Lawyers look into repossessed homes

By Mbalenhle Budaza

Lawyers for Human Rights, together with many legal non-governmental organisations, have noted with growing concern the manner in which repossessed houses are sold at public auctions.

The fact that a reserve price is not mandatory for sales in execution as well as the lack of judicial oversight over these processes has led to substantial consequences for the debtor, including those with constitutional implications.

With great anticipation on May 6, 2016 Given Jua Nkwane, represented by Lawyers for Human Rights’ land and housing programme, launched an application before the High Court, Gauteng Division, Pretoria. The application seeks to challenge the constitutionality of the Uniform Rules of Court insofar as it requires the sale of a person’s home to be conducted without a reserve price. The application further seeks to set aside the sale in execution of Nkwane’s home for a value less than 10% of its market value.

In 2011, Nkwane and his wife obtained a home loan from Standard Bank for the value of R380 000 and bought a house in Ga-Rankuwa, North West. For a period of two years, Nkwane religiously paid his monthly bond installment. After separating from his wife in 2013, and therefore having to maintain two households, Nkwane fell into financial difficulty and defaulted on his instalments.

He immediately alerted Standard Bank to his financial struggles. The bank then offered to assist him with restructuring his debt for a period of six months. However, at the end of the programme and with the sudden loss of his employment, Nkwane was still not in a financial position to satisfy his monthly obligations to the bank. As a result, Standard Bank repossessed his home.

In October 2015, Nkwane’s house was sold in execution for R40 000 without reserve, where the market value of the property was at R380 000. Consequently, with his house sold for such an extremely low amount, Nkwane is left without a home and paralysed by the considerable outstanding debt to the bank, which he laments the likelihood of ever extinguishing within his lifetime.

Although there are legislative provisions in place to govern sales in execution, Rule 46 of the Uniform Rules of Court, and Rule 43 of the Magistrate’s Court Rules, allow for the property of the judgement debtor to be sold in execution to the highest bidder without a reserve price, and most alarmingly even if the debtor’s property is his or her primary residence.

This gap in the law has yielded harmful and absurd results, more often to the prejudice of the debtor. Intervention then becomes an imperative when formal compliance with the rules is not enough to ensure the rights of the debtor and creditor are fairly determined and substantially protected in the absence of a reserve price.

In the application before the high court, Nkwane argues that his constitutional rights to property and adequate housing are unjustifiably infringed by the arbitrary consequences of selling a property for far less than its worth. There is no rational connection between the purpose behind the repossession of the property, the subsequent sale thereof and the outcome of the sale. It can scarcely be submitted that the R40 000 did more than merely satisfy the bank’s legal and/or transfer costs – there was no beneficial outcome gained or recovery of debt by Standard Bank in selling Nkwane’s home. It is further argued that the lack of substantive judicial oversight over this process compromises his right to access a court of law and have his matter adjudicated fairly.

In comparison with other jurisdictions, South Africa has one of the highest percentages of defaulters losing their homes per year. It would therefore be a travesty should the current laws and procedures relating to sales in execution remain unaltered, in particular when with effect they unduly harm judgement debtors and arbitrarily deprive them of their constitutional rights and protections.

*Mbalenhle Budaza is a candidate attorney at Lawyers for Human Rights.