Preventing or Opposing a Sale in Execution A LEGAL GUIDE MAY 2016

Transcription

1 Preventing or Opposing a Sale in Execution A LEGAL GUIDE MAY 2016

2 ii Preventing or Opposing a Sale in Execution A LEGAL GUIDE Acknowledgements MAY 2016 This guide was produced by the Socio-Economic Rights Institute of South Africa. The research, writing, advisory and editorial contributions of Michael Clark (legal research consultant), Lauren Royston (Director: Research and Advocacy), Stuart Wilson (Executive Director) and Bhavna Ramji (Attorney) are gratefully acknowledged. Photo credits: SERI staff, Urban LandMark and Kevin James

3 Preventing or Opposing a Sale in Execution A LEGAL GUIDE Contents ABOUT THIS GUIDE / WHAT IS A SALE IN EXECUTION? / WHAT IS THE LEGAL PROCESS REQUIRED FOR A SALE IN EXECUTION TO TAKE PLACE? / HOW TO OPPOSE OR PREVENT A SALE IN EXECUTION OF YOUR HOME / WHAT TO DO IF A SALE IN EXECUTION HAS ALREADY TAKEN PLACE / RESOURCES / EXAMPLES OF COURT PAPERS / 35

4 2 about this guide In South Africa, many people purchase homes through banks and similar lending institutions. Banks lend these purchasers large amounts of money and the banks then protect themselves by holding security over the homes purchased with the money. This allows banks to reclaim or repossess and then sell purchasers homes if and when the purchasers are unable to repay their loans. As a result, thousands of families lose ownership of their homes each year when their homes are repossessed or sold by a bank. Often, these people are also removed from their homes through eviction proceedings arising from these sales. These bank sales are known as sales in execution. The impact of sales in execution can be devastating. To many people, their homes are the only secure place where they can safely live and raise their families. Their homes are also their most valuable assets. The loss of their homes can force people into more debt to cover their living costs, destroy their family lives, or even render them homeless through subsequent eviction. Sometimes banks sell homes for such low amounts, that people remain indebted to banks even after losing their homes. Fortunately, homeowners have rights that are protected in the Constitution. The right of access to adequate housing (which is contained in section 26 of the Constitution) means that courts must carefully consider whether or not to allow sales in execution, even if the homeowner is behind with his or her mortgage payments. Courts are legally required to make sure that sales in execution follow the proper legal process and that the interests of both homeowners and banks are balanced and protected. The laws which regulate sales in execution are complex and come from many sources. This guide explains the legal processes and sets out what steps homeowners can take to avoid their houses being sold in execution. It will help homeowners prevent sales in execution before they happen. It will also help homeowners oppose sales in execution if the process to repossess their home is already underway, or if they have already lost their homes. This guide is a resource for individuals and households who are facing the threat of a sale in execution of their homes, as well as for community-based paralegals and lawyers who deal with sales in execution of people s homes or bank repossessions.

5 About THIS GUIDE 3 WHAT IS IN THIS GUIDE? This guide explains what sales in execution are and the proper legal process that banks must follow to have someone s home sold in execution. If homeowners are threatened with the sale in execution of their homes, it is important to be aware of the steps in this process and make sure that the proper legal process is followed. If the proper process is not followed, there may be ways to prevent or undo sales in execution. This guide explains what homeowners can do to prevent the sale in execution of their homes or what they can do if their homes have already been sold in execution. Section 1 (page 6) Section 2 (page 10) Section 3 (page 24) Section 4 (page 32) Section 5 (page 34) This section contains information on what sales in execution are. This section contains information on the legal process that banks must follow to have homes sold in execution. This section contains information about what homeowners can do to prevent or oppose the sale in execution of their homes. This section contains information on what homeowners can do after their homes have been sold in execution. This section contains a list of organisations that may be able to provide legal assistance or advice and other useful resources.

6 4 Preventing or Opposing a Sale in Execution A LEGAL GUIDE The story of Elsie Gundwana Using the law to prevent or oppose the sale in execution of your home For many years, the laws relating to sales in execution were unfair to homeowners. Specifically, banks or other creditors could apply to a High Court registrar, who is a court administrator and not a judge, to sell a person s home. The registrar had to be shown that the debtor was behind with his or her payments, and that the creditor had the contractual right to collect the outstanding debt and take the debtor s home. There was no requirement that the sale of the debtor s home be reasonable or fair. The law changed in 2011 with the Constitutional Court case of Gundwana v Steko Development. Elsie Gundwana had lived in her house for 12 years when her bank, Nedcor, got a court order from the registar allowing it to sell her house. Nedcor then sold her house for R , when she only owed it R The sale of her house would also eventually leave Ms Gundwana homeless. None of these considerations were taken into account by the registrar when granting the order allowing the bank to sell Ms Gundwana s home. Ms Gundwana lived in Thembalethu township outside George. In 1995, she bought a new house for R She paid for the house by using some of her savings and by borrowing R from her bank, in terms of a mortgage bond or home loan. The loan required Ms Gundwana to pay back the money she borrowed (along with any interest) in monthly instalments over a period of 20 years. The loan also provided that Ms Gundwana s house would serve as security for the repayment of the loan. For a couple of years, things went well for Ms Gundwana. She was happy in her new home and had a stable income from her job. Although she did not earn a lot of money, her income was enough to support herself and to make her monthly mortgage payments. This changed when Ms Gundwana was unexpectedly retrenched. After losing her job, she turned her home into a bed and breakfast to earn a living and continued paying her bond. Even though Ms Gundwana worked hard, she did not always have enough money from her business to make her monthly payments to Nedcor. In 2003, she missed a few payments. When Ms Gundwana fell behind with her payments, Nedcor relied on the acceleration clause of her loan agreement and told Ms Gundwana to pay the full amount she owed them immediately. By October 2003, although Ms Gundwana had made many payments to Nedcor, she owed Nedcor R due to interest and fee charges levied by Nedcor. Ms Gundwana did not have the money to pay this amount immediately. A few weeks later, Ms Gundwana received a summons from Nedcor. The summons informed Ms Gundwana that the bank was applying for a court order that she owed Nedcor R and, that if she did not pay it, the bank could sell her house to cover her debt. Afraid of losing her home, Ms Gundwana called her bank in an attempt to stop the case against her. She negotiated with the employees of the bank, who told her that if she paid off the payments that she had missed (her arrears) Nedcor would not carry on with the court case. In early 2004, Ms Gundwana borrowed money from family and friends and made two large payments to the bank to pay off her arrears, which together came to R She believed that the bank would drop its case against her after she made these payments and that she would not lose her house. However, without

7 About THIS GUIDE 5 notifying Ms Gundwana, Nedcor had already obtained a court order granting it permission to sell her home in November The order was granted by the registrar of the high court. For the next four years, the bank did not tell Ms Gundwana that it had obtained judgment against her. Ms Gundwana continued making mortgage payments to her bank whenever she could. She paid R during this time, much more than the original amount that she borrowed from the bank. However, the interest on her arrears meant that she still owed the bank R In 2007, four years after the bank had obtained the court order against Ms Gundwana, she received a notice that her house was going to be sold in execution. Ms Gundwana immediately called her bank. She was told that Nedcor was going to sell her house in execution because she was behind with her payments. Later that month, Ms Gundwana s home was sold in execution by the sheriff. The house was bought by a company called Steko Development. The house was transferred to Steko Development, but Ms Gundwana continued to live in it. As a result, Steko Development applied to court to evict Ms Gundwana in Even though Ms Gundwana went to court and tried to argue that she should not be evicted, the court granted the eviction order. Facing the threat of an eviction, Ms Gundwana found a lawyer and applied to court to have the order allowing the sale of her house to be reversed. Ms Gundwana eventually took her case to the Constitutional Court where the court said that the right to housing means that the sale in execution of a person s home can only take place in the following specific circumstances: Only a judge can grant an order allowing a bank to sell a person s house. Before a judge can allow the sale in execution of a person s home to take place, he or she must carefully consider all of the relevant circumstances. This means that a judge must think about the rights and interests of the debtor and the bank carefully and decide whether he or she thinks that it would be fair to allow a sale in execution in the circumstances. The sale of the debtor s home must be proportional to the bank s interest in recovering the debt. A bank should only sell a debtor s home in execution if it has no other way of collecting the debt. If there is a way to collect a debt that would not cost a person his or her home, then the bank should rather try to use that method before using the sale in execution process. As a result of the Constitutional Court s decision, Ms Gundwana was able to get her home back. This story highlights the difficulties that homeowners face when dealing with banks that want to sell their homes in execution and how the law can be complicated and difficult to navigate. However homeowners may, in some cases, also be able to use the law to prevent or oppose the sale in execution of their home or to get their home back.

