South Africa’s biggest banks seem to face a Rand 60 billion claims which is associated with their conduct in linking and selling the dwellings of defaulting debtors at rates below market value. Advocate Douglas Shaw had filed an application for direct access at constitutional court (ConCourt) in support of 219 people present nationwide. It is disputed through three courts namely supreme court, high court and magistrate court, and it seems to be very inappropriate in dealing the case which is being brought by the populace who are “exceptionally poor” and has made ever poorer by “unconstitutional actions of banks”. Court papers were shared with Moneyweb listed banks like Standard Bank, FirstRand, Absa, Nedbank and Changing Tides 17.
The case seeks to set-up whether South Africa’s present law of sale in execution as the properties are sold during public auction by the Sheriff of the court. Due to the occurrence of sale in execution, a bank must first get a court order to link and sell the property in order to obtain home loan repayments which are in arrears. Shaw argues about 151-page application as this process is not sound constitutionally which permits properties to sold for less compared to its market value, actually “this is against the housing and property rights”, stated by the constitution.
Moreover, it defines an existing ConCourt order which states that banks can only sell a property as last-resort “a dead letter”. Domestic banks are informed to sell property for about 5 times more typically than international norms and in some situations, for only 50% of its market worth. Therefore, the applicants approach the court to explain what is defined by “last resort”.
However, Shaw argues that the high-court must not provide an execution order, if the loan seems to be rescheduled in the conditions like if there is adequate equity to permit for payment in arrears, If any possibility of renting properties and employing the proceeds to enclose bond repayments as well if the capability of the owner to have the site developed or sell the property.
Liability in Delict
This case also seeks to withstand the banks as well as liable home loan providers when they sell properties at prices below the market value. Banks are liable in delict or tort in all other countries researched for selling property for less than its actual value. It seems to be strange, with our constitution, if we were the only country where banks could serve with impunity irrespective of damage zone.
By arriving at Rand 60 billion figure, he said that around 100, 000 residences have been sold in execution from 1994. It is evaluated that 10% of these dwelling were been sold at close to market value and as a last-resort with remaining 90% has sold under the prevailing market values. The normal price of house in present economy is R1 million and discounts through which properties has been is around 50% of market rate. The damage zone is calculated to be R500 000 times 100 000 for 1000 people that is R50 million. It is the maximum damage which affected people from 1994 so claim for R60 billion which is equal to one year income of four banks.
The applicants also necessitate the Director of Public prosecution to peep into criminal charges of the directors of each bank for “knowing the selling properties which is less than their value after the introduction of constitution”. It specifies that a report must be provided to the court with 6 months duration.
The huge majority of claims are intensified against Standard, FNB, Absa and Nedbank. Before to filing the court papers, representatives from Standard Bank and FNB bank informed Moneyweb, that they were conscious of intentions to implement proceedings against numerous banks. Even this allegations were formally reviewed and solved once brought before the court. Nedbank also verified it or had viewed a draft version of papers which seems to defend the matter.
Shaw informed that only few applications regarding the case had paid him fees. In cases concerned with township homes, of around 100, people have paid him Rand 1000 each. He revealed that he has received 10-20% of normal fees for his completed work and for the case pursing.