Sales in ex­e­cu­tion laws un­fair

Par­ties with an in­ter­est in the out­come of the sale should ap­point an auc­tion­eer

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - JENNY SMIT

IN THIS era of con­sumer pro­tec­tion, it is ironic that South African law con­tin­ues to al­low res­i­den­tial and com­mer­cial prop­erty to be sold at rock-bot­tom prices if there is a civil judg­ment against the owner.

No one ben­e­fits ex­cept the “sea­soned bar­gain hunters” who at­tend the auc­tions where these prop­er­ties go un­der the ham­mer.

It’s cu­ri­ous that a pro­ce­dure as anachro­nis­tic as that re­lat­ing to the sale and ex­e­cu­tion of im­mov­able prop­erty still ex­ists.

Cur­rently, only sher­iffs of the High Court may con­duct sales in ex­e­cu­tion. This lim­its the debtor’s abil­ity to have a hand in in­creas­ing the po­ten­tial value to be re­alised. An­other party to suf­fer the mis­for­tune of this reg­u­la­tion is the ex­e­cu­tion cred­i­tor. Usu­ally, the money raised is not enough to cover the judg­ment debt in full.

The sher­iffs-only rule for con­duct­ing sales of ex­e­cu­tion, usu­ally by auc­tion, has sev­eral price-in­hibit­ing ef­fects.

One is that notices of sale are usu­ally pub­lished in the clas­si­fieds sec­tion of lo­cal news­pa­pers and typ­i­cally say al­most noth­ing about the na­ture, sit­u­a­tion or ap­pear­ance of the prop­erty concerned.

A very limited au­di­ence hunts for prop­er­ties in this mar­ket. The reg­u­lar at­ten­dees at sher­iff’s auc­tions are gen­er­ally sea­soned bar­gain hunters who have been known to col­lude with each other to ob­tain prop­er­ties at even lower val­ues. This in­hibits the ex­tent to which the price can be driven up and is an anti-com­pet­i­tive prac­tice which, be­cause of the lack of pop­u­lar in­ter­est and at­ten­dance, is be­ing al­lowed to flour­ish.

An­other fac­tor that keeps auc­tion

There is a con­sti­tu­tional ne­ces­sity for ju­di­cial over­sight in cir­cum­stances where a per­son’s right to hous­ing could be in­ter­fered with

prices down is that sher­iffs have nei­ther the skills nor the in­cen­tives to pur­sue higher prices.

In terms of the tar­iff, the sher­iff of the high court is not en­ti­tled to claim more than R8 050 ex­clud­ing Val­ueAdded Tax (VAT) from any one sale, re­gard­less of the fi­nal price.

Hav­ing at­tended sev­eral sales in ex­e­cu­tion, it is ap­par­ent that many sher­iffs do not have the skills of pro­fes­sional auc­tion­eers. Fre­quently, this al­lows bid­ders to bid in in­cre­ments of sin­gle rands, which is lu­di­crous in the con­text of im­mov­able prop­erty.

Be­cause of these short­com­ings, res­i­den­tial and com­mer­cial prop­er­ties are sold in ex­e­cu­tion for far less than their com­mer­cial value. While the sale is ob­vi­ously forced, this in it­self should not be a valid rea­son to pre­vent the debtor or the cred­i­tor from help­ing to re­alise the best pos­si­ble price.

At the very least, the par­ties with an in­ter­est in the out­come of the sales price should be en­ti­tled to ap­point an auc­tion­eer with es­tab­lished net­works of buy­ers, knowl­edge and use of ad­ver­tis­ing spa­ces, as well as ex­per­tise in con­duct­ing auc­tions.

Sales of ex­e­cu­tion of im­mov­able prop­erty are not per­mit­ted when judg­ments are for tri­fling amounts. There is a con­sti­tu­tional ne­ces­sity for ju­di­cial over­sight in cir­cum­stances where a per­son’s right to hous­ing could be in­ter­fered with.

Yet an­other anom­aly is that judg­ments ob­tained in the Mag­is­trate’s Court al­low for sales of ex­e­cu­tion to be con­ducted by the sher­iff or an auc­tion­eer, whereas this is not per­mis­si­ble for High Court judg­ments.

This flies in the face of the prin­ci­ple that “ev­ery­one is equal be­fore the law and has the right to equal pro­tec­tion and ben­e­fit of the law” as con­tained in the bill of rights.

Clearly, the reg­u­la­tions need to be re­vised and syn­chro­nised.

Writ­ten con­cerns about the reg­u­la­tions were raised with the Rules Board for Courts of Law in May 2009. The Rules Board has yet to re­solve whether or not the reg­u­la­tions should be amended. There is a deaf­en­ing si­lence around the un­fair­ness of the reg­u­la­tions. It can per­haps only be at­trib­uted to the lack of fund­ing avail­able to such un­for­tu­nate in­di­vid­u­als who have had their last re­main­ing as­sets of value taken from them, for less than what they were worth.

Pic­ture: MORGUEFILE

The par­ties with an in­ter­est in the out­come of the sales price should be en­ti­tled to ap­point an auc­tion­eer with es­tab­lished net­works of buy­ers, knowl­edge and use of ad­ver­tis­ing spa­ces, as well as ex­per­tise in con­duct­ing auc­tions It is ap­par­ent that...

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