By Ulrike Naumann Monday, March 05, 2012

1. What have been the main trends and important developments in the lending market in your jurisdiction in the last 12 months?
The lending market in South Africa has seen renewed activity with a number of smaller private equity buyouts and other corporate action being funded by bank-lending. The last year has also seen a renewed interest in alternative funding mechanisms (such as the issuance of high yield bonds) and the lending market will continue to feel some pressure from these alternative funding sources in the near future. The lending market has had to take into account the changes to South African company law introduced by the Companies Act 2008 (New Companies Act), which came into force on 1 May 2011 and made some significant changes to the corporate framework.
Forms of Security Over Assets
Real estate
2. What is considered real estate in your jurisdiction? What are the most common forms of security granted over it? What formalities are required?
Real estate
South African law defines real estate as "immovable property", there is no exhaustive list of what constitutes immovable property but the following are always classified as immovable property:

Land, minerals in the soil, trees (unless in the act of falling)
and growing crops of fruit.
A building annexed to the land, if its attachment to the land is so secure that separation from it would cause substantial injury to either the land or the building. This includes all buildings or structures with foundations in the soil.
An object which is attached to immovable property (for example, to a building which is itself immovable property), if its attachment to the immovable property is so secure that separation from it would cause substantial injury to either the immovable property or the article.

Whether buildings or objects that have separate identity and can be detached with relative ease, without causing substantial damage to the immovable property on which they are situated are considered to be part of immovable property depends on the intentions of the owner. If the owner's intention was that these objects or buildings should be annexed permanently, they are considered to be immovable property. Otherwise, these objects or buildings (for example, buildings without foundations, such as sheds, railway lines and all fixtures or annexations to buildings) are not immovable property.
An intangible asset is classified as immovable property if the tangible asset to which it relates is itself classified as immovable property (for example, mineral rights).
Common forms of security
Security over immovable property can only be obtained by a special mortgage of immovable property as set out in the Deeds Registries Act 1937 (DRA) (see below, Formalities).
A mortgage bond does not transfer title in the mortgaged immovable property to the lender. It confers a limited real right on the lender to have the immovable property sold in execution, and the proceeds of that sale applied to settle, or reduce, the debt secured by the mortgage bond.
A special mortgage of immovable property is created by a mortgage bond. A mortgage bond is perfected by registering it at the same deeds registry where the immovable property over which the bond is granted is registered. No other method can confer a valid security over immovable property.

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