Court papers shine a light on property

MARKET IS HEALTHY: SALES IN EXECUTION IN FOCUS

Eight million properties worth more than R5 trillion.

accounts across all banks, of which 4.4% were in default.

Of these accounts in default, a third had entered the sale in execution process.

Basa says about two-thirds of scheduled sales in execution were cancelled before the auction date.

Following the issue of a directive by Gauteng Judge President Dunstan Mlambo, a full bench of the High Court in Johannesburg will hear argument later this month from several banks as well as legal and human rights organisations on the issue of home repossessions.

It will focus on in what circumstances judges should set reserve prices for homes sold in execution at sheriffs’ auctions.

Until recently, no reserve prices were required on homes sold at auction, resulting in some going for as little as R10 to be on-sold for substantial profits by speculators. This left the defaulting client with a huge residual debt to the bank.

Court rules were changed last year to allow for reserve prices, resulting in some judges applying the new rules and others not. It is this inconsistency that the court will address.

Others, such as the Lungelo Lethu Human Rights Foundation, want the courts to waive reserve prices only in exceptional circumstances.

It argues the constitutional rights to dignity, justice and property must be given more weight by the courts. The foundation cites several cases challenging banks’ claims to use legal action as a last resort.

Mbuyiselo Khumalo, head of retail home loans at Absa, in an affidavit before the court says Absa cancelled 70% of sales in execution over the last two years.

The average time between the start of legal proceedings and sale in execution is 33 months, versus the industry standard of 27 months.

The accompanying graphic from Lightstone Property appears to support this claim.

Only a small fraction of repossessed homes end up going on auction, for a variety of reasons: defaulting borrowers settle their arrears, sell their homes privately or challenge the sale in execution in the courts, among others.

Auction sales have declined markedly in recent years, possibly because of the adverse publicity of properties being sold at auction for as little as R10, and then onsold for huge profits.

Standard Bank argues in an affidavit that without the possibility of timeous execution against assets, security is futile: “And without security, the business of money lending becomes infinitely more risky and therefore more expensive for the public.”