8 6 Preventing or Opposing a Sale in Execution A LEGAL GUIDE 1 what is a sale in execution? A sale in execution or bank repossession takes place when a debtor is unable to repay the monthly instalments in terms of a loan they owe to a creditor and the debtor s property is sold at a public auction by the sheriff of the court to pay off the debt. In most cases, the loan is a home loan and the creditor is a bank. Often, the property sold will be the debtor s home. To sell a debtor s home, a creditor or bank must approach a court to get a court order allowing it to sell the home. The order will declare the home specially executable. A bank should only do this after many requests for the debtor to pay the outstanding amounts and when there is no other way to recover a debt (meaning that the debtor has no other property that the bank can sell). Sales in execution are an important way for banks to enforce their rights in terms of loans, especially in cases where debtors who are able to pay their debts refuse to pay. However, sometimes, banks abuse this process. For instance, some banks obtain court orders to sell homes in execution without considering other ways through which they can recover the outstanding debts and without considering the negative impact this will have on debtors. Fortunately, the law provides some protection for debtors who are at risk of losing their homes as a result of sales in execution. The courts have decided that a person s home can only be sold in execution in certain circumstances when it would be fair to all the parties involved. This means that a judge must decide whether to allow a sale in execution by carefully considering the rights and interests of the debtor and the bank. A court must be sure that the sale of a debtor s home will be proportional to the bank s interest in recovering the debt. A court will also not allow a bank to sell a debtor s home to recover a small amount of money when there is another way for the bank to recover the debt. The sale of a debtor s home is only permitted if the legal process for a sale in execution is properly followed (this process is explained in section 2 of this guide). If the legal process is not properly followed, a debtor may be able to have the sale in execution set aside or reversed. This is why it is important for debtors to know the law related to sales in execution. PARTIES INVOLVED IN A SALE IN EXECUTION A debtor is a person who owes money to a creditor (like a bank) in terms of a loan or credit agreement. A creditor is person or institution (usually a bank) to whom money is owed in terms of a loan or credit agreement. A sheriff is an independent officer of the court who carries out all orders of the court including the sale in execution of a person s home. The South African Board of Sheriffs is the statutory body that monitors and disciplines sheriffs. The sheriff must act in accordance with the code of conduct published by the Board of Sheriffs. Complaints against sheriffs should be lodged in writing with the Board. See the Resources section at the end of this guide. A judge and a magistrate are judicial officers of the High Court and Magistrates Court respectively. Judges and magistrates hear and decide cases in the courts by applying the law.

9 WHAT IS A SALE IN EXECUTION? 7 There are also many steps that a debtor can take to prevent or oppose the sale in execution of his or her home. However, once a bank obtains a court order authorising it to sell a debtor s home in execution it is very hard to prevent the sale. For this reason, it is important for debtors to monitor and be actively involved in the process from the beginning. This will increase the chances of preventing a sale in execution from taking place. There are two ways in which the sale in execution of a home can take place: When a homeowner who purchased his or her home in terms of a mortgage bond agreement cannot repay the loan and the bank repossesses the property and sells it to someone else to recover the outstanding debt (see the information box on mortgage bonds). This is the most common situation in which the sale in execution of a debtor s home takes place, and will be the main focus of this guide. When a debtor cannot pay off another type of loan (like a personal loan) and the creditor gets a court order to sell the debtor s property to satisfy the debt. In these cases, the creditor will first sell the debtor s movable property to try and recover enough money to pay off the debt. If the amount of money raised from the sale of the debtor s movable property is not enough to repay the loan, the creditor can also get a court order to sell the debtor s home. Definitions A loan or credit agreement is an agreement in terms of which a person or institution (a creditor) loans a sum of money to another person (a debtor). The debtor then agrees to pay the sum of money back to the creditor in instalments, usually with interest. There are different types of loans including short or long term loans, and loans that may need to be paid off at once or in instalments. A home loan or mortgage bond is a specific type of agreement which debtors conclude with a bank. A home is a place of residence where you are physically present to rest, eat and sleep. The right to a home includes the right to undisturbed privacy, security, dignity and peace within it. It can be a house, a flat or a unit in a sectional title scheme. A public auction is where something, such as a home, is sold under the authority of the court to the public by asking people to bid how much they are willing to pay. The item or home is then sold to the highest bidder (the person who offers the most amount of money for the item or home). In sales in execution, the sheriff conducts the public auction. Some auctions require that a reserve price be set, which means that if none of the bidders offer more than that amount, the item or home will not be sold. An order of court or court order is a written direction by a judge or magistrate, which must be obeyed by the people to whom it applies. It can set out the rights of people in a particular situation, or require or authorise (legally allow) that certain steps IMPORTANT INFORMATION TO KNOW This guide deals with the sale in execution of the home where a debtor ordinarily lives. If a person s second home is sold in execution, for example a holiday house, different rules apply. be taken, or prohibit steps being taken, by one or more parties to a case. Court orders can also change the dates on which cases can be heard, and require that reports or new evidence be submitted to the court on any relevant issue. In terms of the law, proportionality means that there must be a balance between the objective that a person wants to achieve and the method he or she uses to achieve the objective. An action will not be proportional if the method used to achieve the goal causes more harm than is necessary to achieve the goal. For example, in the case of a sale in execution, a bank will only be allowed to sell a person s home if there is no other (less harmful) way to recover the debt. Movable property means any property that can be moved from one place to another, for example furniture and household utensils. Moveable property is different from immovable property, which is property that ordinarily cannot be moved from one place to another such as a house, a flat, land or a farm. The Magistrates Court Rules and the Uniform Rules of Court protect certain moveable property against being sold in execution. This includes bedding and clothes, necessary furniture and household utensils, tools and implements that are important for a person s work, and enough food to feed the household for a month. These items cannot be sold in execution.

