Gauteng High Court Rules On Auction Reserve Prices
The South Gauteng High Court recently heard arguments from both banks and consumer organisations about the need to set a reserve price on a home that will be sold on auction to recover the bank’s funds.
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The Law Changed, Some Courts Didn’t
In 2017 changes to the law made it possible for judges who here such matters and who grant the banks permission to sell homes on auction to set a reserve price before the auction. The intention was to prevent the sale of peoples homes for peanuts and then leaving the consumer with a massive debt and no home.
Though the new law was in place it is being used inconsistently across the country. As a result, a full bench of judges were asked to rule on this matter in the Gauteng area. They were also asked to rule on whether a consumer who is in arrears and is having their home sold on auction can reinstate the bond by paying off all the arrears and reasonable legal costs (something about which there is still debate even though there have been previous court cases showing it is possible)
This month the South High Court ruled that all houses and properties in their jurisdiction will have to have a reserve price set before a home is put on auction. Though they gave no specific guidance on exactly how this should be done and what that reserve price will be, this means that there should be a dramatic drop in any monkey business behind the scenes and homes being sold on auction for R10 and the like (as has happened in the past).
Going, Going, Gone!
The court also said that all matters relating to a single case should be heard at the same time. This is in reaction to the banks often taking the same matter to high court (which is very expensive) twice. Once for the amount owing and once for the order to be allowed to auction off the home. This double charge strategy has seen poor consumers who have financial difficulty simply being financially unable to offer a proper defence.
Consumer rights organisations say that this is a huge win for consumers and will see the banks having to the stick to the SA Constitution. They are also happy to have obtained confirmation that as long as a consumer pays up arrears and reasonable legal fees they have reinstated the contract with the credit provider and in such a case the bank could not go ahead with a sale on auction any more. As long as such payments are made before the auction the account would be reinstated and continue as normal.
It is likely that this ruling will influence courts across the country and that they too will begin to consistently set reserve prices for all auctions except for exceptional cases.