Did you know you can buy a property on instalments, without a bond?
- Property Protect
- 7 days ago
- 3 min read
Is there a way to buy a property with no money down?
Did you know you can buy a property on instalments, without a bond? That is, of course, provided the seller is willing to sell on such terms. Many property investors negotiate such deals to add properties to their portfolio faster, with less capital requirement.
How do instalment purchases work?
An instalment sale agreement in respect of property (referred to in law as "immovable property") is an agreement made possible in theory by the Alienation of Land Act 68 of 1981.
The purchase price is paid to the seller by way of more than two instalments over a period of longer that one year. The instalments payable is ideally sufficient to cover the seller’s bond repayments. The repayment period can be set at between 12 and 60 months, and the seller may require an initial deposit. Sellers may also impose certain penalty terms in such agreements - for example - forfeiture of a certain amount if the purchaser defaults on their obligations.
The agreement must contain certain minimum clauses to be legally sufficient
An attorney should draft the agreement to ensure it meets the requirements as set out in Section 6 of the Act which requires that the agreement be in writing and signed by both parties. It must contain details of the Seller and Purchaser, description and extent of the property, and critical clauses detailing the instalment payment arrangement, among others. Failing to include the minimum required clauses may render the agreement unenforceable, with expensive consequences for one or both parties.
What about the bond? Will the bondholder allow it?
Once the contract has been signed the attorney will inform the bondholder of the conclusion of the contract. The bondholder may not refuse the conclusion of the agreement. The bondholder must provide a certificate within 21 days of the request, which indicates and confirms the amount and interest required to cancel the bond. Note that the contract will lapse if the amount in terms of the certificate exceeds the purchase price.
This strategy may be riskier but is used by financially savvy property investors looking to grow their property portfolio faster. It may be used instead of, or in conjunction with a property gearing strategy.
Did you know?
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