Parties to a sale of immovable property can agree to a deferred payment of the purchase price. The purchaser will then pay the purchase price in instalments and the seller will charge interest on the outstanding amount from time to time. What the parties often don’t keep in mind is that their agreement constitutes a credit transaction as defined in the National Credit Act (“the Act”) and that in certain circumstances the seller will have to register as a credit provider in terms of the Act.
The Act generally applies to all credit agreements between parties dealing at arm’s length. Arm’s length transactions are not defined in the Act but exclude, for example, transactions between dependent family members and any arrangement where the parties are not independent of each other. There are also certain instances where the Act’s application is excluded, for instance where the consumer is a juristic person with an annual turnover or asset value exceeding R1m.
The implications for the seller could be far-reaching if he is not registered, as the agreement will be unlawful and void. Sellers, be careful when you enter into these types of agreements as non-compliance with the Act could be a costly exercise.
Source: STBB’s Thought of The Week
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This information is published for general information purposes and is not intended to constitute legal advice. Specialist legal advice should always be sought in relation to any particular situation. Property Wheel will accept no responsibility for any actions taken or not taken on the basis of this publication.