What is a Notarial Tie Agreement?
As the name suggests, a Notarial Tie Agreement (“Tie Agreement”) is an agreement executed by at least two parties where a condition is registered against the title deeds of two or more properties preventing the properties being sold, mortgaged, or independently dealt with. The idea is for the properties to be seen for all intents and purposes as one property.
It is usually entered into between the owner of pieces of land and the enforcer of the right. The “enforcer” is usually the person or entity who does not wish the properties to be separately dealt and requires the properties to be dealt with as one (often a lending financial institution or a local authority).
Another way of achieving this is by consolidating the properties but this is more expensive and takes longer as you would require a surveyor to prepare and obtain Surveyor General approval of a consolidated diagram.
How is a Tie Agreement formalised?
The parties to the agreement appear before a Notary Public and sign a Tie Agreement which is registered at the Deeds Office in terms of Section 65 of the Deeds Registries Act, 47 of 1937 (“the DRA”), which regulates the registration of Personal Servitudes. The title deeds must be lodged at the Deeds Office so that they can be endorsed to reflect the Tie Agreement and any bondholder’s consents to the Tie Agreement.
Section 65 of the DRA provides that the Tie Agreement will be registered free of any bonds so one would need to be cautious and ensure that bondholders rights are protected. Hereunder is the typical wording of a Tie Agreement:
“The owner of the within metaproperties agrees that the properties shall be tied together and regarded as one property for all intents and purposes and may not be sold or mortgaged separately of each other without the consent of X first being obtained.”
What are the benefits of a Tie Agreement as opposed to a consolidation?
- Generally speaking, it is a much quicker and more cost-effective process;
- The properties being tied do not need to be owned by the same entity or person;
- The properties do not have to be situated next to each other (contiguous) and can even be situated in different Deeds Registries;
- No amendment is required to be made to existing registered bonds;
- A Tie Agreement is generally acceptable to local authorities when a developer of adjoining properties does not have sufficient parking space for the proposed development; and
- The second property can be tied to the property being developed to provide this additional space.
The following criteria make a consolidation less flexible than a Tie Agreement:
- The properties must be contiguous to each other;
- They must be owned by the same person or entity; and
- If the properties are mortgaged, the bondholder has to give consent to the consolidation and consent to the consolidated property (new erf number) being substituted in the bond at an additional cost.
Author: Peter Bowes