Rules, regulations on repossession
‘Ordinary citizens need protection’
SOUTH Africans mobilised this week over the rules of for repossessing properties. South Africa’s rules (and unsympathetic banks) lead to more than 10 times the percentage of defaulters losing their homes than other countries such as the UK. Over the last year the Rules Board that decides on how repossessions work has issued new proposed rules for comment. But many are saying that they don’t go nearly far enough.
The removal of the bizarre prohibition against reserve prices has been welcomed, but the rules do not address that. Unlike most other countries, properties are mostly sold for less than 50% of their value.
According to Advocate Douglas J Shaw of Debtors Defence who is doing a PhD on the subject of repossession law, “It is good that there can now be reserve prices but we need rules providing that the reserve price is the market price of the property which can then fall gradually in a structured way if the property doesn’t sell. This would also address our highly dysfunctional sheriff auctions system. We cannot leave the reserve price to the bank’s discretion. That would only work in a system where the banks have a conscience. Ordinary citizens need protection.”
Shaw’s new Rule 46A also provides rules for when the bank can sell the property and when it can not. For example, if the person has a new job and can now pay the arrears over a few years, they should not be able to sell (many other countries, notably England, would not let them). Where the property is worth much more than the bond, the banks should not be able to sell until the bond reaches 90% of the property value.
Where the person has money and does not pay then their salary can be attached rather than selling their house which is far more damaging.
What should be done when the banks have caused the financial crisis that has caused the default, as in America? Should they then still have the same rights to ruin their client’s lives?
Shaw’s rule gives the Minister the ability to halt all repossessions for a few years as the Irish government did during their crisis, which was caused entirely by the irresponsible lending of their own banks.
Hundreds of people hearing the news on dedicated banking email lists have mobilised and sent messages to the Rules Board, communicating a very clear message as to where the people of South Africa are on this issue. Readers wanting to support (or oppose) the rules proposed by Advocate Shaw can send their comments to the Rules Board at jbalkishun@justice.gov.za and mmokulubete@justice.gov.za before January 29.