Legal Q & A

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Normally the purchase price of a property is paid on date of registration of the transfer from the Seller to the Purchaser by registering a mortgage bond or by transfer of electronic funds or by a combination of both. However the Alienation of Land Act 68 of 1981 has created the opportunity whereby in certain instances the purchase of a property ("land") is paid by way of instalments.

This method of acquiring property is only available in the following instances:

• a deed of sale is concluded
• whereby land which is used or intended to be used mainly for residential purposes (not agricultural land) is sold, and
• payment is made in more than two instalments over a period exceeding one year, and
• the land must be registrable (i.e. the land must be capable of being registered as the subject of a separate title deed), and
• no other similar contract is in existence over the property.

Conveyancers often refer to the above type of sale as an "ALA contract".

If the above requirements have been met, the Conveyancer will record the deed of sale in the Deeds Office by having an endorsement made on the original Title Deed of the land to the effect that the land has been sold by way of instalments. This automatically provides certain safeguards to the Purchaser.

Safeguards afforded to the Purchaser of a property of which the deed of sale has been recorded at the Deeds Office:

• the land may not be transferred at the Deeds Office to any other person/entity other than the Purchaser, or his intermediary, under the contract,
• although the ALA contract ranks after a mortgage bond which has been registered prior to the ALA contract, it will have preferential ranking over any mortgage bonds which may be registered over the land after the ALA contract has been recorded,
• if the Seller becomes insolvent and the land is later sold in execution, the Purchaser acquires a referent claim in respect of the proceeds of the sale, which claim ranks immediately after that of a mortgagee whose mortgage bond was registered prior to or on the day of the recording of the contract.