Consumer Information

Author:  Maryna Botha – STBB
9 March 2017


Where property is sold in an instalment sale agreement, our law requires the contract to be recorded within a certain timeline against the property’s title deed, essentially to protect the purchaser should the seller try to sell the property to a third party without the instalment-paying purchaser’s knowledge. To give teeth to this, the law further provides that a seller cannot claim compensation before such recordal. One may well wonder, as the court was asked to determine here, what happens if the contract was recorded late. Did the obligation to pay instalments come to a standstill in the meantime, or did the outstanding amounts nonetheless accrue and become immediately due and payable once the contract was recorded?


(The applicants in this matter are Mr Amardien and 12 others. In the summary they are referred to as Amardien & others.)

In 2000, the City of Cape Town Community Housing Company (Pty) Ltd (CHC) sold various properties to Amardien and twelve others respectively, in each instance in terms of an instalment sale contract.

Despite the requirement in the Alienation of Land Act (ALA) that such agreements must be recorded against the title deed of the property, no such recordal was (initially) done. However, some time back, after CHC had obtained eviction orders against Amardien and the 12 purchasers, having purported to cancel the contracts by reason of the purchasers’ default in making payment of the instalments, the purchasers successfully appealed against those orders on the basis that CHC had not been entitled to payment by reason of the contracts not yet having been recorded in terms of the ALA.

Thereafter, during April 2014, CHC had the contracts recorded against the title deeds of the properties and the current proceedings arose out of the subsequent (further) cancellations of the contracts, i.e. after the recordal of the instalment sale agreements against the properties’ title deeds. CHC then demanded payment of the outstanding balance and when payment was not forthcoming, it formally cancelled the contracts, sold and transferred the land to a third party. This involved the cancellation of the recordals by the Registrar of Deeds.

Amardien and the other applicants resisted the application and argued that they were not in breach of the agreements because no consideration had become payable until the recordal of the contracts in April 2014. They were thus not in breach at any time before April 2014.

CHC, on the other hand, contended that whereas the instalments did not become payable until the contracts had been recorded, that did not prevent them falling due in accordance with the terms of the contracts. CHC’s contention was thus that the accrued amounts outstanding under the contracts became immediately due and payable upon the recording of the contracts.

The present application dealt with Amardien and the others’ application to court for the following orders:

(i) that CHC’s cancellation of the agreements was unlawful; (ii) setting aside the cancellation by the Registrar of Deeds of the recordal of the agreements; and (iii) declaring the subsequent sale of the properties to the third party to be unlawful and void.

The issues before the court in the present matter related to the validity of the cancellation of the contracts and the following had to be determined:

1) Were Amardien and the other applicants in breach of their payment obligations under the contract? 2) If so, were they given the required notice in terms of section 129 of the National Credit Act (NCA) before the contracts were cancelled? 3) If notice was given, were the extent of their arrears indicated in the notices? (With regard to 2 and 3, some applicants argued that they never received the required notification whilst others argued that the notices they received were defective because the extent of their (alleged) arrears were omitted from the letters addressed to them in terms of section 129 of the NCA. The result was, so it was argued, that a cancellation would be invalid.


• Sales of land on instalments are regulated in terms of Chapter II of the ALA and requires, amongst other things, that an instalment sale contract must be recorded against the title deed of a relevant property. The purpose of recording the contract is to afford certain protections to the purchaser and this is underscored by section 26 of the ALA which determines that, subject to certain conditions, no-one shall receive any consideration by virtue of an instalment sale contract until the contract has been recorded against the property’s title deed.

• Recording of contracts is effected by the Registrar of Deeds at the instance of the seller, but if the seller does not do so within the prescribed period, the purchaser may either cancel the contract within 14 days of the expiry of the period, or at any time thereafter itself apply to the Registrar to have the contract recorded.

• Against this background, CHC’s argument was well-founded. The provisions of sections 20 (requiring recordal) and 26 (no consideration payable until recordal) were not directed at affecting the terms of the agreements and thus do not affect when payment falls due under the contract. Section 26(1) was directed only at excluding the seller’s right to recoup any payment in terms of the contract until it has done what is necessary to afford the purchaser the protection that the legislature intended to be provided consequent to the recording of the contract. Section 26 was clearly framed in a manner designed to serve as an incentive to sellers to attend promptly to the recording of the contracts.

• Apart from the prohibition on the receipt of consideration until the recording has been done, the statutory provisions do not impact on the terms of the agreement. Indeed, the prohibition on the receipt of consideration falls away if the purchaser, as it is entitled to do, obtains the recording of the contract. The statutory provisions provide an incentive to both parties to do what is necessary to achieve the statutory protections that follow upon the recording of the contract. Section 26 has a prohibition against receiving consideration – which denotes that what the seller cannot do is accept payment of that which has fallen due in terms of the contract until it has been recorded. (A party to a contract ordinarily stands to receive payment under it only when the amount concerned has fallen due.)

This conclusion is supported by the definition of ‘consideration’ in the Act, which reads: “the purchase price and interest thereon, excluding rent or occupational interest constituting a reasonable compensation for the use and enjoyment of the land by the purchaser”. It would be impossible to conceive why interest on the purchase price should have been included in the defined meaning of ‘consideration’ if it had been the legislative intention that, irrespective of the terms of the particular agreement, no part of the purchase price should become due before the contract was recorded. Interest could only accrue on an amount that had become due but remained unpaid.

• It followed that inasmuch as Amardien and the others were each in arrears in terms of contracts when the contracts were eventually recorded, they were ‘in breach’ and the contracts could therefore be validly cancelled at that time. 

Valid cancellation?

• Section 19 of the ALA provides that a seller (in terms of an instalment contract) is not entitled to enforce an acceleration of payment clause or to terminate the contract on the breach of the purchaser unless the purchaser has been given notice of the breach and has failed, notwithstanding demand, to remedy the breach within the required period.

• As it was common ground that the contracts were credit agreements and thus subject to the NCA, it was also required that a notice in terms of section 129 of the NCA be provided to the purchasers. (This notice in essence requires that a debtor must be advised of outstanding debt, his or her options of dealing with it, before the credit provider may institute legal proceedings against the debtor). There is some overlapping between section 19 of the ALA and section 129 of the NCA. Because section 129 provides greater protection to the consumer, that section was applicable to the present matter.

• The facts showed that the required notices were sent to Amardien and others by registered post and copies of the post office ‘track and trace’ reports were provided to the court. These showed that save in respect of five purchasers, the notices were collected. With regard to the remaining five, there was no evidence supporting a conclusion that they did not receive the notice from the post office to collect the mail or that there was any impediment to them receiving the notice.

• As such, the notices were dispatched in accordance with legal prescripts.

• Regarding the contention that the extent of the default and the exact amount owing had to be indicated in the notice, there was no authority to support it and it was not a requirement of the NCA. In any event, Amardien and the others were able to ascertain for themselves how much they owed under the contracts. And, if they were uncertain, the notice afforded them the opportunity either directly or through an intermediary such as a debt counsellor, alternative dispute resolution agent or an attorney, to make the necessary enquiries and engage with the substantive issue. The object of the notices were to allow them to avoid the enforcement proceedings or cancellation by engaging with CHC before it happened. This they did not do.

In light of the aforementioned, the claim failed.

The Judgment can be viewed here