Rent-to-Buy: What If You Still Don't Qualify for a Bond?

By Louise Fourie | Principal, Africa Estate

Decide what happens if it fails before you sign, not after. Most rent-to-buy agreements end one of two ways: the buyer qualifies and buys, or does not. The second one is where people lose money, and it is almost always because nobody wrote down what would happen.

Part of our Rent-to-Buy series. Start with the Rent-to-Buy Reality Check.

What usually happens

It depends entirely on the agreement. Common outcomes are:

• The right to buy falls away, and you move out or carry on renting at normal rent.
• The upfront option fee is lost, because it paid the seller for waiting.
• Extra amounts paid "towards the purchase" are lost or only partly refunded, depending on the wording.
• The seller agrees to extend the period, usually at a price.

If it is an instalment sale

If you bought a home in instalments under the Alienation of Land Act, the position is different. A buyer who has paid at least half the price can demand transfer, with a bond registered in the seller's favour for the balance (section 27). See Rent-to-Buy vs Instalment Sale for how the two differ.

Protect yourself before you sign

• Make sure the agreement says, in plain words, what happens to every rand you pay if you do not qualify.
• Never pay upfront more than you can afford to lose.
• Know why your bond was declined, and start fixing it in the first month, not the last.
• Talk to a bond originator halfway through, not at the end.

If the reason you cannot qualify is not something time can fix, read Bond Declined: Why Rent-to-Buy May Not Solve the Problem first, and take the Reality Check.

Source: Alienation of Land Act 68 of 1981, section 27. This article is general information, not legal or financial advice.

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