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Home repossession mess in Gauteng gets its day in court

Lawyers defending clients against the banks say the Gauteng Judge President’s recent directive can be used to freeze home repossessions and evictions.

Gauteng Judge President Dunstan Mlambo wants a full bench of the High Court to sort out the mess of inconsistent judgments over home repossession cases.

In a recent practice directive, Mlambo says he also wants a full bench of the court to decide on the setting of reserve prices when properties are sold at sheriffs’ auctions. Until recently, repossessed properties were sold at auction without reserve prices, resulting in some homes being sold for as little as R10. A recent change in High Court rules now allows judges to set reserve prices. But this has also caused confusion. Some judges have dismissed banks’ applications to declare properties “specially executable” without a reserve price, while others have done the opposite.

In April, former public protector Thuli Madonsela highlighted the injustice of selling properties for a fraction of their market worth, after the Pretoria High Court decided it was legal for Standard Bank to sell a R470 000 house for R40 000 to recover a mortgage debt.

She tweeted: “With due respect to the court, I consider this judgment to be grossly unjust and inequitable. It is a setback regarding social justice. Should this matter be taken on appeal, it would be great if all those concerned about social justice join in as amicus curae (friend of the court)”.

Cases such as this have embarrassed the banks and the legal profession. Following Madonsela’s advice, the Lungelo Lethu Human Rights Foundation (LLHRF), represented by lawyers at the Legal Resources Centre, has been joined to the proceedings as a friend of the court, and will be making written and oral submissions.

LLHRF president King Sibiya sees the directive from the Judge President as a major victory against creditor abuse: “It effectively amounts to a freeze on evictions in Gauteng, which is exactly what we have been campaigning for all these years. There are more humane ways for banks to recover debts than throwing families onto the street. We say the Constitutional rights to dignity, property and justice must be given due weight by courts when hearing cases involving the recovery of debts by banks.”

Sibiya is one of the architects of the R60 billion class action suit being brought against the major lending banks for selling repossessed properties below market price.

“There is an epidemic of evictions in the townships in recent years, with gross abuse of court procedure. We recently surveyed several hundred evictees and more than half were not properly notified by the banks of their intention to bring legal action. How can you defend yourself when you do not know the bank is bringing legal action? It is time for the courts to sort out these inconsistent judgments and abuse of court processes by creditors.”

Alexandra Ashton, an attorney with the Legal Resources Centre, says the Judge President’s directive can’t be used to stop the sale if an order for execution has already been given. “But in cases which are pending before the court in which banks have applied for sale in execution, the directive is a reason for the matter to be postponed until the full court has given its judgment.”

Legal advisor to the LLHRF, Leonard Benjamin, argues that a special tribunal needs to be set up to hear home repossession cases. “The adversarial nature of the court process and the winner-take-all result – usually in favour of the banks – is not always in the best interests of justice. In some of the cases we have seen, the banks are getting away with murder, claiming legal and administration fees to which they are not entitled, and often incorrectly calculating interest and outstanding loan amounts. The courts are not the right forum for this. We need a specialised forum where these cases can be aired in a spirit of finding resolution and allowing debtors time to recover from a financial setbacks without losing their homes.”

Moneyweb approached Standard Bank for comment on the directive. Ross Linstrom, spokesman for the bank, replied: “As you are aware the matter is currently sub judicae and we therefore cannot comment on the questions that you have posed. Suffice for us to say that Standard Bank has duly served and filed its papers and we await the hearing of the matter.”

The Judge President’s directive references four cases involving Absa and Standard Bank to be decided by the High Court. It highlights inconsistencies in judgments by the court, particularly where banks apply for default judgments against debtors and at the same time ask the courts to declare properties executable (authorising them to be sold at sheriffs’ auctions). For banks, this expedites matters and allows them to auction properties without having to approach the court twice: once for a money judgment, and again to declare the property executable.

Mlambo’s directive says the practice of the court is to postpone applications such as these to allow the debtor time to catch up on the arrears. “If upon the postponed date the arrears will have been brought up, the agreement would be reinstated (in terms of the National Credit Act) and the debtor will not lose her home,” says the directive.