10 8 Preventing or Opposing a Sale in Execution A LEGAL GUIDE Important information about mortgage bonds A mortgage or mortgage bond agreement is a specific type of loan in terms of which a debtor (sometimes called a mortgagor) borrows money from a bank (sometimes called a mortgagee). An important part of a mortgage bond agreement is that the debtor agrees that he or she will put up his or her home as security for the repayment of the loan. A debtor usually concludes a mortgage bond agreement to borrow money to buy his or her home. IMPORTANT INFORMATION TO KNOW Make sure that when you choose an address where the bank should send you notices in terms of the mortgage agreement, that the address you provide is where you will be living or regularly receiving mail. If you give the bank an address which you do not use regularly or which you will be leaving, then the bank may be justified in sending you notices at that address even if you do not actually receive the notices. Section 96 of the National Credit Act says that you can change the address where you receive legal notices by notifying the bank in writing of the new address. The agreement allows the bank to register a mortgage bond over the property in the deeds office. This gives the bank the power to, after following certain legal processes, sell the home of the debtor if the debtor defaults (does not make the necessary repayments) in order to recover the amounts outstanding in terms of the loan. In terms of a mortgage, a debtor must repay the amount borrowed from the bank (this is called the capital debt) and interest on that amount in a manner provided for in the agreement. Mortgages are usually payable in monthly instalments that are determined in the agreement over a long period of time (sometimes up to 20 or 30 years). In addition to these repayments, a mortgage with a bank may also require you to pay bank administration fees as determined by the agreement. A debtor should take into account all of these payments when deciding whether or not a mortgage is affordable to him or her. Some of the common clauses in mortgage agreements in South Africa are: Most mortgages provide that if a debtor defaults on the agreement the bank can, after giving the debtor notice of the default and time to rectify the default, demand that the debtor pay the full amount outstanding in terms of the mortgage (including any interest or bank administration fees). This is known as an acceleration clause. The accelerated debt is usually a large amount of money which many debtors cannot pay at once. If the debtor cannot or does not pay this when the bank requests him or her to, mortgages could also provide that the bank can go to court to get an order authorising the sale of the debtor s home. Section 129(3) of the National Credit Act (discussed in sections 2 and 3 below) allows a debtor to avoid acceleration of his or her debt by paying back only the instalments he or she has missed and the reasonable legal costs of the bank at any time before the loan agreement is executed on. Most mortgages provide that a certificate from the bank will qualify as proof of the balance of the debt that a debtor owes the bank. For this reason, it is important that debtors carefully check any balance statements received from the bank and get in touch with the bank if he or she picks up any irregularities. A mortgage agreement will always have a clause in terms of which the debtor chooses an address where he or she will receive legal notices. This is called a domicilium citandi ex executandi or domicilium.

11 WHAT IS A SALE IN EXECUTION? 9 Definitions When a bank loans money to a debtor, it usually requires the debtor to put up security to guarantee payment of the loan. If the debtor fails to make the necessary repayments in terms of the loan, the bank is allowed to sell the security provided in order to satisfy the debt. This usually takes the form of a valuable item or a mortgage bond on a debtor s home. A mortgage bond is a document that records that the home of the debtor has been put up as security for the repayment of the mortgage bond agreement. This document is registered with the title deed of the property in the deeds office by the Registrar of Deeds. You can read more about a mortgage bond on the previous page. When a debtor defaults on a loan, it means that he or she failed to fulfil a condition or term of the loan, usually to make the necessary repayments on time in terms of the loan. Interest is an amount that is charged by the creditor or bank for the debtor to borrow money. Interest is usually calculated as a percentage of the capital amount (the amount that was borrowed from the creditor).

12 10 2 what is the legal process required for a sale in execution to take place? A bank has to follow a particular legal process before it will be allowed to sell a debtor s home in execution to satisfy a debt. This means that a bank has to follow the requirements set out in the law before a judge will grant it an order to sell a debtor s home in execution. The process is dealt with in Rules 6 and 46 of the Uniform Rules of Court and in section 129 of the National Credit Act. In South African courts this process can be brought by an action or application procedure in either a High Court or Magistrates Court. The section below sets out the legal process. It is important for debtors to be aware of the process described in this guide. If a bank does not properly follow the legal process, a debtor could have a procedural defence (a defence that has to do with problems in the way in which the process has been carried out) against a court granting an order allowing the sale in execution of his or her house. If a court grants an order allowing a debtor s home to be sold in execution without compliance with the legal rules set out in this guide, the order may be invalid and the debtor could have it set aside or reversed. See pages 12 and 13 of this guide for a flowchart of the 11 steps in the legal process for a sale in execution. IMPORTANT INFORMATION TO KNOW When you deal with your bank or creditors it is important to always try to do it in writing. Record the times, dates and names of the people you speak to whenever you discuss important issues as this may be useful as evidence for any legal disputes.

13 WHAT IS THE LEGAL PROCESS REQUIRED FOR A SALE IN EXECUTION TO TAKE PLACE? 11 THE LEGAL PROCESS FOR A SALE IN EXECUTION CONSISTS OF 11 STEPS Step 1: Section 129 notice served on the debtor Step 2: Step 3: Step 4: Step 5: Step 6: Step 7: Step 8: Step 9: Launch of proceedings in court Notice of motion or summons served on the debtor Debtor files notice of intention to oppose or defend Application heard in court Court gives an order that the debtor owes money and declares the home specially executable Warrant of execution served on the debtor Steps taken by the sheriff and bank before a sale in execution Sale in execution Step 10: Transfer of the property to the new owner and settlement of the debt after sale in execution Step 11: Debtor vacates property or eviction proceedings launched in court by the new owner

14 12 WHAT IS THE LEGAL PROCESS REQUIRED FOR A SALE IN EXECUTION TO TAKE PLACE? START Debtor misses instalments in terms of a loan or mortgage. Bank informs the debtor of default and informally asks the debtor to bring his or her payments up to date by calling the debtor or sending letters or s. what is the legal process required for a sale in execution to take place? Debtor negotiates with the bank about how to settle his or her debt or chooses to begin: Debt counselling Alternative dispute resolution A case with a consumer court; or A case with the Financial Services Ombud. (See section 3 of this guide for more information about these options) Agreement is reached between the debtor and bank. The bank abandons legal proceedings. END Negotiations and options in terms the National Credit Act fail. STEP 1: SECTION 129 NOTICE SERVED Section 129 notice served on debtor, which formally informs the debtor of his or her default and informs the debtor of the options in terms of the National Credit Act. Debtor either does not respond to notice or does not use the options in terms of the National Credit Act. STEP 5: APPLICATION HEARD IN COURT Court hearing takes place before a judge or magistrate. STEP 4: DEBTOR FILES NOTICE OF INTENTION TO DEFEND OR OPPOSE Judge dismisses the case or orders the bank to find another way to satisfy the debt. END STEP 2: LAUNCH OF PROCEEDINGS IN COURT Bank starts legal proceedings against the debtor in court. Debtor files notice of intention to defend or oppose the bank s case. The debtor files his or her answering affidavit or plea setting out his or her case, and raising defences. STEP 3: NOTICE OF MOTION OR SUMMONS SERVED Sheriff serves notice of motion or summons on debtor. Debtor does not oppose court case. Court hearing takes place before a judge or magistrate. Judge grants default order allowing the debtor s home to be sold in execution. Judge postpones the hearing by asking for more information.

15 WHAT IS THE LEGAL PROCESS REQUIRED FOR A SALE IN EXECUTION TO TAKE PLACE? 13 STEP 11:DEBTOR VACATES HOME OR EVICTION PROCEEDINGS LAUNCHED BY NEW OWNER Debtor either vacates the property voluntarily or comes to an agreement with the new owner to remain on the property. If no agreement is reached, the new owner could apply to the court for an eviction order to evict the debtor. END STEP 10: TRANSFER OF THE PROPERTY TO THE NEW OWNER AND SETTLEMENT OF THE DEBT AFTER SALE IN EXECUTION Property is registered in the name of the new owner and the debtor loses ownership. Sheriff works out a payment plan for how to settle the debt and pay for the costs of the sale in execution, based on the amount that the house was sold for. Enough money is raised from the sale in execution to repay the debt. Not enough money is raised from the sale in execution to repay the debt. Debtor does not need to make any further payments to the bank and should be paid the amount left over after the debt has been settled. Debtor negotiates payment plan to pay the remaining debt. STEP 6: COURT GRANTS AN ORDER Court gives an order that the debtor owes money and declares the home specially executable. This means that the court orders that the debtor s home can be sold in execution to repay the debt. STEP 9: SALE IN EXECUTION CARRIED OUT BY SHERIFF Sale in execution is carried out by the sheriff at a public auction. The judge (or the registrar or clerk of the court) issues a warrant of execution. STEP 7: WARRANT OF EXECUTION SERVED Sheriff serves the warrant of execution on the debtor. STEP 8: ADMINISTRATIVE STEPS TAKEN BY THE SHERIFF AND BANK BEFORE THE SALE IN EXECUTION The sheriff and bank perform important administrative steps before the sale in execution, including: Setting a time and place for the sale in execution Preparing the notice of sale in execution Preparing the conditions of sale Setting a reserve price (if the bank decides to have a reserve price) Publishing notices in local newspapers, government newspapers and on the Magistrates Court notice board. Debtor has court decision set aside or rescinded. (See section 4 for more information on how to do this)

