, Question 1
The scenario requires an assessment of whether Xolani’s two assets — Erf
201 Meadowlands Township and his usufruct over the farm Moreson — may
lawfully be encumbered by a notarial bond in favour of Moses. The answer
turns on the distinction between movable and immovable property, and the
different forms of security available under South African property law.
The legal nature of notarial bonds
A notarial bond is a security instrument that allows a debtor to hypothecate
movable property in favour of a creditor. It is executed before a notary and
registered in the deeds registry. The governing legislation is the Security by
Means of Movable Property Act 57 of 1993, which makes clear that only
movable property may be the subject of a notarial bond1. This means that land
or rights that are classified as immovable fall outside the scope of notarial
bonds and must instead be encumbered by a mortgage bond.
Erf 201 Meadowlands Township
Erf 201 is registered land and thus constitutes immovable property. Even
though Xolani leases the property to Zanele, he retains ownership, which is an
immovable real right. South African law provides that immovable property can
only be mortgaged through a mortgage bond, which is registered in the
deeds office in terms of the Deeds Registries Act 47 of 19372. A notarial
bond over Erf 201 would therefore be legally impermissible, since the security
would be void for falling outside the statutory framework. If Moses wishes to
secure his claim against Xolani with Erf 201, the correct mechanism is the
registration of a mortgage bond against the title deed of that property.
1
Security by Means of Movable Property Act 57 of 1993.
2
Deeds Registries Act 47 of 1937.
The scenario requires an assessment of whether Xolani’s two assets — Erf
201 Meadowlands Township and his usufruct over the farm Moreson — may
lawfully be encumbered by a notarial bond in favour of Moses. The answer
turns on the distinction between movable and immovable property, and the
different forms of security available under South African property law.
The legal nature of notarial bonds
A notarial bond is a security instrument that allows a debtor to hypothecate
movable property in favour of a creditor. It is executed before a notary and
registered in the deeds registry. The governing legislation is the Security by
Means of Movable Property Act 57 of 1993, which makes clear that only
movable property may be the subject of a notarial bond1. This means that land
or rights that are classified as immovable fall outside the scope of notarial
bonds and must instead be encumbered by a mortgage bond.
Erf 201 Meadowlands Township
Erf 201 is registered land and thus constitutes immovable property. Even
though Xolani leases the property to Zanele, he retains ownership, which is an
immovable real right. South African law provides that immovable property can
only be mortgaged through a mortgage bond, which is registered in the
deeds office in terms of the Deeds Registries Act 47 of 19372. A notarial
bond over Erf 201 would therefore be legally impermissible, since the security
would be void for falling outside the statutory framework. If Moses wishes to
secure his claim against Xolani with Erf 201, the correct mechanism is the
registration of a mortgage bond against the title deed of that property.
1
Security by Means of Movable Property Act 57 of 1993.
2
Deeds Registries Act 47 of 1937.