Divergent practices have entered the court system over the years. Mlambo wants the court to decide what, if any, discretion judges should have in granting judgments for the full accelerated balances on mortgage debts. Most mortgage bonds have “acceleration clauses” which allows banks to call up the full outstanding loan even though the debtor may only be three or four months in arrears.

“A person’s home is their most important asset and it should not be possible to have it so easily removed from them,” says Benjamin. “If a person is three months in arrears, the law as it stands allows for the bank to attach movables, such as furniture and sell these items to catch up on arrears. Why go straight for the house as the first option?

“This directive is a vitally important step in establishing uniformity in the way courts treat home repossession cases and, hopefully, to bring greater justice and respect for the Constitution to such cases.”

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Let’s understand the situation. The bank is not selling the property om auction. The property does not yet belong to the bank. The bank loaned funds to the owner who has defaulted in the loan. The property is sold on public auction where a representative of the bank will bid up to a certain amount for the bank. Usually to around the outstanding loan. (Depending on the amount the bank is willing to recover on the loan)
When the property is bought at the auction by the bank it ONLY THEN becomes the new owner of the bank. Then that Property in Possession at the bank incurs costs. No bank wants or need that property, it incurs costs and lead to losses.

Remember there is a defaulting loan and no bank can allow a property to be sold for far less than the debt. They will go out of business.

Understood, but there are constitutional rights to borrowers and not prejudicing their right to get fair market value while the bank recoups its borrowings.

Most of the time the bonds have been securitized anyway. Which means that the bank does not have the right to sell the property from under the owners’ feet. Home owners, do your home work Check out this URL or google NEWERA SECURITISATION for more info.

http://www.acts.co.za/news/blog/2015/11/busted-joburg-man-catches-standard-bank-out-over-securitisation-denial

The other side of the coin is that if the owner could not sell the property in time, the bank has not given the bond holder sufficient time to obtain whatever the market value is. This is because the bank officials are in cahoots with each other and engineer these ludricous sales for their own benefit.

Funny how the auctions take place with little or no advertising and when you do arrive at an auction there are a million reasons why you can’t register to bid. I went to one simply to observe the procedure. The highest bid was a just over R100K when a bidder rushed in and bid R300K on the spot and much to the annoyance of the first bidder, won the bid. Said property had a municipal valuation of R900K – go figure.

‘’Be alert. Your country needs you’’
Anonymous
Bank slogans:
• Barclays’ Absa (“Today, tomorrow, together”),
• Nedbank, (“Making things happen”),
• Standard Bank (“Inspired. Motivated. Involved.”)
• FirstRand (How can we help you?)
• Investec (Out the ordinary)
• CAPITEC (“Simplicity is the ultimate sophistication”)

Certain Bankers are legalised crooks methinks, despite slogan like this!

Found many errors on a relatives mortgage statement from ABSA a couple years ago and they could not provide me with a amortisation table to prove their calculations vs mine done on excel (which were correct). The only recourse he had was to go to the court really, ABSA basically said too bad.

I can imagine there have been a lot of repossessions based on incorrect information, they should have the pants sued off them and senior retail banking executives take responsibility if the civil rights groups can find the evidence to support this has been happening.

but exactly what debt have you recovered if you are owed R470k and sell the house for R40K? You only recovered 8% of the debt. Is it not better to relax the term of the loan i.e. extend the term to reduce the repayment so that you can still recover the debt in full. Or help the debtor to find a tenant who can afford pay amount close to the monthly payment and for the debtor to rent a more affordable property. Banks should be more creative in how they deal with this.

There should be an option, if the bank decides NOT to set reserve price, then they should have no further claim against the debtor because it prejudices the debtor to have no home, their home sold for a fraction and still owe the bank. What exactly do you owe the bank for because they took their property back and decided to sell it for song?

A criminal syndicate is in operation, aided and abetted by criminal governments. At least our judiciary, as usual will be the heroes that save the day through justice. And hopefully the criminal media owned by the banks will sing their praises when the rule against the banks, in the same way they sang their praises when they ruled against Zuma.

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