- The Letter of Undertaking or guarantee (“the undertaking”) must be designated as being “revocable” if circumstances in relation to the finances of a transaction change (e.g. the amended cancellation figures exceed the initial amount requested by the existing mortgagee and the surplus value in the transaction makes the payment of the amount stipulated in the undertaking impossible). If the undertaking, is not expressly made revocable, then the conveyancer will be at risk to perform in terms of the undertaking despite the finances not being available to satisfy the payment due to the bridging finance institution.
- Likewise, the undertaking should be revocable if the transaction does not proceed or if the signatory’s mandate is terminated.
- The conveyancer must attend to a detailed breakdown of all the financial aspects of the transaction prior to issuing any undertaking in favour of a bridging finance institution. If there are linked conveyancing transactions attended to by multiple firms of attorneys on behalf of one or more of the parties to the conveyancing transaction, then those firms must be required to similarly furnish confirmation of the financial aspects under their control.
- The conveyancer must ensure that there will be enough funds available on registration, to cover the amount advanced and must be particularly vigilant where more than one amount is advanced on any one transaction.
- Conveyancers should refrain from providing undertakings in circumstances where registration is not imminent. In other words, only once all conditions and requirements of a transaction have been complied with (where rates clearance figures have not been issued by the local authority this can cause a significant delay in the registration of the transaction).
- The conveyancer should only confirm that the transaction is unconditional once s/he has properly satisfied her/himself that there are no conditions or impediments to the registration.
- When a new or further undertaking is requested by the conveyancing client to be issued to another creditor, or even in replacement of the previous letter of undertaking, the conveyancer must again attend to a preliminary reconciliation of the finances of a transaction.
- It follows that once an undertaking is issued in substitution of an earlier undertaking to the same or another bridging finance institution, then the conveyancer should only issue the replacement or substitution undertaking once the previous original undertaking has been received back and cancelled.
- It is prudent to put in a proviso that the undertaking is subject to any payment that may be required to be made to SARS in terms of the Income Tax Act.
- It is suggested that all requests for bridging finance are vetted and undertakings signed by one designated partner/director.
- In the case where the client is a juristic person, or a co-owner/joint owner of a property, the conveyancer should ensure that the person instructing her/him has been properly authorised to apply for the financing.
- All conveyancing practices should make sure that there are checks and balances in place to ensure that the bridging finance company is paid out on registration, before the rest of the proceeds are disbursed.
- The conveyancer must ensure that the bridging finance company is notified if the transaction is cancelled or delayed or if his mandate has been withdrawn.
The conveyancer should avoid committing to a specific date on which transfer can be expected.