Homes can’t be sold for a song
REPOSSESSIONS: A RESERVE PRICE MUST BE SET
High court rules a reserve price must be set at repossession auctions.
Auctions were rife with bid-rigging syndicates. Dispossessed homeowners were left with nothing.
pressure on the defaulting client to catch up on arrears. The court took a different view and wants the matters heard together.
Court rules were recently changed to allow for judges to set reserve prices. However, some judges applied the new rules, others did not. This case was about setting a standard across the entire court.
Advocate Douglas Shaw says the ruling is a major victory for bank clients: “It is unbelievable that the banks would continue to argue for the right to sell repossessed properties without a reserve price. This ruling changes that by forcing judges to impose reserve prices except in exceptional circumstances.
“A second major victory for mortgage bond holders is that once you pay off your arrears, your mortgage contract automatically revives, and this is not something that is at the discretion of the banks.”
In its court papers, Lungelo Lethu Human Rights Foundation, which defends people against eviction, says in hundreds of cases it has seen the practice of allowing properties to be sold without a reserve price meant these auctions became nesting grounds for bid-rigging syndicates, which could pick up properties for a pittance and then on-sell them for massive profits. Once the lawyers had taken their share of the spoils, nothing was left for the dispossessed homeowner.
The court ruled the power to reinstate a credit agreement lies with the consumer, not the credit provider, once the arrears and reasonable costs have been settled. Foundation co-founder King Sibiya says the effect of the ruling will be to make it extremely difficult for banks to evict clients from their primary residences. Eviction is the inevitable consequence of a sale-in-execution order. He says over 100 000 families have been evicted from their homes since the constitution came into effect.
The court also dismissed the banks’ claims that by setting a reserve price, there would be less interest from prospective buyers.
Though the ruling applies to the Johannesburg high court, other courts will be under pressure to apply the same standards.
The court made no ruling on what level reserve prices should be set.
Once you pay off arrears, your contract revives