The National Credit Act (34 of 2005)

— and why, for most property investors, it will not affect you

What is the NCA?

The National Credit Act, 2005 (Act 34 of 2005) is the legislation that regulates the credit industry in South Africa. A mortgage bond is a credit agreement, so it is governed by the NCA in certain circumstances — but, as set out below, those circumstances are narrower than most investors assume.

How does the NCA affect you as a borrower?

When the NCA came into force, property investors worried it would make it harder to secure bond finance for growing a portfolio. That concern remains largely unfounded provided your investment structures are set up correctly. The NCA applies in full only to:

• Natural persons — individuals borrowing in their own name; and
• Smaller juristic persons — partnerships, close corporations, companies, and trusts (see the trustee rule below) whose asset value or annual turnover, combined with any related juristic persons, is below a threshold set by the Minister.

If you buy property in your own name, the NCA applies to you in full. That does not mean finance is unavailable — it means the bank cannot simply apply the informal ‘30% of gross income’ rule of thumb; it must assess your full income, expenses, and credit history before lending.

The R1 million threshold — still current

The threshold has been R1 million since it was set by the Minister of Trade and Industry in Government Notice 713, Government Gazette 28893, of 1 June 2006, and it has not been revised since. A juristic person whose asset value or annual turnover (aggregated with related juristic persons) equals or exceeds R1 million at the time the agreement is made falls outside the Act entirely under section 4(1)(a)(i). Given current property values, most special-purpose property-owning entities clear this line comfortably.

The trustee rule — a correction worth knowing

Not every trust automatically counts as a ‘juristic person’ for NCA purposes. Under the Act’s definitions, a trust is treated as a juristic person only if it has three or more individual trustees, or if one of its trustees is itself a juristic person (e.g. a corporate trustee). A trust with only one or two individual trustees is instead assessed by reference to its trustees personally.

Practical impact: if you’re using a trust to hold property and want the benefit of the R1 million exemption, make sure it has three or more individual trustees (or a corporate trustee) in place before you apply for finance. Many banks already insist on this for exactly this reason.

The bond itself is usually excluded anyway

Separately from the R1 million test, section 9(4) of the NCA defines a ‘large agreement’ as (a) any mortgage agreement, regardless of amount, or (b) any other credit transaction with a principal debt at or above a threshold currently set at R250,000. Section 4(1)(b) then excludes large agreements made by juristic-person borrowers from the Act, even where that juristic person sits below the R1 million threshold.

In practice, this means a mortgage bond granted to a company, close corporation, or qualifying trust is treated as a large agreement automatically, whatever the entity’s asset value or turnover. This is a stronger exclusion than the R1 million test alone, and it reinforces the case for holding investment property through a properly constituted entity rather than in your own name.

Recent case law

In The Profit Hub (Pty) Ltd v Zuwon Consultants (Pty) Ltd [2026] ZASCA 88, the Supreme Court of Appeal confirmed that these exclusions are tested on substance rather than labelling — an agreement dressed up as something else (in that case, invoice discounting) will still be characterised as a loan, and assessed against the large-agreement and juristic-person thresholds, if that is its true commercial effect. The lesson for investors: keep your entity’s stated asset value or turnover, and the classification of each facility, properly documented at the time each agreement is signed.

What this all means for reckless lending and disclosure

Where the NCA does apply to you (typically, borrowing in your own name), you retain its core protections:

• Protection against reckless lending — a bank that lends more than you can reasonably afford risks having the agreement set aside by the National Credit Regulator.
• A mandatory upfront quote setting out your monthly repayment, the interest/capital split, and the total cost of credit over the life of the bond.
• Plain-language documentation, free of the dense legalese that once characterised bond agreements.
• A written explanation if your application is declined, with the right to see your own credit record.

Because reckless-lending exposure makes banks more cautious with personal borrowers, it is correspondingly harder to finance a growing multi-property portfolio in your own name — which is the core reason most active investors move to a structure.

A note on entity choice

Close corporations remain valid, existing legal entities and can still hold property and borrow. However, no new close corporations have been registrable since the Companies Act, 2008 came into effect on 1 May 2011; anyone setting up a new structure today will use a company or a trust rather than a CC. If you already have an older CC in your portfolio, it continues to work exactly as described here.

Bottom line

For most property investors, the NCA’s practical impact comes down to how you hold the property. Buy in your own name, and the Act’s consumer protections — and the bank’s more conservative lending posture — apply in full. Buy through a properly structured company, close corporation, or trust with three or more individual trustees, meeting the R1 million threshold (or simply taking out a mortgage, which is excluded as a large agreement in its own right), and the Act’s restrictions on the credit provider largely fall away. There is no reason a well-structured investor should be unable to keep growing a portfolio through bank finance.

Important note
This article is provided for general guidance only and reflects the law as understood at the time of writing. It does not constitute legal or financial advice. The National Credit Act, its thresholds, and the case law interpreting it can change, and your own circumstances and structuring will affect how it applies to you. Please verify current thresholds and case law, and confirm the position for your specific structure, with a qualified attorney and/or your bank before acting.