Even homeowners in default of their mortgage loans have rights, says court

A judgment handed down last Friday in the Johannesburg High Court should give comfort to homeowners in default of their mortgage loans: they, too, have rights that must be protected.

Changing Tides, part of SA Home Loans, had asked the court for a money judgment against Itumeleng Tsapi, alleging that he was in default on his home loan.

At the same time, it asked for Tsapi’s property to be declared specially executable – meaning Changing Tides would have the right to sell it at auction.

Read:
FNB home repossession goes horribly wrong
Banks can expect a noisy reception over R60bn home foreclosure class action
Durban man takes on FirstRand over home loan dispute – and gets court backing

Not so fast, said Judge Seena Yacoob of the Joburg High Court.

“A person’s home can only be declared specially executable by a judicial officer who is required to exercise their discretion after considering all relevant factors.”

These factors include the circumstances in which the debt was acquired, attempts made to pay off the debt, the financial and employment situation of the debtor, among others.

One of the key factors to be considered in such cases is whether the property being repossessed is the borrower’s primary residence.

Changing Tides was unable to provide this information to the court.

“While an applicant is only required to set out information that is known to it, this does not release it from the obligations to make reasonable enquiries,” reads the judgment.

Judge Yacoob dismissed Changing Tides’s case as “hopelessly flawed” – and this is not the first time Changing Tides has been on the receiving end of a withering court judgment.

It didn’t get much better for Changing Tides …

“Too often, an applicant for default judgment and special executability pays lip service to the requirements, either referring to information that is not before the court or making assertions that are not supported by the papers,” reads the latest judgment.

“There is no compliance with the basic rules of evidence and affidavits, let alone the specific requirements for applications of this type.”

The company alleged that Tsapi had made no payment since 1 June 2024, and referred to a certificate of balance that was not annexed to the affidavit.

It then alleges that the last payment made by the borrower was received in November 2023.

So which version was true?

The company then alleged it knew nothing about Tsapi’s financial strength – as required by courts in cases such as this – but baldly asserted the he could not satisfy the debt.

It was unclear, noted the judge, how Tsapi was able to obtain a loan “with no information about his financial position, nor how Changing Tides knows the debt cannot be satisfied in any other way”.

The company did not explain how and when Tsapi breached the loan agreement, nor were any details provided on the payment history or what attempts were made to contact the borrower to resolve the issue.

Lenders keep pushing their luck

Applicants such as Changing Tides seem unfazed by repeated removals from the roll because of shortcomings in their applications, and take advantage of the leniency of the court allowing them to repeatedly supplement their applications, said Yacoob.

“Not only does this result in unwieldy court files, the clogging of court rolls with matters that ought not to be there, and a waste of judicial resources with judges having to read and re-read multiple affidavits on multiple set down dates, there is also the risk of unnecessary compounded costs being added to the account of the hapless respondent/ defendant whose loan agreement makes them liable for debt recovery costs.”

Listen/read: How to manage and, eventually, say goodbye to debt

The dismissal of the case launched by Changing Tides does not mean it has hit the end of the legal road, but it has to bring a “proper application’” before the court.

Consumers urged ‘not to give up’

The ruling is an important one for consumers, says consumer legal advisor Leonard Benjamin.

The lesson here is not to simply give up when dragged to court by lenders, but to post a defence and force the banks to honour the rights embedded in law.

Read: SCA orders FirstRand to repay client R170k for defective bakkie

“Credit providers believe that they are entitled to judgment just because the consumer is in default,” says Benjamin.

“This is, apparently, a belief shared by consumers because in a vast majority of cases – perhaps up to 90% – consumers don’t oppose the proceedings.

“However, the fact that the consumer may be in default is only the start of the enquiry that the court must make before it grants an executability order.”

Rule 46A (of the court rules) allows a consumer to place facts regarding their circumstances before the court even though they may be in default.

Read:
Can the bank take your house if you are under debt review?
FirstRand sees higher debt review activity, even among those not in arrears

“Should the facts that are presented show that it would be unjust to grant an executability order – for instance, that there are alternative ways available for recovery of the judgment debt – the court may not grant the judgment at all,” says Benjamin.

“This should be an incentive for consumers not to simply give up.”

Follow Moneyweb’s in-depth finance and business news on WhatsApp here.