Understanding the "Instalment Sale Agreement"
UNDERSTANDING THE “INSTALMENT SALE AGREEMENT”
Has your purchaser’s bond approval been declined? There is another possibility worth looking into – the Alienation of Land of Act 1981 makes it possible to buy property by way of instalments. The Seller retains full ownership of the property until the full purchase price has been paid, where after transfer of ownership will be registered in the deeds office.
WHAT DO YOU NEED FOR AN INSTALMENT SALE?
You need a willing Seller and Purchaser and a properly drafted sale agreement prepared by your conveyancer.
WHAT DO YOU NEED TO DO?
- The Sale Agreement must be reduced to writing.
- The purchase price must be paid in two or more instalments over a period longer than 1 year but not exceeding 5 years.
- Instalments can only be paid once the agreement has been registered in the deeds office.
- The instalments should ideally be sufficient to cover the Seller’s bond repayments.
- The Purchaser should ideally pay a deposit (at least enough to cover the agent commission).
- The Purchaser will be liable for all rates and taxes if so agreed between the parties.
- Even though the purchase price may be paid over several years, transfer duty still needs to be paid within 6 months from signing the offer to purchase to avoid penalties.
- The buyer will, while in occupation of the property pay rental as well as instalments.
The agreement is registered against the Seller’s title deed in the Deeds office by way of a ‘recordal’ of the facts. This will be done by your conveyancer. The recordal must be registered against the title deed within 90 days of signature of the agreement. The Purchaser only takes transfer of the property once the full purchase price has been paid or upon payment of the final instalment wherein the bond is also cancelled. The current bondholder is notified of the sale and will issue a certificate of the outstanding balance due on the bond within 21 days from request.