1.1.1 Arises automatically, in certain circumstances, where one
person becomes indebted to another or particular
relationship exists which might result in indebtedness
188.8.131.52 Landlord’s tacit hypothec
184.108.40.206.1 Security granted over certain moveables on
leased property. Granted in favour of the
landlord of that property, so the person who
owns the property, has the security.
220.127.116.11.2 What does it secure?
18.104.22.168.2.1 OVER DUE RENTAL
22.214.171.124.3 When does it arise?
126.96.36.199.3.1 It arises as soon as the rent becomes overdue, however at that
point in time its only a personal right.
188.8.131.52.3.1.1 How do you PERFECT THE HYPOTHEC?
(ie. give rise to what will ultimately be a
limited real right))
184.108.40.206.220.127.116.11 The landlord must go to court and attach the property in
question, and once a notice of attachment has been
served on the lessee, the landlord will have a ltd real right
in that property, and the security will be perfected.
18.104.22.168.4 What is the relevance of the Magistrates’
Courts Act (s31) & Automatic Rent Interdicts?
22.214.171.124.4.1 This act says that a landlord in this situation can go to the mag court provided
it is a case where the overdue rental falls within the monetary jurisdiction of
the mag court (up to max of R400K), anything more it goes to the high court.
Then the land landlord can ask for an automatic rent interdict which will
prevent the lessee or anyone else from moving the property from the
premises. NOTE: Interdicts are quick, and you don’t have to notify the lessee.
126.96.36.199.5 Rights of landlord on insolvency of lessee?
188.8.131.52.5.1 Landlords tacit hypothec gives rise to a ltd real right, and
thus if anyone else tries to claim the property to pay their
debt, the landlord can say no, they have a ltd real right and
thus entitled to the proceeds from the sale of the property.
184.108.40.206.5.1.1 HOWEVER, is only the case when rejecting other creditors who
SECURED THEIR CLAIMS AFTER THE DATE IN WHICH THE OVER
DUE RENTAL BECAME PAYABLE
220.127.116.11.6 Limitations on rent claimable?
18.104.22.168.6.1 You cannot claim the full amount necessarily. If the rental is payable in up
to one month intervals then the maximum amount that the landlord is
secured for is 3 months. If payable in 1-3 month intervals then max amount
secured is 6 months. Intervals of 3-6 months --> max amount secured is for
9 months. In all other cases, max amount secured is 15 months.
22.214.171.124.7 Property subject to hypothec?
126.96.36.199.7.1 The general principle is that everything on the
property could be subject to the hypothec.
188.8.131.52.184.108.40.206 Cannot claim the property of a
sub-lessee unless they owe rent too
220.127.116.11.18.104.22.168 3rd parties property, unless lessee and
sub-lessee's property cannot cover the debt
22.214.171.124.126.96.36.199 Any property subject to
a Notarial bond
188.8.131.52.184.108.40.206 Any property secured by a
Credit grantor’s hypothec
220.127.116.11.8.1 Payment of arrear rental
18.104.22.168.8.2 Does the hypothec terminate upon cancellation / termination of lease agreement?
22.214.171.124.8.2.1 NO Only once the rent has been paid!!!!!!
126.96.36.199 Credit grantor’s hypothec
188.8.131.52.1 What is it & when does it arise?
184.108.40.206.1.1 Arises automatically, purchaser
doesn’t have to do anything to
give rise to a CGH
220.127.116.11.1.2 Exists to secure debts which have arisen in
terms of an iINSTALMENT SALE AGREEMENT
18.104.22.168.1.2.1 Agreement must either say that you wont be the owner of the car until the
FULL AMOUNT has been paid at 60 months, or the agreement must say that
you will become the owner immediately on signing the agreement but if you
default then toyota is entitled to claim that you return the car to them.
22.214.171.124.2 Insolvency of purchaser?
126.96.36.199.2.1 Seller becomes a secured creditor in the insolvent estate (best position)
1.2 Judicial Mortgages
1.2.1 Created by judicial authority ie. courts
1.2.2 When do they arise?
188.8.131.52 Arise as soon as the sheriff has gone to someone
house to find enough property to pay off the debt,
and they’ve attached the relevant property.
1.2.3 What is the effect of a judicial mortgage?
184.108.40.206 Solvent Debtor
220.127.116.11.1 It gives the creditor who has the judicial mortgage a
preference over the proceeds of the sale of the property
that has been attached over the other creditors in the
estate. There is a qualification in this, in that creditors
rank in the order in which they have obtained attachment.
18.104.22.168 Insolvent Debtor
22.214.171.124.1 Question is when the sale of the goods in question are PROCESSED. If the person is declared
insolvent before the sale of the goods then the creditors preference will end and they will just
become a normal creditor in the insolvent estate.
2 Ranking Of Security
2.1 Over Immoveable Property
2.1.1 1. Enrichment lien(s)
126.96.36.199 2. Special mortgage bond(s) *NB date of registration
must be taken into consideration
188.8.131.52.1 3. Debtor & creditor lien(s)
2.2 Over moveable property
2.2.1 1. Enrichment lien(s)
184.108.40.206 2. Pledge(s)
220.127.116.11.1 3. Special notarial bond(s)
18.104.22.168.1.1 4. Debtor / creditor lien(s)
22.214.171.124.1.1.1 5. Credit grantor’s hypothec(s)
126.96.36.199.188.8.131.52 6. Landlord’s hypothec(s)
3.1 How does suretyship differ from the
other kinds of security discussed?
