Changes to court rules will stop auction sales at ridiculous prices

Posted 31 January 2014 Written by Fin24

Proposed changes to court rules will stop banks from selling repossessed houses at ridiculous prices. This is in response to court judgments where the constitutional right to adequate housing has been infringed.  

Proposed changes in court rules, that will make it impossible for creditors to sell the homes of defaulters for a pittance, would greatly alleviate the suffering of deeply indebted SA consumers, said Neil Roets, CEO of Debt Rescue.

Roets said it had become common practice, especially for banks, to sell off property of credit defaulters at auction, often for “ridiculous” prices.

“The likely change in these rules could see a reserve price being set for the sale in execution of defaulting debtors’ homes. This will avoid the consumers being left without a home and with little relief for their outstanding debt,” said Roets.

The idea behind exploring the amendment of Uniform Rule 46 for the high courts and Rule 43 of the Magistrate’s Courts Rules is to protect debtors in instances where their homes are sold for an extremely low amount and they still find themselves owing money to their creditors.

This week, the Rules Board for Courts of Law invited comments on the proposed amendment.

The board says that, assuming there is support for the proposal, it would mean that a property that failed to reach its reserve price would not be sold, thus giving a debtor some protection.

The deadline for submissions is February 28.

The secretary to the rules board, Raj Daya, said courts had shown concern in cases before them about houses that were sold in execution for a fraction of their value. 

Daya said it was important to ask if the forced sales in execution were a justifiable way of satisfying judgment creditors and protecting debtors.

The Banking Association of SA said it had not received input from its members.

The association’s legal committee chairperson, Nicky Lala-Mohan, said the proposed amendment was a response to court judgments that set parameters for what courts must do to ensure they exercise oversight when the constitutional right to access to adequate housing is implicated. 

Lala-Mohan said the argument for setting reserve prices was to protect the defaulter from being held liable for a large debt to the creditor after the property had been sold for a small amount.


Although the banks could decide to buy a property rather than allow it to be sold for a low price, they were under no obligation to do so. 

Roets said the proposed amendments were a great idea. He said sales in execution without a reserve price were vulnerable to collusion between players in the industry.

This could result in the sale of houses at rock-bottom prices to the prejudice of the debtor.

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