Why cheap bank repossessions will now be the exception
A judgment by the Johannesburg high court should make it impossible for banks to sell primary residences for a pittance on auction when consumers fall in arrears on their home loans.
In terms of the ruling, creditors will only be allowed in exceptional cases to auction primary residences without a reserve price being set by a court, effectively making minimum selling prices the "default position", says Alexandra Ashton of the Legal Resources Centre and attorney for the Lungelo Lethu Human Rights Foundation, which was admitted as a friend of the court in the case.
The banks argued that by setting a reserve price there would be less interest from prospective buyers and it would therefore make it less likely for a buyer to be found.
The judgment, which was delivered on Wednesday, reads: "The allegation appears to be without foundation, but even if it is so, we can see no reason why the court cannot be approached for a variation of an existing order, making it more likely to find a buyer should the perceived difficulties arise."
The court also ruled that if the home owner was able to pay the amount in arrears prior to the sale, the credit agreement is revived and the sale of the property cannot proceed.
For foundation president King Sibiya, the case represents the first time the courts have heard "the other side of the story".
He said "for years, they’ve heard only the banks’ side; that the client has failed to honour the terms of the credit agreement".
What the courts had not heard about until now were cases of houses sold in execution for R10 and sold on for enormous profits, he said.
"One such example is that of Mrs Mapule Molokomme. After the death of her husband, Mrs Molokomme’s home was sold on auction for R10. She was thereafter evicted from the property when she was eight months’ pregnant.
"Roughly a year prior to the sale, her moveable property was attached by the sheriff. Prior to the attachment of her moveable property, she had owned an industrial sewing machine which she used to run a business. After it was sold, her business suffered and her income dropped by more than half."
The foundation is helping about 600 people who have lost their homes due to sales in execution and about 1,000 people facing legal proceedings about the sales of their properties.
"In other countries you are given six to 12 months before your property is sold in execution. In SA you can lose your house in three months," he said.
Correction: June 12, 2018
Due to a typo, an earlier version of this article mistakenly referred to King Sibiya as a 'resident' of the Lungelo Lethu Human Rights Foundation. He is the president.