Court rules that banks can sell your house for next to nothing – TimesLIVE

When a person obtains a home loan from the bank, a mortgage bond is usually registered over their home as security by the bank. The bank will use this to recover any debt should the debtor default on their home loan repayments, in which event the debtor may lose their home.

This has raised the question of whether the bank should be allowed to sell the debtor’s home for an amount that is at least equivalent to the outstanding debt or to sell the property at any price.

This was the subject of a Pretoria High Court judgment (PDF, 12MB) handed down on 22 March 2018. The Court dismissed a challenge against the constitutionality of certain rules of court which enable the home of a debtor to be sold without a reserve price.

Background

Given Nkwane obtained a home loan from Standard Bank in September 2011 for an amount of R380,000 and had a mortgage bond registered in favour of the bank. Nkwane defaulted on his home loan in February 2012. For the rest of that year he continued to default and only managed to make some of his payments intermittently.

In January 2013, he applied for debt review, but this was unsuccessful. In March 2013, he applied for rehabilitation (this would enable him to pay substantially less for his monthly instalment). This application was approved by the bank.

However, by July 2014, Nkwane informed the bank that he could no longer afford the instalments and wanted to sell his property. The bank informed him that he must use the bank’s “Easy Sell” mandate to do this (this Standard Bank’s programme to help distressed home owners sell their properties). Nkwane was unable to do this however, because his wife refused to sign the “Easy Sell” mandate.

The bank then instituted legal proceedings against Nkwane and successfully obtained a warrant of execution against Nkwane’s home. A warrant of execution enables a creditor, such as a bank, to attach a person’s property and sell it.

At the sale of execution, the house was sold for R40,000. At the time of the sale the insurable value of the house was nearly R500,000.