New Foreclosure Ruling sets Reserve Price on Properties Sold in Execution
The issue of land, and immovable property, is and arguably has always been one of South Africa’s most important issues. Adequate housing is one of the most basic human needs and desires, and is so important that it is provided for in the Constitution, which states that “everyone has the right to adequate housing”, and that “no one may be evicted from their home, or have their home demolished, without an order of court made after considering all the relevant circumstances”.
Unfortunately, housing is expensive, and very few people can afford to purchase a home without a loan from a bank or home loan provider. Almost everyone needs a bond. However, in today’s economic climate, it can be easy to fall into arrears with a lender. Many people find their homes being repossessed and sold at sheriff auctions. While in theory this may be a way for the lender to recover the money owed to it, in our law there has historically been no reserve price set at these auctions. This means that no minimum price was set, resulting in properties being sold, in some cases, for as little as R10 or R100.To further add insult to injury to borrowers in this position, the lender would often then claim the shortfall on the bond amount from them.
However, the justice system has weighed in on the topic and on Wednesday 12 September 2018, in the case of ABSA Bank v Mokebe and Others*, a full bench of the South Gauteng High Court ruled that, except in exceptional circumstances, repossessed homes may no longer be sold at auctions without a reserve price being set. This means that any bid on the property must at least equal the reserve price, or else the property would not be sold. In turn, this reduces the shortfall that the borrower would have to cover.
The judgment is likely to set a precedent countrywide and represents a significant victory for consumers. The judgment did not specify what reserve prices would be, but as judicial oversight must be exercised over the repossession of homes, a reserve price must be decided by judges with all relevant facts before the court. Note also that the ruling applies only to primary residences.
*Absa Bank Limited v Mokebe; Absa Bank Limited v Kobe; Absa Bank Limited v Vokwani; Standard Bank of South Africa Limited v Colombick and Another (2018/00612; 2017/48091; 2018/1459; 2017/35579)  ZAGPJHC 485 (12 September 2018)
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