LHR, together with many legal NGOs, 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 have led to substantial consequences for the judgment debtor, including those with constitutional implications.
With great anticipation, LHR is pleased to announce that on 6 May 2016 Mr. Given Jua Nkwane, represented by LHR’s Land and Housing Programme, has launched an application before the High Court of South Africa, Gauteng Division, Pretoria, which 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 his home for a value less than 10% of its market value.
Background
In 2011, Mr. Nkwane and his wife obtained a home loan from Standard Bank for the value of R380 000.00 and bought a house in Ga-Rankuwa, North West. For a period of two years, Mr. Nkwane religiously paid his monthly bond instalments. After separating from his wife in 2013, and therefore having to maintain two households, Mr. Nkwane fell into financial difficulty and defaulted on his instalments.
Mr. Nkwane immediately alerted Standard Bank to his financial struggles, which then offered to assist him with restructuring his debt for a period of 6 months. However, at the end of the programme and with the sudden loss of his employment, Mr. 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, Mr. Nkwane’s house was sold in execution for R40 000.00 without reserve, where the market value of the property was at R380 000.00. Consequently, with his house sold for such an extremely low amount, Mr. Nkwane is left without a home and paralyzed by the considerable outstanding debt to the Bank, which he laments the unlikelihood of ever extinguishing within his lifetime
Judgment debtor held hostage by Uniform Rules of Court
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 Magistrates’ Court Rules, allow for the property of the judgment 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 both harmful and absurd results, more often to the prejudice of the judgment debtor. Intervention then becomes an imperative when formal compliance with the rules is not enough to ensure that the rights of the judgment debtor and creditor are fairly determined and substantially protected in the absence of a reserve price.
In the application before the High Court of South Africa, Mr. 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 000.00 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 Mr. Nkwane’s home. It is further argued that the lack of substantive judicial oversight over this process compromises Mr. Nkwane’s 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 annum. 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 judgment debtors and arbitrarily deprives them of their constitutional rights and protections.