Property law concept. Key from real estate and gavel.
The long-awaited R60 billion class action lawsuit against banks for repossessing and selling properties for a fraction of their worth, will be heard in Johannesburg High Court from 24 February and could last four days.
The case was initiated more than eight years ago by the Lungelo Lethu Human Rights Foundation – which was set up to protect homeowners facing eviction – and Advocate Douglas Shaw.
ALSO READ: How title deeds determine who truly benefits from SA’s property system
Houses sold without owners’ knowledge
Foundation president Nkululeko Xhelithole says the law has for too long been weaponised against consumers, and cites an example of a pregnant Soweto woman who was left homeless after being evicted from her home – having no idea it had been sold at a sheriffs’ auction.
In another case, a Vosloorus man spent nine months in prison for supposedly “trespassing” in his own home after discovering it had been sold to a new owner. He, too, had no idea he was in arrears or that his home had been sold at auction.
“The abuses by the banks are particularly evident when it comes to home foreclosure, and it cannot be divorced from SA’s apartheid history,” Xhelithole says.
“Back in the 1980s we fought against evictions on purely political grounds. Today, the evictions continue – but it is the banks that are doing it.
“In case after case, legal papers are not properly served, or not served at all, and we’ve found syndicates operating out of the banks and sheriffs’ offices. Many township millionaires were made this way. It’s time for some justice.”
Evidence disputes
The case is likely to get bogged down in technical arguments from the outset.
Banks have successfully blocked new affidavits being submitted as evidence, after the initial case was lodged with the court more than eight years ago.
They have also asked for a de bonis propriis order against Shaw, which could amount to more than R5 million, for various perceived breaches of court rules. A de bonis propriis is a punitive order that holds counsel personally responsible for legal costs.
“It’s an intimidation tactic. And of course I will defend this,” says Shaw.
ALSO READ: First-time home buyer? Here are the answers to all your questions
Homes sold below market value
The banks have also attempted to exclude from evidence a National Credit Regulator (NCR) database that appears to show thousands of homes being sold well below market value.
This database contains more than 24 000 examples of properties being repossessed and sold at auction – some for as little as R100 and R1 000. These are apparently based on the banks’ own figures (excluding Absa).
The NCR database is a crucial piece of evidence for dispossessed homeowners, which Shaw says he will argue must be admitted, since it formed part of his original replying affidavit.
The homeowners are arguing that the banks violated constitutional protections against the arbitrary deprivation of property.
Though most dispossessed homeowners admit to being in arrears, this does not justify the banks selling their properties for a pittance – sometimes, for amounts so trivial these sales appear to be simulated, or sham, transactions.
The four main respondents are Absa, Nedbank, Standard Bank and FirstRand, along with the SA Human Rights Commission and the NCR, to name a few. SA Home Loans has also been cited as a respondent but has not filed a defence.
Banks’ defence
In their answering affidavits, the banks have argued that they comply with the law at all times and make every effort to rehabilitate defaulting clients, starting with a friendly reminder to catch up on arrears and, if that doesn’t work, rescheduling the debt.
All banks insist that the legal process – commencing with a Section 129 notice in terms of the National Credit Act (NCA) – is pursued only as a last resort.
A Section 129 notice is a formal demand to settle arrears or face legal action.Until 2017, Court Rule 46A allowed banks to sell repossessed homes without a reserve (or floor) price. This allowed some properties to be sold for as little as R200 and even R10.
The rules were changed in 2017 to give judges the discretion to impose reserve prices and to explore alternative arrangements such as debt review, instalment plans, voluntary sales or refinancing before approving execution (sale at auction), with foreclosure being the last resort.
The banks say they have complied with this new rule, though Shaw questions this and argues that this does not excuse their behaviour prior to 2017.
ALSO READ: All you need to know about property scams and how to avoid them
Court proceedings
The court hearing on 24 February will establish whether or not the banks have a prima facie case to answer, with Judge Leonie Windell presiding.
The court must also decide whether the class can be ‘certified’, a formal process that would allow the complainants to sue as a single entity.
The sum of R60 billion is an estimate of the lost equity from more than 100Â 000 homes being sold below market value since the Constitution came into effect in 1994.
Although the Constitution introduced property protections, the complainants say the banks routinely violated these by selling their houses and stripping them of whatever equity they had accumulated in the home.
“This will be the largest civil action in South African history,” said the Lungelo Lethu Human Rights Foundation in a statement.
The foundation argues that SA’s foreclosure practices, until 2017, were medieval in comparison with countries such as Australia, Germany and the UK, and were heavily weighted in favour of the lenders.
This article was republished from Moneyweb. Read the original here.
About the Author
