Press Release: High Court orders setting of reserve price for sales in execution

For Immediate Release: 12 September 2018

Johannesburg High Court orders the setting of a reserve price in sales in execution affecting immovable property which is a primary residence.

Today, 12 September 2018, the Johannesburg High Court delivered judgment in the matter between ABSA Bank Limited and D K Mokebe and three others. This case is related to the court’s practice in foreclosures and sales in execution. The LRC represented the Lungelo Lethu Human Rights Foundation in making submissions to the court.

On 2 May 2018, the Judge President of the High Court issued a directive inviting potential amici curiae to intervene in four unopposed matters referred to the full bench.  The amici were asked to make submissions on two main issues. The first involved a technical point about whether or not the court could grant a money judgment arising from default on a home loan to a bank without also declaring the bonded home executable; and the second required the amici to address the court on the circumstances under which a court should set a reserve price in sales in execution.

The LRC represented the Lungelo Lethu Human Rights Foundation in making submissions based on their experiences as an organisation involved in South Africa’s anti-eviction movement. The organisation is led by King Sibiya, an activist who has been assisting individuals and communities faced with evictions since the apartheid era.

The LLHRF assisted the court by setting out the lived experiences of its members, mainly poor people disadvantaged by the apartheid system, who had invested large proportions of their earnings and life savings into buying houses which were sold on auction in sales in execution for trivial amounts of money, sometimes as low as R10. This meant that defaulting on a bond payment effectively thrust an otherwise middle income family into poverty.

The LLHRF’s submission to the court was primarily concerned with the setting of a reserve price on auction. It argued that the failure to set a reserve price in sales in execution caused undue hardship to debtors and that (in response to the position taken by the applicant banks) there was no discernible economic or other reason to do so. On this issue, the court accepted LLHRF’s main points and held that a reserve price should be set by a court in matters where execution is granted against immovable property used as the debtor’s primary residence, except in extraordinary circumstances.

The court held that the setting of a reserve price should be done by a court once it was apprised of all the relevant circumstances and that it is the responsibility of the parties in an application for execution to place this information before the court, so as not to allow the matter to be resolved without the debtor’s and creditor’s input.

This procedure, the court reasoned, will allow for the infusion of justice and equity into sales in execution and bring the court’s practice into conformity with the right to adequate housing, as found in section 26(3) of the Constitution, by allowing for enhanced judicial oversight in execution proceedings. The court also recognised that immovable property often forms a debtor’s primary investment and that the setting of a reserve price would mitigate against the debtor’s investment being completely lost.

We are hopeful that the setting of reserve prices in sales in execution will stop the practice of homes being sold on auction for next-to-nothing and create the possibility of a debtor recovering some money from the sale.

King Sibiya and clients of LLHRF expressed their satisfaction at the ruling on the peremptory setting of a reserve price. They indicated that this is major victory in the struggle to ensure that rights of debtors to housing are respected and promoted in all cases.

ENDS