Bank Guarantee In Property Sale

So you have decided to either sell or buy a property. On the part of the seller, the primary interest is the consideration or the payment. The seller would want the payment upfront once the contract is signed and the certificate of title is turned over to the buyer. However, this is not usually the case, there are terms and conditions, like should it be paid in cash or will a check be issued, personal or manager's, or instead, is it necessary to issue a bank guarantee and proceeds of a loan as payment will be released depending on what was agreed upon.

In case of cash or check payment, there is not much to worry about except for criminal elements if paid in cash, and a bouncing check should there be insufficient funds. In both instances, there are remedies within your immediate control.

It would be a different story if the mode of payment is on installment basis or when a bank guarantee is issued in exchange for the certificate of title.

Focus will be made on the arrangement where a bank guarantee shall be issued.

There is a situation where the parties have agreed on the issuance of a bank guarantee by a respectable and reputable bank. It is the essence of the guarantee that upon the transfer of title to the buyer, and the annotation of the bank lien on the certificate, the proceeds of the loan will then be paid out to seller.

This seems to be simple and yet one has to be careful with such arrangement.

There no quarrel about getting paid through the bank on the strength of such bank guarantee. But the question is when will such payment be forthcoming? What are the risks involved?

The bank guarantee is not a separate commitment being given by the issuer. It is dependent on a principal contract, a loan or credit line, entered into by a borrower (in this case by the buyer) and the lender or the bank. If for any reason, the principal contract fails to materialize, such as the death of the borrower, or bankruptcy perhaps, before the loan proceeds are released, will the bank still honor the bank guarantee? Do you think, it will still release the funds and instead file a claim against the estate or in bankruptcy proceedings?

On the other hand, assuming everything went well, and the borrower is pretty much alive and kicking, and financially solid, when do you get paid then?

That depends on how soon the annotation can be made, and there are requirements before this is done by the Register of Deeds. Once those are completed then the transaction will be processed which would take about a month.

So the bottomline here is - make sure you are are fully covered in case of fortuitous events and delays as described here. Do not be deceived by the assurances made in the course of the transaction. Just be firm on what you want and have it reduced into writing. It can save lives from unnecessary stresses and anxieties