3.1.1 A person and not a thing
gives rise to the security.
3.2.1 The major advantages are commercial
(director can stand surety) and convenience
(no possession, and little admin required).
3.3.1 Only gives rise to a PERSONAL RIGHT. This means
that if the surety (person who is extending the
security themselves) becomes insolvent, dies, leaves
country, then the creditors security is meaningless.
3.4 Definition and Structure
3.4.1 A contract where a 3rd party (the surety) binds himself to the principal debt
(either to the whole or just a part of that debt) while the debtor is still bound.
3.4.2 The surety will only be liable if the debtor DEFAULTS.
3.4.3 The contract is between the surety and the creditor ONLY. There is no
requirement for the debtor to consent or even know about the suretyship
3.4.4 Suretyship is similar to other forms of security in
that it is ACCESSORY to the principal contract.
184.108.40.206 Principal Obligation
220.127.116.11.1 Must be valid & legal
18.104.22.168.2 Need NOT exist at the time of
concluding the suretyship agmt
3.4.5 Can a company not yet formed enter into a suretyship agmt?
22.214.171.124 NO, if the debtor doesn’t exist yet, then a suretyship cannot be entered into for a debtor’s debts.
126.96.36.199.1.1 Needs to specify (1) the identity of the creditor, (2)
the identity of the debtor, (3) the identity of the
surety, (4) the nature and amount of the principal
debt, and (5) the duration of the suretyship
3.5.2 Non-compliance with requirements?
188.8.131.52 Renders contract void, for two reasons:
1. there must be certainty for the
parties, 2. it prevents exploitation of the
surety by the creditor.
3.6 Effect of Suretyship?
3.6.1 What is the surety’s principal obligation?
184.108.40.206 To pay if the debtor doesn’t pay.
3.6.2 To what extent may the surety be held liable?
220.127.116.11 This is entirely dependent on what the contract says. The contract
may say that the surety is liable for the full amount of the principal
debt, for example. What it CANT be, is MORE than the principal debt.
3.7.1 More than one surety providing security in
relation to one debt. They are jointly and severably
liable for the payment of the principal debt
18.104.22.168 ie. The creditor can proceed against one or all of the
co-sureties… all or one can be held liable. If only one is held
liable, the others are absolved and can’t be held liable.
3.7.2 Where co sureties are solvent
22.214.171.124 They will be liable only for a pro rata share of the
principal debt UNLESS they have agreed otherwise.
3.8 Relationship between surety & creditor
3.8.1 UNLESS otherwise agreed, debt
enforceable on debtor’s default
126.96.36.199 HOWEVER, there are FOUR defences available to surety
188.8.131.52.1 2. Defences in rem
184.108.40.206.1.1 Any defenses based on the underlying obligation,
which will be a debt. If the debt is invalid or
unlawful, the contract will be invalid or unlawful.
220.127.116.11.1.1.1 HOWEVER the defences that surety cannot
rely upon are those that relate to the
personal status of the debtor.
18.104.22.168.2 4. Benefit of excussion NB
22.214.171.124.2.1 Refers to the obligation of the creditor which the surety can
raise to exhaust all legal remedies against the debtor (must
try and get the debtor to pay) before a approaching the surety
to pay. NB This only applies if the surety RAISES it.
126.96.36.199.2.1.1 If there is a shortfall of excussion,
then surety must pay remaining
188.8.131.52.2.2 Circumstances when this defense may fail:
184.108.40.206.2.2.1 1. when the debtor has been declared insolvent
and his estate has been sequestrated
220.127.116.11.18.104.22.168 2. when the surety fails to raise this defense
22.214.171.124.126.96.36.199.1 3. Where the surety waives his benefit of excussion.
188.8.131.52.184.108.40.206.1.1 4. Where the surety has bound themselves as co-principal
debtor, then the benefit of excussion will fail.
220.127.116.11.3 3. Benefit of Division
18.104.22.168.3.1 Only applies when there are
co-sureties on board.
22.214.171.124.3.2 If creditor proceeds against one of the sureties, that co surety can
say that they are only liable for THEIR share of the debt.
126.96.36.199.3.2.1 So this allows co surety to claim from the other co sureties
where he has paid the whole of the principal obligation.
188.8.131.52.4 1. Defence of public policy
184.108.40.206.4.1 Contract contrary to public policy = unenforceable
220.127.116.11.4.1.1 Whats contrary to public policy?
18.104.22.168.22.214.171.124 Contrary to the desires of the community.
126.96.36.199.188.8.131.52.1 Unreasonable in terms of the
184.108.40.206.220.127.116.11.1.1 NO commercial justification for the clause
18.104.22.168.22.214.171.124.1.1.1 Clause makes unnecessary inroads
into the surety’s rights
3.9.1 Payment / discharge of principal debt, as
suretyship is accessory
126.96.36.199 Material alteration of suretyship agmt by creditor to
detriment of surety
188.8.131.52.1 Expiration of time
184.108.40.206.1.1 Notice of termination
3.10 Surety’s remedies
3.10.1 Surety who pays has
recourse (can claim money
back) against Debtor AND
220.127.116.11.1 Surety must have paid debt already OR must have raised any defenses
available or not have been negligent in failing to raise those defenses
18.104.22.168 WHAT IF surety pays creditor & debtor
22.214.171.124.1 Surety is entitled to the debtors enrichment claim against the creditor to get his money back.