The process of “paying and clearing” a property, also known as a “guaranteed payment” or bond cancellation, is a critical final step in the sale of a home or the closure of a mortgage bond. When a property sale is finalized, the proceeds must be used to fully settle the outstanding home loan with the bank, a service facilitated by the bank’s attorneys. For First National Bank (FNB) customers, this service is known as the “Pay and Clear” fee.
This cost is not a single flat charge but a combination of professional fees, statutory costs, and administrative charges levied by FNB’s appointed attorneys to ensure the legal discharge of the bond from the property’s title deed. Understanding the full scope of this fee, its variable components, and the factors that influence the final amount is essential for any homeowner or seller to accurately budget for the conclusion of their property transaction.
How Much Does FNB Charge For Pay And Clear? A Complete Breakdown of Costs and Procedures
Component 1: The Core Attorney’s Fee for Pay and Clear Administration
This is the professional fee charged by FNB’s conveyancing attorneys for managing the legal and administrative process of settling and cancelling the bond. It is the most substantial portion of the total cost.
Nature of the Fee: This fee covers the attorney’s work in obtaining a settlement figure from FNB, preparing the necessary guarantee for the transferring attorney, receiving and allocating the sale proceeds, settling the loan account, preparing the bond cancellation documents, and lodging these documents with the relevant Deeds Office to formally remove the bank’s bond from the property title.
Cost Structure: The attorney’s fee is not a standard percentage but is typically calculated on a sliding scale based on the original bond amount or the settlement figure. It is regulated in accordance with guidelines from the Legal Practice Council. For an average bond, this fee often falls within a range of R 2,500 to R 4,500 (excluding VAT). The final amount will be specified in the attorney’s invoice.
Component 2: Statutory Deeds Office Fees
These are mandatory government charges paid to the Deeds Office for the registration of the bond cancellation. These fees are fixed by regulation and are non-negotiable.
Nature of the Fee: This is the cost for the Deeds Office to process and record the cancellation of the bond (the discharge of mortgage) against the property’s title deed. No property transfer can be finalized until this step is complete.
Cost Structure: The Deeds Office fee is a set tariff. For the discharge of a standard mortgage bond, the fee is currently R 130. This fee is paid by the attorney on behalf of the client and is included in the final Pay and Clear invoice.
Component 3: Value-Added Tax (VAT)
VAT is applied to the professional services rendered by the attorneys, as they are VAT-registered service providers.
Nature of the Fee: South African VAT, at the standard rate of 15%, is levied on the attorney’s professional fee for the Pay and Clear service.
Cost Structure: VAT is calculated as 15% of the attorney’s fee. For example, if the attorney’s fee is R 3,000, the VAT added would be R 450. This makes the total cost of that component R 3,450.
Component 4: Potential Additional Administrative or Courier Fees
Depending on the specific circumstances of the cancellation, there may be additional minor charges.
Nature of the Fees: These can include charges for secure courier services to send original documents between attorneys and the Deeds Office, or bank charges for the electronic transfer of the settlement funds. Some firms may also include a nominal admin fee.
Cost Structure: These are typically smaller, incidental costs. Courier fees might range from R 150 to R 300, and any admin fee would usually be under R 200. They are not always present but should be anticipated.
The Total Estimated Cost Range for FNB Pay and Clear
When combining all the above components, the total fee payable by the seller for the FNB Pay and Clear service can be estimated.
Typical Total Cost: For a standard residential property bond cancellation, the total fee (including VAT) typically falls within a range of R 3,000 to R 5,500. This range covers the attorney’s fee, Deeds Office fee, VAT, and potential sundries.
Important Variables: The final amount is influenced by the original bond amount and the specific tariff structure of the appointed law firm. More complex scenarios, such as cancelling multiple bonds on one property or dealing with an estate, may incur higher fees.
The Pay and Clear Process and Who Bears the Cost
Understanding who pays and the sequence of events provides crucial context for this fee.
Liability for Payment: The seller is contractually responsible for the Pay and Clear fee. This cost is deducted by the conveyancing attorneys from the proceeds of the property sale before the net balance is paid to the seller. The seller does not pay this upfront; it is settled during the financial closure of the transaction.
Standard Procedure:
1. Upon the sale agreement becoming unconditional, the transferring attorney requests a settlement figure and instructs FNB’s appointed attorneys.
2. The FNB attorneys issue a guaranteed payment figure (the Pay and Clear figure) to the transferring attorney.
3. On registration day, the purchaser’s bond funds and deposit are used to pay this guaranteed amount to FNB’s attorneys.
4. The attorneys pay FNB, settle the loan, and prepare the cancellation documents.
5. Simultaneously, the transferring attorney registers the transfer of the property to the new owner.
6. The FNB attorneys then register the bond cancellation, and the seller’s account is formally closed. All fees are deducted from the sale proceeds held in trust.
Key Considerations and How to Obtain an Exact Quote
To avoid surprises, sellers must proactively seek detailed information.
Obtaining a Formal Quote: The exact Pay and Clear fee will be provided in writing by FNB’s appointed attorneys once they are instructed. The seller or the transferring attorney can request a detailed cost breakdown from the law firm handling the cancellation. This should be done early in the sale process for accurate financial planning.
Role of the Transferring Attorney: The transferring attorney managing the property sale will coordinate directly with FNB’s cancellation attorneys. They will provide the seller with a draft financial statement showing all expected deductions, including the estimated Pay and Clear fee, before registration.
No Direct FNB Account Fee: It is important to note that FNB itself does not charge a separate “Pay and Clear” account fee. The entire cost is for the legal services required to execute the cancellation, which FNB mandates be done through their panel of attorneys to ensure a guaranteed settlement.
Closing
In conclusion, while the FNB Pay and Clear service is an unavoidable cost in the property sales process, it is a structured and regulated fee for essential legal work. By understanding its components—the attorney’s fee, Deeds Office charges, VAT, and sundries—sellers can accurately anticipate a final cost typically between R 3,000 and R 5,500. Proactive communication with the transferring attorney to obtain the formal invoice from FNB’s appointed law firm is the most reliable way to confirm the exact amount and ensure a smooth, well-budgeted conclusion to the property transaction.