IEASA National - News

Appeal Court rules that Banks may attach and sell homes to recover debts   Article Date :17 Jan 2006 Banks given the green light for sales in execution of defaulted payers' homes. Commercial banks achieved a victory in their continued struggle against bond payment defaulters. In a unanimous ruling by the five appeal court judges, who pronounced this to be a test case, the banks were given the green light for sales in execution of defaulted payers' homes. This brings to a close many months of confusion and legal uncertainty about the constitutional validity of such sales in execution for an industry in which the value of registered mortgage bonds exceeds R500 billion in any given year. This victory for Standard Bank follows a previous ruling by the Rand Supreme Court which put an end to such sales in execution, because it was claimed that the entire process was unconstitutional. The Supreme Court had made this ruling after the constitutional court had declared a similar process in magistrate' courts as unconstitutional. The constitutional court had ruled that in applications for sale in execution of any person's house, the magistrate should first do a thorough investigation to ensure that the home owner's constitutional right to adequate housing is not violated. However, appeal court judges E Cameron, R Nugent, C Howie, B Jafta and D Mlambo yesterday ruled that the Supreme Court judge had misinterpreted the constitutional court ruling. The constitutional court case related only to the poorest of the poor - people who lived in RDP houses, bought using government subsidies, who were in danger of losing their homes because of ridiculously tiny amounts of unpaid debt. For these people, their homes are their only places of shelter, and if it were sold, they would have no further access to "adequate housing". None of these considerations apply to normal mortgage bonds, however. The judges ruled that the constitution does not guarantee all housing - it guarantees "adequate housing". Why can't owners of expensive houses not simply move into cheaper houses, if they are unable to keep up their mortgage payments? "After all, you can't compare a person's luxury house in the suburb or his holiday home with the RDP housing of the poor." One should also keep in mind that since mortgage bond arrangements are valid contracts signed by home owners, the money advanced by the bank is closely tied to the house for which this money is borrowed. According to the judges' decision, therefore, banks can still apply for rulings against defaulters of mortgage bonds, just as they had done for many decades past. For defaulters who are unable to pay, banks can still, as in the past, apply for sales in execution, and these applications can still, as in the past, be approved or denied. The only new requirement is that the bank must now include a note in the subpoena informing the defaulter that he would need to supply sufficient evidence if he were to submit that his constitutional right to proper housing would be violated. Philip de Bruin CLICK HERE TO RETURN TO THE MAIN NEWS PAGE