Some good news for creditors here – the SCA (Supreme Court of Appeal) has just held that a 30 year prescription period applies to special notarial bonds. That’s important because it’s always prudent when making a loan or extending credit to take as much security from the debtor as you can. And whilst a mortgage bond over immovable property is usually going to be first prize here, movables can also provide strong security.
If possible, hold the debtor’s movables yourself and take a pledge over them. Where however your debtor cannot give you actual possession (which is likely to be the case with substantial business assets such as machinery in a factory), consider registering a “special notarial bond” over them.
That will give you the same strong security (in law, not necessarily in practical terms) as you would have with a pledge, even though you don’t have actual possession. Just make sure that each asset is listed in such a way that it is, as required by law for validity, “…specified and described in the bond in a manner which renders it readily recognisable…”, so give full descriptions with any available serial numbers and the like.
What about prescription?
You will know that most debts prescribe after 3 years, but some only after 6 (cheques for example), some after 15 (most State debts), and some after 30 – judgment debts, tax debts, some State debts and “any debt secured by a mortgage bond”.
A creditor’s R500k victory
If your debtor has significant movable assets, ask your lawyer about registering a special notarial bond over them. Not only will it give you security for your claim, but it will also protect you from a “3 year prescription” defence.
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