16 14 Preventing or Opposing a Sale in Execution A LEGAL GUIDE STEP 1: SECTION 129 NOTICE SERVED ON THE DEBTOR Definitions A debtor is in arrears when he or she has missed some of the payments he or she is required to pay in terms of a loan. When all the missed payments are added up, this amount is called the arrears. Other information that should be in a Section 129 Notice A section 129 notice must also include the following information: The notice should be clearly dated. The notice should say that the bank will begin legal proceedings against the debtor if he or she does not respond to the notice. The notice must inform the debtor that he or she has the right of access to adequate housing that is protected in section 26 of the Constitution and that if the debtor believes that the enforcement of the bank s debt could threaten this right, he or she should take steps to protect his or her constitutional rights. A section 129 notice is the first step in the legal process of a sale in execution. It has been a legal requirement since 2006, in terms of the National Credit Act. A section 129 notice informs a debtor that he or she is in arrears with his or her mortgage or loan repayments. The notice should specify how much the debtor is behind in his or her payments and ask the debtor to bring his or her payments up to date. It also provides a debtor with several ways to avoid being taken to court by the bank. The notice will say that the bank is willing to negotiate with the debtor about how to bring his or her payments up to date. This could include working out a new payment plan. The section 129 notice must also inform the debtor about the remedies provided in the National Credit Act. This means that the notice must inform a debtor that he or she can apply for debt counselling, can approach an alternative dispute resolution agent, a consumer court or the Financial Services Ombud. The notice will also specify a date by when a debtor has to make use of these remedies in order to prevent any further legal action against him or her. See section 3 of this guide for more information on how a debtor can use these remedies. A section 129 notice should be taken seriously by a debtor to avoid further legal action being taken against him or her. In terms of the law, a bank must send a debtor a section 129 notice before starting legal proceedings to recover an outstanding debt. If a bank does not send a section 129 notice before approaching a court, the judge must postpone the case in order to allow the bank to send the notice and give the debtor a fair opportunity to consider it. A bank may, however, try to inform a debtor about his or her arrears through a number of different ways in addition to the section 129 notice. Some banks could try to send you letters or s, or try to call you. Even if you receive some of these notices or calls, a bank is still required to send you a section 129 notice before he or she can start legal proceedings against you.

17 WHAT IS THE LEGAL PROCESS REQUIRED FOR A SALE IN EXECUTION TO TAKE PLACE? 15 An example of a section 129 notice. An example of a registered mail collection notice. IMPORTANT INFORMATION TO KNOW The law requires that a bank do everything that is reasonably possible to try to ensure that the debtor receives a section 129 notice. This is why banks usually send section 129 notices through registered post. This is a special kind of postal service where the post office keeps detailed records of where the letter or package is at all times to make sure that the letter or post does not get lost or damaged. By sending a section 129 notice by registered post, a bank will be able to show that a notice arrived at a debtor s local post office and that the post office sent a collection notice to the debtor. This is all that is required of a bank. However, section 129 of the National Credit Act allows you to choose whether you want the notice sent by registered post, or served by hand at your address. If you have any doubts about whether you will be able to collect registered post, or fear that notifications will not reach you, you should demand that the bank serve the notice at your address. Even if the bank has done everything it reasonably can to make sure that the debtor receives the section 129 notice, but the debtor still does not receive it, the court may still postpone the case, and order that the section 129 notice be re-delivered if the debtor provides an acceptable explanation for why the notice did not come to their attention. This is why it is very important that you ensure that you provide your bank with your updated address where you would like to receive legal notices every time you change your address. You should also collect any notices that may be sent to you through registered post even if the collection notice does not say that it is from your bank.

18 16 Preventing or Opposing a Sale in Execution A LEGAL GUIDE STEP 2: LAUNCH OF PROCEEDINGS IN COURT STEP 3: NOTICE OF MOTION OR SUMMONS SERVED ON THE DEBTOR If the debtor does not respond to the section 129 notice the bank may start legal proceedings in a High Court or Magistrates Court. The National Credit Act provides that a bank can only institute legal proceedings 10 business days after sending the debtor a section 129 notice. The people involved in the case are called the parties to the proceedings. In application proceedings, the person bringing the case to court is called the applicant, while the person opposing the case is the respondent. In action proceedings the person bringing the case to court is the plaintiff and the person opposing the case is the defendant. In a case for an order granting the sale in execution of a home, the plaintiff or applicant is the bank, and the defendant or respondent is the debtor. In terms of the Rules of Court, the bank must get the sheriff to serve a summons or notice of motion on the debtor informing him or her of the legal proceedings and the date of the court hearing. The sheriff must serve these documents on the debtor personally. A summons is accompanied by a document called the particulars of claim or the statement of material facts written by the bank or its lawyer. A notice of motion is generally accompanied by a founding affidavit. The purpose of a summons or notice of motion is for the bank to set out what order it wants the court to make. In cases for the sale in execution of a person s home, the bank usually asks for the court to make two orders: An order stating that the debtor owes the bank a certain amount in terms of the loan or credit agreement, and An order authorising or allowing the bank to sell the debtor s home in execution in order to satisfy the debt owed by the debtor. Often a bank asks a court to make both of these orders in the same document and at the same time. However, it may also be that a bank only asks a court for the first order and, once it obtains that order from a court, it asks for the second order. Definitions An applicant or plaintiff is the person or institution that starts legal proceedings against another person, who is called a respondent or defendant.

19 WHAT IS THE LEGAL PROCESS REQUIRED FOR A SALE IN EXECUTION TO TAKE PLACE? 17 An example of a summons. Definitions A summons or notice of motion is an official notice that sets out what order the plaintiff wants the court to make. It also gives the defendant information about when and where the plaintiff will approach a court to obtain this order. Particulars of claim are a written statement used in court which sets out the important facts that the plaintiff will rely on to convince the court that it should grant him or her the order he or she wants. Particulars of claim are not a sworn statement as they set out the evidence that will be proven by witnesses in court. A founding affidavit is a written statement used in court which sets out someone s case. An affidavit must be signed by the person who promises that it is true.

