the debt disclosed therein or for a lesser amount. (my underlining)
(4) The provisions of this section shall not apply if the mortgaged land is to be transferred –
(a) to a person who would not himself be competent to mortgage it; or
(b) to two or more persons, unless they take transfer of the land in undivided shares and renounce, in the written consent referred to in sub-section (1), the exception de duobus vel pluribus reis debendi.”
From the above, it is abundantly clear that a debtor may not be substituted under a bond where the transferor of the land, i.e. the existing debtor is –
- a trustee in an insolvent estate;
- an executor administering an estate in terms of section 34 of the Administration of Estates Act 66 of 1965;
- the liquidator of a company or close corporation which is being wound up under the supervision of the court and is unable to pay its debts, or
- when the transferor has reserved a real right, for example a usufruct;
- when the bond being substituted is a surety bond;
- when the new owner (transferee) is not competent to mortgage the land, for example a fiduciary; and
- when all the property mortgaged under the bond has not been transferred to the proposed new debtor.
The latter prohibition merits explanation. Section 57(1) of the Act refers that the owner must transfer to another person “the whole of the land hypothecated there under”. As far back as 1978 (see repealed RCR 10 of 1978) the registrars of deeds were of the opinion that section 57 cannot be applied where one merely acquires a share in the land mortgaged, for example where land was registered in the names of A and B, in undivided shares, and A acquires the share of B. However, in 1994 (see RCR 7 of 1994) the Registrars had a change of mind and ruled that section 57 can be applied where a co-owner transfers the whole of his/her share to another co-debtor or to any other person. The argument being that the “land” is defined in section 102 of the Act as “including a share in land”. This ruling gave rise to problems where the share of a co-owner is not transferred to the remaining co-owner, but to a third party, and the other co-owners are not being aware of the substitution or the waiver of the legal exception de duobus vel pluribus reis debendi. In this regard the Registrars ruled in 2005 (see RCR 19 of 2005) that where the share of a co-owner is transferred to another person (other than an existing co-owner), all existing co-owners must consent to the substitution and all the debtors must de novo waive the legal exception; de duobus vel pluribus reis debendi. This ruling was confirmed by the Registrars again in 2006 (see RCR 7 of 2006).
It is with the utmost of respect that I differ from Conference, in that should the legislature have intended that a share in the land can be substituted, the relevant section would have clearly and unambiguously provided for such substitution and furthermore provided for the consent of co debtors, and for the waiver of the necessary legal exception, as is provided for in section 57(4)(b). It is submitted that by allowing for the substitution of a share, the Registrars have created law and not provided an interpretation of the section. Having said that, the existing practice, as per the 2005 Conference Resolution, will prevail until the Registrars can be convinced otherwise. At the Deeds Regulation Board Meeting held in 2013 , a proposal for the amendment of section 57 has been made and we await the outcome.
Another variation to the theme of “the whole of the land hypothecated there under” is where A is the owner of two erven mortgaged under the same bond and sells only one of the erven to B. The substitution in terms of section 57 cannot be effected, unless there is a simultaneous release of the other erf from the operation of the bond.
In the same vein, two or more mortgagors cannot be substituted for a mortgagor in respect of specific properties mortgaged under a bond, for example, where an owner of twelve erven mortgaged under one bond transfer the twelve erven to three different owners by virtue of separate titles, the new owners will not be capable of being substituted as debtors under the bond (see RCR 18(a) of 1996).
The provisions of section 57 can also not be applied where the transfer of the mortgaged property is effected by endorsement, for example a transfer in terms of section 24bis(2), section 25(3), section 45(1), 45bis(1) of the Act (see RCR 2 of 2005.
Conveyancers alike must be very wary in applying the provisions of section 57, given the hidden implications.
Please do not hesitate to contact us for more information.
TONKIN CLACEY PRETORIA
012 346 1278