Notarial Bonds in South Africa

What Is a Notarial Bond?

A notarial bond is a legal instrument that creates a real right of security over movable property. Unlike a mortgage bond (which secures immovable property such as land and buildings), a notarial bond is used to pledge movable assets machinery, vehicles, stock-in-trade, equipment, or other goods as security for a debt or obligation.

Because the bond is registered at the Deeds Office, it creates a real right that is enforceable against third parties. This means that even if the debtor becomes insolvent, the bondholder has a preferential claim over the bonded assets.

General vs Special Notarial Bond

South African law recognises two main types of notarial bond:

• General notarial bond: This bond covers all the movable property of the debtor, present and future. It does not identify specific assets. While it creates a real right upon registration, it only grants preference on insolvency not a real right of pursuit over specific assets.
• Special notarial bond: Registered under the Security by Means of Movable Property Act 57 of 1993, this bond covers specifically described and identified movable assets. It grants the bondholder a real right of preference over those specific assets, enforceable even outside of insolvency.

In commercial practice, special notarial bonds are generally preferred because they provide the bondholder with stronger rights over identifiable assets.

Why Only a Notary Can Execute a Notarial Bond

Under South African law, a notarial bond must be prepared and executed before an admitted Notary Public. A standard attorney even a senior one is not authorised to execute a notarial bond. The Notary's role is to:

• Ensure all legal requirements are met and the parties understand the instrument
• Verify the identity of all parties
• Execute the bond in the required form
• Attend to lodgment and registration at the Deeds Office

Deeds Office Registration

A notarial bond takes effect only upon registration at the Deeds Office. The Notary prepares the bond instrument and lodges it at the relevant Deeds Office. Registration typically takes 5–10 working days, depending on the workload at the office.

Until the bond is registered, it does not create a real right and has limited legal force. It is important to factor in this registration period when planning transactions with fixed dates or funding requirements.

Commercial Use Cases

Notarial bonds are most commonly used in commercial lending and financing arrangements:

• Business loans: Banks and financial institutions frequently require a notarial bond over business equipment, stock, or vehicles as security for commercial credit facilities.
• Asset finance: Equipment, plant, and machinery financing often involves a special notarial bond over the financed assets.
• Private lending: Private creditors extending large loans may require a notarial bond over the debtor's movable property.
• Agricultural finance: Bonds over crops, livestock, and farming equipment are common in agricultural lending.

Cancelling or Releasing a Notarial Bond

Once the underlying debt is repaid, the notarial bond must be formally cancelled by the Notary Public and the cancellation registered at the Deeds Office. Until cancelled, the bond remains registered and visible on any title or asset search. Cancellation requires consent from the bondholder.