20 18 Preventing or Opposing a Sale in Execution A LEGAL GUIDE STEP 4: DEBTOR FILES NOTICE OF INTENTION TO OPPOSE OR DEFEND STEP 5: APPLICATION HEARD IN COURT Definitions A default order is when a judge grants an order in favour of one of the parties, without the other party being heard. For example, if a case for the sale in execution of a person s home is not opposed by a debtor a default order may be granted to the bank. The next step in the legal process offers a debtor the chance to oppose the bank s case. This is also called defending the case. This is a formal process that requires a debtor to notify the bank s lawyer and the court before a certain date (mentioned in the summons or notice of motion) that he or she opposes the bank s case. A notice of intention to oppose is usually followed by an answering affidavit. A notice of intention to defend is usually followed by a plea. These are written statements which set out a person s defences or arguments against the bank s claim and explain why either of the orders sought by the bank should not be granted by the court. See section 3 of this guide for more information on how to do this, as well as examples of these documents. If a debtor does not file papers in court or attend court on the day of the hearing, a judge or magistrate may grant a default order allowing the debtor s home to be sold in execution without any further notice to the debtor. A debtor may attend court on the day of the hearing to oppose the bank s case by raising arguments or defences to show why a judge should not allow a sale in execution. There are a number of legal defences that a debtor could raise in court. These include procedural defences (these defences are about the legal process and whether or not the proper legal process was followed) or substantive defences (these defences are about whether or not it would be fair for the court to authorise the sale in execution of a debtor s home). See section 3 of this guide for more information on what types of defences a debtor could raise. It is important to remember that the bank could be asking the court for one or both of the orders mentioned above in step 3. This could mean that the defences raised by a debtor may have to relate to the debt and how much he or she owes the bank, whether the sale of a debtor s home should be allowed to take place, or both of these issues.

21 WHAT IS THE LEGAL PROCESS REQUIRED FOR A SALE IN EXECUTION TO TAKE PLACE? 19 STEP 6: COURT GIVES AN ORDER THAT THE DEBTOR OWES MONEY AND DECLARES THE HOME SPECIALLY EXECUTABLE After listening to the arguments made by the parties at the hearing in court, and considering all the relevant circumstances, the judge or magistrate will deliver his or her order. In cases of the sale in execution of a person s home, this could include: A court order that says that the debtor is under a legal obligation to pay the bank the full debt remaining outstanding in terms of the loan (plus interest and costs). This is referred to as an order for a judgment debt. A court order authorising the sheriff to sell the home of the debtor in order to satisfy the judgment debt. This is called a warrant of execution or a writ of execution. Although these orders are often granted together, a warrant of execution can be set aside or reversed if a debtor pays what he or she owes to the bank in full before the sale in execution takes place. Once a bank has obtained a warrant of execution, the bank must use it within three years of obtaining it or within three years from the last payment accepted from the debtor. If the bank does not use the warrant of execution within this time, it becomes invalid. For example, a bank cannot try to sell a debtor s home in 2016 with a warrant of execution issued in Usually, a warrant of execution will be issued by a court. In some cases the registrar or clerk of the court can also issue a warrant of execution, but this can only take place after a judge or magistrate has considered the case and found that a debtor s home may be sold in execution. For this reason, a debtor should always check who issued the warrant of execution and whether it is accompanied by a court order that says that the debtor s home is specially executable. If a registrar or clerk issues a warrant of execution without a court order, a debtor may be able to have the warrant set aside or reversed. See section 4 of this guide for more information on how to have a sale in execution set aside or reversed. IMPORTANT INFORMATION TO KNOW If you make any payments to a bank to pay off a judgment debt, the bank can only execute against the portion of the judgment debt that remains outstanding. Parties involved in Sale in Execution The registrar and the clerk are administrative officers of the High Court and Magistrates Court respectively. They maintain the court s records and files and open new case files. The offices of the registrar and clerk are open to the public and court files are public documents. Definitions A judgment debt is a legal obligation for a debtor to pay a debt to a bank that is set out or confirmed by a judge in a court order. A warrant of execution or a writ of execution is a court order that gives a sheriff the legal permission to make sure that a court judgment is enforced. For example, a warrant of execution could grant the sheriff the power to take possession of a debtor s home and sell it in execution to satisfy a judgment debt owed to a bank. An example of a warrant of execution.

22 20 Preventing or Opposing a Sale in Execution A LEGAL GUIDE STEP 7: WARRANT OF EXECUTION SERVED ON THE DEBTOR Once a warrant of execution has been issued, the bank must get the sheriff to serve the warrant of execution on the debtor. As was mentioned earlier in this guide, a warrant of execution remains valid for three years. This means that a bank does not have to enforce the warrant immediately. The warrant must have a full description of the property and the address of the property to allow the sheriff to identify the property. A warrant of execution gives the sheriff the legal power to attach (or take possession of) the property mentioned in the warrant. This means that the debtor is legally required to hand over the title deed of the property to the sheriff, so that the sheriff can sell the property in execution.

23 WHAT IS THE LEGAL PROCESS REQUIRED FOR A SALE IN EXECUTION TO TAKE PLACE? 21 STEP 8: STEPS TAKEN BY THE SHERIFF AND BANK BEFORE A SALE IN EXECUTION After the warrant of execution has been served on the debtor, there are a number of steps that the bank and the sheriff have to perform before the sale in execution can take place. These steps are mostly administrative and have to be completed within strict timeframes. It is important for a debtor to monitor whether the bank and the sheriff follow these steps properly. This is because a debtor may be able to have the sale in execution set aside if the bank and sheriff failed to comply with a material step in this process. See section 3 of this guide for more information on how to monitor the sale in execution process and what would qualify as a material step. The steps that the sheriff and the bank have to perform before a sale in execution include: The sheriff must set a date and place for the sale in execution and must inform all of the parties. The sale in execution may not take place within a month of the notice of attachment being served on the debtor. The sheriff and bank must jointly prepare a notice of the sale in execution. This notice is to inform other people about the sale. The notice should contain a clear description of the property, give the address of the property, mention the time and place of the sale and explain the conditions of the sale. A copy of this notice must be kept at the offices of the sheriff and must be available to the public. The bank or its lawyer must prepare the conditions of sale. This must be done at least 20 days before the sale takes place. The bank can also set a reserve price for the sale of the debtor s home. The sheriff must publish notices informing the public of the sale in execution in a local newspaper where the property is located and in the Government Gazette. This must be done between 5 and 15 days before the sale takes place. The sheriff must place a notice of the sale on the notice board of the local Magistrates Court and at (or close to) the place where the sale in execution will take place. This must be done at least 10 days before the sale. Definitions The Government Gazette is the government s official news publication in which laws, regulations or notices are published to keep the general public informed. An example of conditions of sale.

24 22 Preventing or Opposing a Sale in Execution A LEGAL GUIDE STEP 9: SALE IN EXECUTION OF DEBTOR S HOME After these steps have been followed, the sheriff conducts the sale in execution of the debtor s property at the time and place specified in the notice of sale. The sale in execution is conducted by the sheriff of the court at a public auction (see the definition of a public auction on page 7 of this guide). Importantly, the sheriff must act in accordance with the code of conduct published by the South African Board of Sheriffs. This code means that a sheriff should act honestly and with integrity at all times. STEP 10: TRANSFER OF THE PROPERTY TO THE NEW OWNER AND SETTLEMENT OF THE DEBT AFTER A SALE IN EXECUTION After the sale in execution, the sheriff is responsible for making sure that the highest bidder pays the purchase price agreed on at the public auction. Once the purchase price has been paid, the sheriff must make sure that the property gets transferred from the name of the debtor into the name of the new owner. This means that the debtor loses ownership of the home. The purchase price paid for the property is used to cover the costs of the sale in execution and to settle the judgment debt owed to the bank. This is done in terms of a payment plan that is worked out by the sheriff. If the purchase price is not enough to satisfy the debt, the debtor is responsible for repaying the remaining amount owed to the bank. This can usually be done by coming to an agreement with the bank about how to settle the outstanding amount. However, if the home is sold for more than the costs of the sale and the amount owed to the bank in terms of the judgment debt, the portion of the purchase price remaining will be paid out to the debtor.

