When selling a home, most sellers focus on the sale price and finding a buyer, but one crucial step often overlooked is the cancellation of the mortgage bond. Many homeowners may not realise that notifying the bank about the property being on the market can save both time and money.
Understanding the Financial Implications
Calculating the net proceeds from a home sale isn’t as straightforward as subtracting the bond balance from the purchase price. Sellers must also consider various costs including:
- Estate Agents Commission
- Early termination penalty and admin fees implemented by the bank.
- Outstanding rates and levies.
- Required compliance certificates.
- Bond cancellation fees payable to the attorney.
The Role of the Cancellation Attorney
The cancellation attorney plays a pivotal role in the bond cancellation process. They are responsible for FICA-compliance for the bank, drafting essential documents, and submitting them to the Deeds Office, a process that usually runs simultaneously with the transfer. The attorney also bears the risk of any funds not reaching the bank, emphasizing the importance of diligence in their duties.
The banks can take 1 to 10 working days to issue a cancellation instruction. Only once the instruction is issued to an attorney, will the banks send out the security documents. Unfortunately, obtaining these documents isn’t instantaneous; banks typically take 7 to 10 days to issue important security documents, meaning delays can occur if replacements of the security documents are needed.
A bond cancellation requires a “proceed to lodge,” which includes all necessary documents being uploaded and accepted by the bank.
The cancellation attorney may not register without the proceed to register from their client bank. This means the cancellation attorney may need to hold the matter over at prep for a day to obtain the bank’s final instructions and then issue the proceed to register.
Yes, the bond cancellation attorney is the bank’s attorney first, but to stay the bank’s attorney needs to make sure they provide good service to the banks’ clients.
Bond cancellation figures explained
We at Ulrich Attorneys and Associates Inc, when attending to your transfers will assist with requesting the formal cancellation instruction. All we need is the client’s bond account number and which bank the property is bonded with.
Bond cancellation attorneys are required to register bond cancellation within 120 days from date of issue of the figures to the attorney. They will receive a snapshot of the clients’ balance at the time the cancellation figures are requested by an attorney.
The cancellation figures will be the balance due on the bond and may add the following:
- Early termination fee up to 90 days
- Banks Admin fee
- Outstanding insurance or insurance due for 4 months (120 days).
- Personal loans / Credit card balances that the bank granted using the property as security. This is the only one the client can apply to the bank to have separated from the balance. The cancellation attorney cannot do this on your behalf.
- Overdraft where the property has been used as collateral.
Very important to note that the cancellation attorney does not have access to the bank’s bond system. The attorney will not know if the client is maintaining their bond, made a deposit or made a withdrawal on that bond after the date the instruction is issued.
Navigating the Penalty Period
Many homeowners are unaware of the 90-day penalty period invoked by banks upon cancelling a bond. This fee is designed to cover the bank’s potential lost interest. If the property is not sold within this timeframe, sellers should proactively contact the bank on day 91 to update them.
It’s crucial for sellers to be explicit in their instructions to the bank; they should clarify that they are merely notifying the bank of the sale rather than instructing the cancellation. Neglecting this could lead to significant delays.
The bank has the right to reinstate the penalty period if they do not have registration within 120 days from the date the instruction was issued to the cancellation attorney. It is the seller’s right to wait out the penalty period of 90 days which can delay transfer for this duration.
Maintaining your bond during the cancellation process
Even after the property is sold and bond cancellation has been issued, clients need to keep paying the bond debit order to the day of registration. This is crucial to avoid potential legal action from the bank and to ensure there’s no shortfall on registration of the matter in the Deeds Office. The interest on the bond is also minimized this way.
Cancellation attorneys will not automatically request updated figures. This may be necessary if the client stops maintaining the bond and a shortfall arises, or if the client has made a lump sum payment (e.g., lottery winnings). If the penalty period has expired.
If updated figures are requested after a guarantee has already been issued, it can cause delays. The guarantee will need to be cancelled, new instructions given, and fresh documents prepared and signed, which may take time.
If the cancellation process is delayed, it could push back the property registration, especially if the bank needs to issue a new proceed (taking 5-10 working days) or the penalty period gets reinstated.
All in all, maintaining the bond and handling updated figures carefully can avoid complications and delays down the line. It’s important to keep communication clear with both the transfer attorney and bond attorney to ensure everything stays on track.
Refunds after registration
Any overpayments to the client’s bond account will be refunded within 7 to 10 working days from the date of registration. Since the guarantee reflects past figures and most clients maintain their bonds, there should typically be an amount due back to the client.
Refund Process:
- The client will be required to complete a refund form for the bank, even if there is a shortfall or if the client has signed an acknowledgment of debt. The bank insists on this form being signed, along with the most current banking details.
- The bank will not accept third-party banking details, even if they are the transfer attorney’s details. The only exception is if there is a divorce decree specifying that funds must be paid to the attorney for final distribution per the settlement agreement.
- Clients should aim to provide banking details from the same bank as the bond account, as some banks will not process refunds to accounts with a different bank, even if it’s in the client’s name and the debit order has been running from that account for years. If the refund is directed to the cancellation attorney, delays may occur before the client receives it.
Conclusion
In the intricate world of property transactions, understanding the process of bond cancellation is vital for sellers. By staying informed and prioritizing communication, homeowners can navigate this complex landscape more effectively. At Ulrich Attorneys and Associates Inc, we strive to simplify these processes to help you achieve a successful property transfer.