Repos: judges grill banks
RESERVE PRICES: ‘A MATTER FOR COURTS TO DECIDE’
Banks’ claim that sales in execution only used as a last resort is challenged by rights and legal bodies.
Afull bench of the Johannesburg High Court sat last week to deliberate how and when reserve prices should be applied before repossessed homes are sold at sheriffs’ auctions.
For several legal and human rights groups admitted as friends of the court, this is a pivotal case to decide whether the banks’ right to recover a loan supersedes Constitutional protections to dignity and property.
Things didn’t go well for the banks, who were berated by the judges for arriving in court without proper paperwork, expecting the courts to grant judgments against clients who were behind on their mortgage payments.
This follows a number of cases where homes were repossessed by banks for as little as R10 and then on-sold at auction for a substantial profit, leaving the defaulting client with a shortfall to the bank.
The judges wanted to know why the banks habitually arrived in court expecting a sale in execution judgment (allowing the property to be sold at auction) without sufficient information to allow the courts to make an informed decision. The banks have repeatedly insisted they apply for execution orders only as a last resort.
Gauteng Judge President Dunstan Mlambo ordered a full bench of the High Court to decide on four cases involving Standard Bank and Absa. Three judges were asked to decide on several issues, including the setting of reserve prices to avoid homes being sold at auction for a pittance, and whether banks should be awarded a money judgment at the same time as a sale in execution order.
The banks argued that reserve prices should only be set by judges in exceptional circumstances, and want the court to split the awarding of the money judgment from the sale in execution order.
Alfred Cockrell, representing Legal Resources Centre and Lungelo Lethu Human Rights Foundation (LLHRF), argued that the default position of the courts should be to set a reserve price because not to do so would be detrimental to debtors. The banks’ sole interest was to recover their outstanding debt and no more, hence it should be up to the courts – not the banks – to determine when and how the reserve price should be set.
The LLHRF challenged the banks’ claim that sale in execution was used only as a last resort, and only after exhaustive efforts were made to reach an accommodation with clients in arrears. LLHRF cited several cases where homeowners were evicted without being notified that legal action had been taken against them. It argues that the setting of a reserve price is a key safeguard against a debtor’s investment being completely lost since experience shows once a home is sold at auction, there’s little to nothing left for the dispossessed homeowner.
Judgment was reserved.