25 WHAT IS THE LEGAL PROCESS REQUIRED FOR A SALE IN EXECUTION TO TAKE PLACE? 23 STEP 11: DEBTOR VACATES PROPERTY OR EVICTION PROCEEDINGS LAUNCHED BY THE NEW OWNER If a debtor s home is sold in execution, he or she is no longer the legal owner of the property. However, this does not mean that the debtor has no legal rights to remain on the property. The debtor could, for example, stay on the property by getting the permission or consent of the new owner to stay there, by concluding a lease agreement with the new owner or by opposing eviction proceedings on the basis that an eviction would not be just and equitable in terms of the law. In many cases, however, the new owner asks the debtor to leave the house. If the debtor and the new owner cannot come to an agreement or the debtor does not have anywhere else to go, the new owner may apply to court for an order evicting the debtor from the property. For more information on how to resist an eviction, see SERI s guide on resisting an eviction mentioned in the Resources section of this guide. Reinstatement of loan agreement At any time before execution of the loan agreement, the debtor can reinstate the loan agreement by paying to the bank the full value of the arrears owing at the point of reinstatement (the payments missed by the debtor with interest) and all the reasonable costs incurred by the bank in trying to enforce the agreement. The Constitutional Court is currently considering a case that will decide exactly when and how a debtor can reinstate the agreement.

26 24 3 how to oppose or prevent a sale in execution of your home There are a number of steps that you, as a debtor, can take to oppose or prevent the sale in execution of your home. Some of these steps can only be done if the bank has not begun legal proceedings against you, while others can be done at any time. The steps that you could take to oppose or prevent the sale in execution of your home are: Applying for debt counselling Using alternative dispute resolution Applying for your complaint to be heard by the National Consumer Tribunal Reinstating your loan agreement Getting legal assistance Opposing the bank s case in court by filing the required papers, attending the court hearing and raising defences Monitoring the sale in execution process. Parties involved in a Sale in Execution A debt counsellor is a person who offers professional advice on how over-indebted debtors should repay their debts by negotiating, on behalf of the debtor, with all the debtor s creditors to have the term of each debt extended, the instalments reduced and the interest rate on the debts reduced. A debt counsellor must be qualified and registered in terms of the National Credit Act.

27 HOW TO OPPOSE OR PREVENT A SALE IN EXECUTION OF YOUR HOME 25 DEBT COUNSELLING One of the important steps that you can take to make sure that your home is not sold in execution, is to participate in debt counselling. This is provided for in the National Credit Act. In terms of this law a debtor can apply to a debt counsellor to renegotiate or re-arrange his or her debt. You can do this by applying to a debt counsellor to have yourself declared over-indebted. Importantly, you can only qualify for debt counselling if a debt counsellor believes that you are over-indebted or that you will struggle to repay your debts within the time periods set out in your loan agreements. If a debt counsellor agrees to assist you, he or she will gather information about your debts and help you to repay your debts by negotiating, on your behalf, with all of your creditors to have the term of each debt extended, the instalments reduced or the interest rate on your debts reduced. After gathering this information and negotiating with your creditors, a debt counsellor develops a restructured repayment plan. This is a reasonable plan that helps you repay your debts according to the new, renegotiated terms. This plan will then be discussed with you and your creditors. If everyone is satisfied with the proposed plan, the debt counsellor could approach the Magistrates Court to have this plan be made an order of court. This is called a consent order. Even if not all of the parties agree to the new plan, the debt counsellor can still apply to the Magistrates Court to have his or her plan made an order of court. A restructured repayment plan provides for you to make a single monthly payment to a payment distribution agency (or PDA). This is an agency that is accredited by the National Credit Regulator to collect repayments from over-indebted debtors and pay them over to creditors. If a debt counsellor refuses to assist you on the basis that he or she does not believe that you are over-indebted, you can approach a Magistrates Court directly and ask for the magistrate to restructure your debt. The Magistrates Court has the power to conduct a hearing and assess your income and your ability to pay off your debts. The court has the power to restructure your debts in the same way that a debt counsellor can. The court also has the power to suspend or set aside portions of loan agreements or whole loans, if the magistrate considers these loans to be reckless. Debt counselling is not free. A debt counsellor may charge fees for his or her services. Fortunately, these fees are regulated in guidelines set out by the National Credit Regulator. This means that debt counsellors may not charge you more than the fees specified in these guidelines and must tell you upfront how much debt counselling will cost you. Debt counsellors must also provide you with written information about their fees if you ask them. It is important to make sure that a debt counsellor is registered with the National Credit Regulator and that you can trust him or her. One way to make sure that you find a debt counsellor that you can trust is by approaching the Debt Counsellors Association of South Africa (DCASA) and asking them to put you in touch with a good debt counsellor. See the Resources section at the end of this guide for information on how to contact the DCASA. Definitions The National Credit Act defines a person as over-indebted when he or she is or will be unable to pay off their debts within the time periods specified in their loan agreements. Debt counsellors usually determine whether a person will be able to satisfy their debts by considering what their income and expenses are. They also look at whether a debtor has been able to pay off their debts in the past.

28 26 Preventing or Opposing a Sale in Execution A LEGAL GUIDE HOW MUCH WILL DEBT COUNSELLING COST? There are different fees that can be charged by a debt counsellor. Some of most important fees are set out in this box. Make sure that a debt counsellor does not charge you more than the fees in this box. An application fee: This is the fee that a debtor pays to apply to a debt counsellor to review their debt and determine whether he or she is over-indebted and qualifies for debt counselling. This fee is R50. A rejection fee: If a debt counsellor determines that you are not over-indebted (in other words, you do not qualify for debt counselling), then you would have to pay a rejection fee of R300 (excluding VAT). The application and rejection fees are the only fees that you must pay directly to a debt counsellor. All the other fees are worked into your restructured repayment plan. IMPORTANT INFORMATION TO KNOW A debt counsellor s fee or restructuring fee: This is the fee that is payable for the debt counsellor s services. This fee is restricted to a maximum amount of R6 000 (excluding VAT), or the first instalment of your restructured repayment plan, whichever is the lesser. This means that if your instalment is less than R6 000, your debt counsellor may charge you no more than the instalment. After-care fees: You will also have to pay a monthly after-care fee to your debt counsellor. This is 5% of your monthly instalment to a maximum of R400 a month (excluding VAT) for 24 months. After 24 months this fee will decrease to 3% of your monthly instalment to a maximum of R400 a month, until you ve paid off all your debt. A debtor cannot apply for debt counselling in relation to a debt in respect of which a bank has already approached a court to institute enforcement proceedings. This means that you cannot apply for debt counselling for a debt if you have already received a summons or notice of motion in respect of that debt. You may, however, apply for debt counselling in relation to your other debts. Definitions Negotiation is a form of alternative dispute resolution that takes place directly between the parties involved in the disagreement. When negotiating the parties sit down with each other and try to come to an agreement that serves everybody s needs. This could mean that the parties might have to compromise on certain issues. Mediation is a form of alternative dispute resolution in which a neutral third party helps the parties to reach agreement or negotiate a settlement out of court. A mediator facilitates this process, which is normally voluntary. A mediator may charge a fee to mediate a dispute, but that can be negotiated with them. Mediation is usually not legally binding, but it is a good idea for the parties to put the mediated agreement in writing and sign it. Arbitration is another form of alternative dispute resolution. Anyone can ask for the disagreement to be arbitrated instead of having to go to court. Arbitration is a form of alternative dispute resolution where parties to a dispute refer it to one or more persons to review the evidence and impose a decision that could be made legally binding and enforceable. Arbitration could take different forms ranging from informal to formal.

