Creating sufficient and adequate safeguards in the processes regulating the sale in execution of residential property

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Picture: Nokuthula Mbatha/African News Agency (ANA)

The Constitution of South Africa provides for justiciable socio-economic rights. The right of access to adequate housing is one of the rights guaranteed in the Bill of Rights in section 26 of the Constitution. The Constitutional Court in Jaftha v Schoeman and Others, Van Rooyen v Stoltz and Others 2005 (2) SA 140 (CC) stated the importance of the right of access to adequate housing in the following terms:

“Section 26 must be seen as making that decisive break from the past. It emphasises the importance of adequate housing and in particular security of tenure in our new constitutional democracy. The indignity suffered as a result of evictions from homes, forced removals and the relocation to land often wholly inadequate for housing needs has to be replaced with a system in which the state must strive to provide access to adequate housing for all and, where that exists, refrain from permitting people to be removed unless it can be justified.”

However, as was noted by the Court in Absa Bank Limited v Mokebe et al 2018 (6) SA 492 (GJ), “[i]t is an economic reality that most citizens who acquire immovable property are unable to afford to pay the cash price of such property due to the marked difference in property prices and the wealth, or lack thereof, of ordinary citizens.” Thus, a mortgage bond or home loan is a mechanism geared towards assisting people to acquire property. The mortgage bond system, as the court has noted, constitutes “an indispensable tool for spreading home ownership.” It enables people who cannot immediately afford to purchase a home to secure a home loan to finance the purchase of a home. It is also a reality of life that people fall into economic and financial hardship and default on their repayment agreements. If this happens there are rights vested on the lender – who invariably in most cases is a bank – to execute upon the assets of the borrower. However, where the asset to be executed upon is a house which is the primary residence of the borrower, the court has judicial oversight to ensure that such execution is in accordance with the law.

Although it is trite that the right to access housing is an important socio-economic right which guarantees the right to human dignity, adequate and sufficient processes regulating the sale in execution of residential property were until recently ineffectual. This created a scenario where unscrupulous judgment creditors rode roughshod over poor judgment debtors. If this trend had been left unchecked, it had the potential to further drive the ever widening chasm of inequality in the country.

In 2016, the Rules Board for Courts of Law embarked on a process to amend the Uniform Rules of High Court and Magistrates Court of South Africa. This process was informed by the need to develop the law to be in sync with the constitutional imperatives enunciated in the jurisprudence of the Constitutional Court. The South African Human Rights Commission (“Commission”) participated in that process and advocated for the Rules Board for Courts of Law to amend the regime of sales in executions. The Commission recommended that the Uniform Rules be amended to provide for a court, in exercising its judicial oversight function, to set a reserve price at which bidding must begin at sales in execution of a primary residence.

In 2017, the Uniform Rules were accordingly amended by the Rules Board to provide that the court may set a reserve price in the exercise of its judicial function. The Commission welcomed the amendments to the Uniform Rules and hoped that the amendments in the Uniform Rules will be the much needed safety net, properly insulating judgment debtors from abuse while simultaneously protecting the commercial interests of judgment creditors during sales in execution of immovable residential property.

In a country, such as ours, where the cost of housing is untenable with low income groups not able to access bonded houses, and estimates revealing that a lot of households in South Africa are highly indebted impairing their ability to access financing, the sale in execution of houses at unconscionable amounts causes untold socio-economic hardships on a significant segment of our population. Indeed, as the court has noted, execution on a residential immovable property is not “in itself an odious thing, but is part and parcel of economic life”, and is tied to the social value of enforcing contracts and requiring the discharge of debts. Put differently, the ability to execute on a residential immovable property ensures that the credit market churns and incentivises financiers to advance loans to enable people to purchase immovable property. However, it cannot be gainsaid that the right to execute has been subject to abuse at times. When such abuses occur, the insidious effect thereof is that home ownership and security of tenure is diminished.

The two separate and recent High Court judgments, namely, Absa Bank Ltd v Mokebe et al and Standard Bank of South Africa Limited v Hendricks et al in the Gauteng and Western Cape Divisions, respectively indicate that courts are willing to strike a constitutionally compliant delicate balance between the interests of judgment debtors to home ownership and security of tenure and the ability of creditors to sell the properties. The cumulative effect of these two judgments by the respective High Courts is, that the court will set a reserve price, save in exceptional circumstances. 

This means that although it is not mandatory for a court to set a reserve price, in terms of the Uniform Rules, the court has adopted a posture to set a reserve price as a matter of course. The court has also further clarified that sheriffs should personally serve summons on a defaulting bank customer, at home or their place of work. Thus, past practices, such as, merely affixing a summons to a door or placing it in a post box which in the past judges found to be an acceptable form of personal service is now unacceptable.

This posture of judicial oversight adopted by the court is commendable in that it will curb such inequities and practices as evidenced  in  some cases such as Nkwane, where Mr Nkwane’s house was sold in execution for R40 000.00 without a reserve price when  the market value of the property in question was R380 000.00. It is unconscionable and sad to hear of such instances which are still prevalent after twenty-five years into our constitutional democracy, where there are attempts to sell these homes at a fraction of their market value. This is not only prejudicial to the judgment debtor, but it is also an affront to human dignity. It also goes against the grain and ethos of our constitutional vision, which is to improve the quality of life of everyone.

 

Advocate Mohamed Shafie Ameermia is a Commissioner at the South African Human Rights Commission who champions the rights to housing, water and sanitation at the Commission.