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Tuesday Apr 12, 2011

Bank gets bloody nose over property grab

The Constitutional Court has ruled that only a judge can decide if a bank can sell the home of a person who defaults on his or her bond.

The court ruled yesterday that a court of law must exercise judicial oversight if indigent debtors risk losing their homes after judgment on a money debt.

"It is unconstitutional for a registrar of a high court to declare immovable property specially executable when ordering default judgment," the ruling stated.

The case involved Elsie Gundwana, a resident in Thembalethu, outside George.

Nedcor sold her house to collect R5 268 arrears on her bond. In 2003 the property was sold in execution to Steko Development CC after Gundwana missed payments. Steko subsequently obtained an eviction order against Gundwana, who claimed the order was granted without her knowledge.

Gundwana argued that it was for a judge, not a registrar, to consider if a person's house could be sold in execution. She unsuccessfully appealed against the eviction order in the Western Cape High Court and the Supreme Court of Appeal. Yesterday the Constitutional Court agreed with her and said normally banks should first try to settle debts by trying to execute movable property.

Her lawyer, Francois van Zyl, said Gundwana was delighted about the precedent the court ruling had set.

"It means banks that wish to execute on mortgage bonds must approach a judge and show why the sale of a person's home would be justifiable in all the circumstances," he said.

"One of the most important factors will always be the amount a bond holder is in arrears. Banks must now be on their guard to ensure they conduct themselves fairly and constitutionally towards their mortgage customers."

Gundwana's case was referred back to the Western Cape High Court for determination of her review application on the default judgment granted against her.

The court also set aside the eviction order and referred it back to the George Magistrate's Court for final determination, once the High Court has ruled on her rescission application.

The court ordered that Nedcor Bank and the justice minister foot Gundwana's legal bill.

Teboho Mosikili, an attorney at the Socio Economic Rights Institute, said the ruling was not applicable retrospectively, but would be applied in future cases.

"I don't have statistics, but every day an order is being issued for a house to be sold in execution," he said.

National Consumer Forum spokesman Thami Bolani said: "The Constitutional Court made a significant judgment which we believe will enhance consumer protection in the country."

He said many people had lost their homes after losing their jobs and and later becoming indebted to banks.

"A house is an important investment and it is important that before it is taken away, a rigorous process be followed," said Bolani.

"This judgment will ensure consumers' most important asset does not get taken way easily."

Cape Times

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