29 HOW TO OPPOSE OR PREVENT A SALE IN EXECUTION OF YOUR HOME 27 ALTERNATIVE DISPUTE RESOLUTION Another way to avoid having your home sold in execution by a bank is to use alternative dispute resolution to negotiate or resolve any disagreement with the bank. There are different forms of alternative dispute resolution that you could use. These include negotiation, mediation or arbitration. Some forms of dispute resolution are informal (for example negotiation, where people informally discuss an issue to try to come to an agreement) while others can be formal (for example certain types of arbitration, where lawyers may have to be present and formal processes are followed). The National Credit Act provides that a debtor could approach an alternative dispute resolution agent to assist a debtor and a bank to come to an agreement through one of the forms of dispute resolution mentioned above. When participating in dispute resolution all the parties must negotiate in good faith, honestly and sincerely. Once the parties come to an agreement, a dispute resolution agent will record the agreement and submit it either to a court or to the National Credit Tribunal to be made legally binding. If a dispute resolution agent does not believe that you and the bank are participating in good faith, or believes that you and the bank will not be able to resolve the issue, he or she must provide a certificate that shows that the process has failed. Ordinarily, you should always try to negotiate and come to an agreement with your bank by using alternative dispute resolution before you approach a court or lay a complaint with the National Consumer Tribunal. The National Credit Act also says that a debtor can lay a complaint with a consumer court (in Gauteng, this would be the Gauteng Consumer Affairs Court) or with the Office of the Ombud for Financial Service Providers. For the contact information for the Gauteng Consumer Affairs Court and the Ombud for Financial Service Providers, see the Resources section at the end of this guide. APPLY FOR YOUR CASE TO BE HEARD BY THE NATIONAL CONSUMER TRIBUNAL In 2008, the National Credit Act created the National Consumer Tribunal. This Tribunal is like a court that can hear evidence, decide the outcome of cases and can make legally enforceable orders in relation to complaints that are made to it by both debtors and creditors. Any debtor, who tried to negotiate or mediate with his or her creditor, can apply to the Tribunal to have his or her case heard. If you want to have your case heard before the Tribunal, you must approach the Tribunal within 20 business days after negotiations with the bank have failed (in exceptional instances where good reasons can be provided, the Tribunal may hear your case if you do not fall within this period). The Tribunal may conduct a hearing into the complaint. Hearings before the Tribunal may be presided over by either one or three Tribunal members. The hearings are held in an informal manner and are usually open to the public. Tribunal hearings are inquisitorial, which means that the Tribunal members will ask the parties questions in order to actively investigate the facts of the case. The Tribunal members can call witnesses to appear before it and can question people under oath. You, the bank and anyone with a material interest in the matter has the right to participate in the hearing. The Tribunal has the power to make legally binding orders. Any order of the Tribunal can be enforced as if it were an order of the High

30 28 Preventing or Opposing a Sale in Execution A LEGAL GUIDE Court. The National Credit Act provides that the Tribunal can make any order permitted under the circumstances. Some examples of orders that the Tribunal can make include: an order that a bank s actions are legally prohibited in terms of the National Credit Act, an order confirming any agreement between a debtor and a bank, an order requiring the bank to repay any amounts that the Tribunal believes are excessive (including administration charges and interest), and any other appropriate order to give effect to a right of one of the parties. The Tribunal can also make interim orders. An interim order is a temporary order that either directs a party to do something or prevents them from doing something until the conclusion of the hearing. The Tribunal can make these orders if it believes that your complaint may be true and that the order is reasonably necessary to prevent you from suffering serious harm. REINSTATE THE LOAN AGREEMENT Section 129(3) of the National Credit Act allows the debtor to reinstate a loan agreement at any time before the bank seeks to execute the loan agreement against him or her whether by selling his or her home or otherwise. To reinstate a loan agreement you only have to pay the amounts by which you have fallen behind with your payments (your arrears), and the bank s reasonable costs enforcing the agreement at the time you seek to reinstate. Importantly you do not have to pay the full accelerated debt to reinstate your agreement. Once you have reinstated your agreement, all legal proceedings against you are brought to an end, and you carry on paying your instalments to the bank as normal. If you fall behind again, then the bank has to start new proceedings against you before the debt can be accelerated and the loan agreement executed. At the time this guide was being written, the Constitutional Court was considering an important case that will decide exactly when and how a consumer can reinstate a loan agreement. However, you should be able to reinstate your credit agreement at any time before your house is actually sold at public auction. If you are in a position to reinstate, it is a good idea to contact your bank, offer to pay the arrears and ask them to tell you what they think a reasonable sum to compensate them for their legal costs is. If you can t agree on that sum, pay your arrears, as well as what you think is a reasonable sum for the bank s enforcement costs, and then immediately tell the sheriff and/or the court what you have done. That will, in most cases, stop the sale, as the sheriff will be reluctant to sell your home if he or she thinks it is illegal to do so, and the court will not grant an order declaring your home executable if it thinks you might have reinstated the agreement. As with most things, reinstating your agreement is easier if you have a lawyer or paralegal to help you.

31 HOW TO OPPOSE OR PREVENT A SALE IN EXECUTION OF YOUR HOME 29 GET LEGAL ASSISTANCE Sale in execution cases are often complex and you should try to get advice or assistance from a lawyer. It is important to find a lawyer that you trust, and who will fight for you. Be careful of lawyers who ask for money upfront. If possible, speak to different lawyers to find out if you are being given good advice. If you cannot afford a private lawyer there are a number of places you can go to get free legal representation, including Legal Aid SA, university law clinics, pro bono (free) lawyers at private law firms or legal NGOs. See the Resources section at the end of this guide for more information. It may, however, be difficult to get a lawyer. In terms of the South African legal system, ordinary people are supposed to be given the opportunity to represent themselves in court if they cannot find a lawyer. If you know your rights, you can go to court and explain to the judge or magistrate that you do not have a lawyer but are trying to find one that will represent you. The judge or magistrate is likely to postpone the case until you can get a lawyer. FILE A NOTICE OF INTENTION TO OPPOSE OR DEFEND It is important to seek legal assistance as soon as you receive a summons or notice of motion, so that a lawyer can help you draft the notice of intention to oppose or defend the application while there is still time. As mentioned in section 2 of this guide, this is a formal process that requires notifying the bank s attorney and the court before a certain date (mentioned in the notice of motion or summons) and going to court to file a notice of intention to oppose or defend. Remember that a notice of intention to oppose is followed by an answering affidavit, and a notice of intention to defend is followed by a plea. It is important to raise some of the defences or arguments about why a sale in execution should not be allowed in these statements. See the section on raising defences later on in section 3 of this guide. If you are unable to get legal assistance you can ask the registrar or clerk of the court for guidance on how to draft this notice of intention to oppose or defend and how to file it in court. ATTEND THE COURT HEARING If you are served with a notice of motion or summons you should file a notice of intention to oppose or defend the application and attend court on the day of the hearing. Attending the hearing does not mean that you agree to the judgment debt or to your home being sold in execution but rather shows that you oppose it. You should attend the court hearing even if you do not have a lawyer or only received the notice a few days before the the court date. If this is the case, you should ask the judge for a postponement until you can find legal representation.

