DEFFINITION:

An installment sale agreement is an agreement of sale of land as defined in terms of the Alienation of Land Act, 1981 used or intended to be used mainly for residential purposes and in terms of a contract as defined in terms of the Alienation of Land Act, 1981 in terms of which the purchase price is paid to the seller by way of more than 2 (two) installments over a period of longer than 1 (one) year but no more than 5 (five) years.

Chapter II of the Act shall not apply in respect of any contract where the Seller is

• The State;
• A Community Development Board (Act 3 of 1966)
• The National Housing Commission; or
• A Local Authority.

Furthermore

• Agricultural land;
• Land held by the State or the Minister in trust on behalf of any person

• The purchase price is to be paid to the seller over a period of time, in installments which should ideally be sufficient to cover the seller's bond repayments.

• The purchaser should ideally pay a deposit, sufficient to cover at least the estate agent's commission.

• The agreement is registered against the title deeds in the Deeds Office by way of Section 20 of the Act recordal, registered within 90 days of signature of the agreement. This implies that the seller would not be able to register any further bonds over the property, or sell the property without the consent of the purchaser.

• The payments should be made over a period of no less than one year, but not exceeding five years.

• Installments can only be paid once the agreement has been registered against the title deeds of the property.

• Transfer duty and costs should be paid by the purchaser to SARS within six months from the date of conclusion of the sale agreement otherwise the Transfer Duty shall attract penalties calculated at 10% per annum of the amount outstanding towards SARS.

• The seller retains ownership of the property.

• Should the purchaser fail to effect any payment in terms of the agreement timeousley, all payments made by him, will be forfeited as towards damages suffered and the property will revert back to the seller.

• In the event of the seller's estate becoming insolvent, the purchaser shall hold a preferent claim as apposed to a concurrent claim in respect of the proceeds of the sale of the property.

In terms of Section 8(3) of the NCA, an installment sale agreement as referred to in terms of Chapter II of the Act will be a credit agreement governed by the NCA in circumstances where:

• The purchase price is paid in installments and any charge, fee or interest is payable to the seller.

If no interest, fees or other charges are paid to the Seller the NCA will not apply.

REMEMBER – That inflation of the purchase price over and above the market value of the property may be viewed as a charge rendering the NCA applicable.

• If credit in excess of R500 000,00 is granted, the credit grantor (seller) will have to register as a credit provider before any credit is extended.
• The buyer can raise the defense that the credit provider (the seller) should never have extended credit in the first place or raise the defense that lending was done recklessly, even when less than an amount of R500 000 is granted in credit.
• In order to counter such a defense the seller will have to show that the seller had taken all reasonable steps and conducted a proper investigation into the buyers' ability to service the debt.
• The court may then suspend the working of the agreement;

Or set aside all or part of the borrower's (buyer's) obligations in terms thereof;
Reduce the interest rate charged;
Adjust the terms of the agreement or even adjust the installments.

It is clear that the risk remains with the Seller while the Purchaser can request debt counseling at any given point in time and cannot be precluded from approaching a debt counselor.