In this article, we look at the types of mortgage bonds registrable in Zimbabwe. There are various types of mortgage bonds that can be registered. A mortgage bond is a popular real security used by financial institutions to secure repayment of a debt. Below is an overview of the types of mortgage bonds.
| Types of mortgage bonds | Definition |
| Mortgage Bond | A mortgage bond is a method whereby a creditor secures the repayment of a debt by the debtor/mortgagor. By registering a mortgage bond in the creditor’s favour over the immovable property of the debtor, the creditor, on registration of the mortgage bond, converts his/her personal right for payment to a real right enforceable against third parties. A mortgage bond, therefore, vests a limited real security right, which affords the bondholder/mortgagee a preferential claim to the proceeds of the burdened immovable property and prevents the debtor/mortgagor from alienating the immovable property without the knowledge and consent of the bondholder. |
| Collateral Bond | A collateral mortgage bond is an additional mortgage bond for a debt or obligation for which security has already been provided to the creditor by the debtor. Such a bond must be granted by the same mortgagor (the debtor) in favour of the same mortgagee (the creditor) for the same debt or obligation or part of a debt or obligation that has already been secured by the principal security. The principal security could have been given by way of a mortgage bond or notarial bond (known as the principal bond) or any other form of security. |
| Surety Bond | A surety bond is a bond passed by a third party (mortgagor) as further security for a debt or obligation of a debtor already secured by a registered bond or notarial bond (principal bond). |
| Covering Bond | A covering bond can be defined as a special mortgage securing a future debt. It must be expressly declared to secure a future debt, and a maximum amount must be stipulated. The preference conferred by this bond is determined by the date of its registrations and not by the date on which the debt is incurred. |
| Debenture bond | A company, if so authorized by its memorandum or articles, may create and issue debentures in terms of the Companies & Other Business Entities Act. Debentures are inter alia secured either by a notarial bond or a mortgage bond in favour of one or more debenture holders or a trustee for the debenture holders. |
| Kustingsbrief | A kustingsbrief can be defined as a special mortgage over an immovable thing, to secure a principal debt incurred in respect of the purchase of that thing, where the deed of hypothecation is registered simultaneously with the deed of transfer of the particular thing. |
| Sectional mortgage bond | A sectional mortgage bond hypothecates sectional title property, namely units, leases registered over units, exclusive use areas, common property and real rights registered in sectional title schemes. |
| Notarial Bond | Movable property is hypothecated by notarial bonds executed and attested before a notary public, whereafter it is simply registered (as opposed to executed) in the deeds registry. |
| Participation mortgage bond | A participation mortgage bond forms part of an investment scheme whereby members of the public are invited to invest in a scheme that lends money to members of the public and businesses against the security of mortgage bonds over the debtor’s/borrower’s immovable property |
| Indemnity Bond | An indemnity bond is registered where a person (X) undertakes to comply with an obligation (or pay a debt) on behalf of another person (Y), on the condition that the principal debtor (Y) indemnifies X should X be compelled to comply with such obligations on behalf of Y. To secure this indemnity by Y, X may insist that Y register a mortgage bond in favour of X and such a mortgage bond would be an indemnity bond. |
In conclusion, various types of mortgage bonds can be registered for various purposes in Zimbabwe.
Disclaimer:
The information and opinions expressed above are for general information only. They are not intended to constitute legal or other professional advice. For clarification, assistance or any questions please contact Lex Amicus, by email at: lexamicus@outlook.com.
Lex Amicus 