32 30 Preventing or Opposing a Sale in Execution A LEGAL GUIDE An example of a notice of intention to defend. An example of a plea. RAISE DEFENCES AGAINST THE SALE IN EXECUTION It is important to raise defences or arguments to show why the sale in execution of your home should not be allowed by the judge. You could raise defences that have to do with problems in the way in which the process has been carried out (these are called procedural defences) or defences that have to do with why the sale in execution should not take place (these are called substantive defences). As mentioned earlier in this guide, the Constitutional Court has held that a judge can only authorise a sale in execution of a person s home if he or she has considered all the relevant circumstances and is satisfied that the sale would not amount to an unreasonable infringement of the constitutional right of access to housing. This means that a judge can only grant an order allowing the sale in execution of a person s home if he or she believes that it would be fair in the circumstances. It is for this reason that you should provide the court with all your personal circumstances and the information about your debt or loan. This should include: Information about the fact that this is your home (the place where you ordinarily live and reside), Information about the amount of debt that remains outstanding (how much of the debt you have not paid off),

33 HOW TO OPPOSE OR PREVENT A SALE IN EXECUTION OF YOUR HOME 31 Information about the amount of debt in arrears (the number of instalment payments that you missed), Information about why you fell into arrears or missed payments, Information about all the amounts that you paid to the creditor or bank before you started missing payments, Information about the efforts that you made to repay the debt in the past, Information showing how you attempted to find solutions to restructure your debt repayments through conversations or negotiations with the bank, Information about your sources of income (to show that you can pay off the debt), Information to show that there may be other ways in which you can pay off the debt that would be less harmful to you, or Information about how the sale in execution of your home could lead to you becoming homeless or losing your government housing subsidy. You should also explain what your defences are. Substantive defences can relate to: The fact that you are not actually in arrears. How the sale in execution will affect you and your family. How there are other ways in which you can repay the bank that would be less damaging to you. How the bank has unreasonably refused to find other ways for you to repay your debt. Whether there is a threat of homelessness and a lack of an alternative place for you to stay. Procedural defences can relate to: How you did not receive notices or court papers that were supposed to be served on you. No legal representation. MONITOR THE SALE IN EXECUTION If a court orders the sale in execution of your home despite you opposing the application, you should still monitor the sale in execution to make sure that the legal processes as set out in this guide are properly followed. This is important because if certain material (essential or important) steps in this process are not followed, you could apply to another judge to have the sale in execution of your home set aside or reversed. A material step would be a step that, if it was not followed, would cause you harm or prejudice you, and would defeat the purpose of the rules of court. By monitoring how the sale in execution takes place, you can gather evidence to show that important steps were not properly followed. For more information about how to have a sale in execution set aside or reversed, see section 4 of this guide which follows next.

34 32 4 what to do if a sale in execution has already taken place If your home was unfairly or unlawfully sold in execution to satisfy an outstanding debt, there may be a number of things that you can do to try to get your house back or have the sale set aside or reversed. These include: Having an order in judgment debt rescinded in court Having a sale in execution set aside by a court Opposing eviction proceedings HAVING AN ORDER IN JUDGMENT DEBT RESCINDED IN COURT You may only become aware that a bank has applied to court to have your home sold in execution after a default order has already been granted (for a definition of default order, see page 18 of this guide). As a result you would not have had a chance to oppose the granting of the order. If this is the case, you may be able to have the default order rescinded by applying to the High Court or Magistrates Court where the order was made. It is not easy to have a court order rescinded. For this reason, you should try to do everything you can before a sale in execution takes place. If you want to rescind an order it is recommended that you get a lawyer to help bring your application because rescission applications are complex and may be difficult to understand. Definitions The rescission of a judgment or having a judgment rescinded means that a court sets aside a judgment as if the judgment had never been granted.

35 WHAT TO DO IF A SALE IN EXECUTION HAS ALREADY TAKEN PLACE 33 To have an order rescinded, you will have to prove that: You had a valid legal defence against the order you are trying to rescind at the time that the order was granted. This means that if you had opposed the order and raised the defence, that you would have succeeded in dismissing the bank s case. You were not in willful default of appearance at the court hearing. This means that you must show the court that you did not fail to defend the case simply because you did not want to. You must show that you would have opposed the case if you had known about it. Courts will consider rescinding default orders if you can show that you did not receive any legal notices or summons about the legal proceedings and can show that you had a valid legal defence that would have meant that the court awarding the default judgment would not have granted it. The law requires that you apply for the rescission of a court order within 20 days of becoming aware of the court order. HAVING A SALE IN EXECUTION SET ASIDE IN COURT Having a sale in execution set aside or reversed is difficult to do. This is because the law provides a lot of protection to the new owner who bought the house in the sale in execution. A court must be convinced that there are very good reasons before it sets aside a sale in execution. A sale in execution could be set aside if you can show that: The material or important steps in the legal process of a sale in execution were not properly followed. The debt had already been paid off or the loan agreement had been reinstated by the time the sale in execution had taken place. The sale in execution was unreasonable because there were other, less harmful, ways to recover the outstanding debt. It is recommended that you get a lawyer to help you bring an application setting a sale in execution aside because these processes are complex and could be difficult to undo. OPPOSING EVICTION PROCEEDINGS Once your home has been sold in execution to satisfy a debt, you are no longer the lawful owner of the property. This means that the new owner could ask you to leave the property if you have alternative housing to live in. If you do not have anywhere else to go or you refuse to leave the property, the new owner may apply to court for a court order to evict you from the property. See SERI s guide on resisting an eviction mentioned in the Resources section of this guide for information on how to resist an eviction. IMPORTANT INFORMATION TO KNOW Even though you might be an unlawful occupier, you still have rights. You cannot be evicted without a court order that has been lawfully obtained.

36 34 5 resources REPORTS OTHER INSTITUTIONS RESISTING EVICTIONS IN SOUTH AFRICA: A LEGAL AND PRACTICAL GUIDE EVICTIONS AND ALTERNATIVE ACCOMMODATION IN SOUTH AFRICA : AN ANALYSIS OF THE JURISPRUDENCE AND IMPLICATIONS FOR LOCAL GOVERNMENT Tel: edward@seri-sa.org LEGAL ASSISTANCE AND ADVICE LEGAL AID SOUTH AFRICA National Tel: CENTRE FOR APPLIED LEGAL STUDIES (CALS) University of the Witwatersrand, Johannesburg Tel: LAWYERS FOR HUMAN RIGHTS (LHR) Pretoria, Johannesburg, Cape Town, Durban and Upington Tel: (Pretoria Office) LEGAL RESOURCES CENTRE (LRC) Johannesburg, Cape Town, Durban and Grahamstown Tel: (National Office) PROBONO.ORG Johannesburg and Durban Tel: (Johannesburg Office) SOCIO-ECONOMIC RIGHTS INSTITUTE OF SOUTH AFRICA (SERI) Johannesburg Tel: DEBT COUNSELLING ASSOCIATION OF SOUTH AFRICA (DCASA) Tel: info@dcasa.co.za GAUTENG CONSUMER AFFAIRS COURT (GCAC) To have a complaint heard by the court, a debtor must lay a complaint with the Gauteng Office of Consumer Affairs and Business Compliance. GAUTENG OFFICE OF CONSUMER AFFAIRS AND BUSINESS COMPLIANCE Tel: consumer@gauteng.gov.za za/consumeraffairs/pages/ ConsumerAffairs.aspx NATIONAL CONSUMER TRIBUNAL Tel: / registry@thenct.org.za OFFICE OF THE OMBUD FOR FINANCIAL SERVICES PROVIDERS (FAIS OMBUD) Tel: / info@faisombud.co.za SOUTH AFRICAN BOARD OF SHERIFFS Tel: contact@sheriffs.org.za SOUTH AFRICAN UNIVERSITY LAW CLINICS ASSOCIATION (SAULCA) National Tel: NATIONAL ALLIANCE FOR THE DEVELOPMENT OF COMMUNITY ADVICE OFFICES (NADCAO) National Tel:

37 EXAMPLES OF COURT PAPERS 35 6 examples of court papers An example of a section 129 notice. An example of a registered mail collection notice.

38 36 Preventing or Opposing a Sale in Execution A LEGAL GUIDE An example of a summons. An example of a warrant of execution.

39 EXAMPLES OF COURT PAPERS 37 An example of conditions of sale. An example of a notice of intention to defend.

40 38 Preventing or Opposing a Sale in Execution A LEGAL GUIDE An example of a plea.

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42 40 Preventing or Opposing a Sale in Execution A LEGAL GUIDE

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