On 28 November 2018 the Constitutional Court (CC) upheld an appeal against an order of the Cape Town High Court (HC). The HC upheld the cancellation of Instalment Sale Agreements (ISAs), concluded between applicants and the Cape Town Community Housing Company (Pty) Limited (CTCHC), by the CTCHC and subsequently by the Registrar of Deeds, and the ultimate sale of those properties to the S & N Trust (Trust).
In 1998, the City of Cape Town established a subsidised housing programme, administered by the CTCHC. Between 2000 and 2001, the applicants who were 12 purchasers amongst more than 2000, entered into the ISAs for subsidised houses in Mitchell’s Plain with the CTCHC. The ISAs required the CTCHC to record the ISAs and the applicants to pay monthly instalments for four years with their state subsidy being the final instalment. The applicants paid irregularly because of unexpected instalment increases, inferior quality of building standards, the CTCHC’s failure to fix the defects, among other reasons. The CTCHC also failed to record the ISAs, as required by s.26 of the Alienation of Land Act 68 of 1981 (ALA), which prohibits it from receiving payments until the ISAs are recorded. Despite this, it continued to receive payments from applicants.
The CTCHC only recorded the ISAs in April 2014, over ten years after their conclusion. Within a month thereafter, the CTCHC issued notices in terms of s.129(1) of the National Credit Act (NCA), stating that the applicants were in arrears which must be remedied within 20 days, failing which the ISAs would be cancelled. The applicants failed to pay. On 23 June 2014, the CTCHC sold the applicants’ homes to the Trust. The CTCHC cancelled the ISAs’ recordal on 4 May 2015 and transferred the properties to the Trust on 5 May 2015. The Trust then instituted eviction proceedings against 5 applicants in the Mitchell’s Plain Magistrates Court and expressed an intention to evict the others.
The applicants instituted proceedings in the HC, challenging the lawfulness of the CTCHC’s cancellation of the ISAs and the cancellation of the recordal by the Registrar of Deeds, and sought that the sale of their properties to the Trust be declared void. The HC held that s.26 of the ALA prevents a creditor from receiving consideration until recording the ISAs; but such amounts nonetheless become due regardless. Therefore, the CTCHC’s cancellation of the ISAs was valid as the applicants were in arrears at the time of recordal. The HC also held that the CTCHC fulfilled its obligations under s.129(1) of the NCA by providing evidence of delivery of notices to the applicants; and that, for s.129(1), notices need not state the amount of the arrears, but rather applicants can themselves determine the amount – or otherwise, if uncertain, consult with CTCHC to determine the amount. The HC thus dismissed the application with costs and refused leave to appeal, as did the Supreme Court of Appeal.
The applicants applied to the CC for leave to appeal against the HC’s judgment, arguing that the matter impacts on their right to housing. They submitted that, in terms of s.26 of the ALA, they could only default after the CTCHC recorded the ISAs. They also submitted that the proper interpretation of s.129 of the NCA is that a credit provider must state the arrear amount owing in a notice to a consumer.
The CTCHC, supporting the HC’s judgment, submitted that the payments are due retroactively where an ISA is recorded late. Regarding the s.129(1) notices, CTCHC submitted that they contained the arrear amounts but regardless, s.129(1) does not require the inclusion thereof. CTCHC submitted that the cancellation of ISAs was thus valid, and that s.129(1) notices were sufficient.
The Women’s Legal Centre Trust (WLC) was admitted as amicus curiae. It submitted that s.129 of the NCA must be interpreted in line with the right to housing in s.26 of the Constitution, and regard must be had for how the cancellation of the ISAs would adversely impact women and their right to access housing.
In a unanimous judgment by Mhlantla J, the CC held that s.20 read with s.26 of the ALA provides that ISA payments are not due and payable until recorded with the Registrar of Deeds, and that the seller is statutorily barred from receiving payments until then. Therefore, the applicants were not in arrears as contended by the CTCHC and no fault could be imputed to them during the period when the ISAs were unrecorded.
The CC also held that s.19 of the ALA and s.129 of the NCA differ in purpose. S.19 provides steps a seller must take before cancelling an ISA, whereas a s.129 notice is ordinarily served after a s.19 notice. Thus the s.129 notice served on the applicants was premature when the CTCHC claimed cancellation as it had not satisfied the requirements of the s.19 ALA notice. Since CTCHC took more than ten years to record the ISAs, it should have advised the applicants of the recordal and given them time to pay the instalments. The CC, for clarification purposes, also decided that the phrase “draw the default to the notice of” in s.129(1) means that the amount owed must be clear and specified in the notice.
In its order, the CC upheld the appeal and set aside the HC order, the cancellation of the ISAs, and the cancellation of the recordal of the ISAs by the Registrar of Deeds.
The LRC and its clients have welcomed this important judgment which confirms an earlier Cape decision as to when payments need to be made in ISA – and now clearly sets out what is required of a seller if and when payments are not made timeously. The procedures and the necessity to clearly state the amount owed lends far greater protection to the most vulnerable when purchasing probably the only house that they can ever purchase with the help of a government housing subsidy.
Lawyers: Steve Kahanovitz, Chwayita Mathiso; Ria Matsala and Michael Bishop
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