Banks heading for a showdown for 'unjust' sale of homes

Durban - THE country’s major banks are heading for a showdown with hundreds of aggrieved customers who have filed an application in the Gauteng High Court seeking certification of a R60 billion class action, claiming their homes were unjustly sold in execution for as little as 10% of their market value.

More than 200 bank customers, including Innocent Gwisai, Ernest Mashaba, John Mojake, Gladys Mviko, Elizabeth Majoro, Magda Odendaal, Anne Peachey and Johannes Theunis Booysen as well as the Lungelo Lethu Human Rights Foundation, which has for years fought for the rights of home owners, have filed papers requesting that the court certify them as a class to sue the banks for damages, alleging that their properties were in some cases sold for as little as R100.

The respondents in the matter include Nedbank; Absa; First Rand Bank; Changing Tides 17; Investec Limited; the National Credit Regulator, the SA Human Rights Commission, the Rules Board and the Minister of Justice and Constitutional Development, although the applicants are only seeking relief from the banks.

However, the banks have opposed the application and denied any wrongdoing saying that they understand the impact foreclosure has on their customers and their families.

In court papers, Booysen said that there were “literally tens of thousands of potential litigants in the matter whose rights have been violated since 1994”.

“This is a large class of people and many of the person in this class are poor,” Booysen said.

Booysen said the class members had a common cause of action in that the banks had sold their properties “for substantially (more than 10%) less than it was worth” while the properties of members of some of the subclasses outlined in court papers had been sold other than “as a last resort”.

Booysen said in some cases properties had been sold in execution when there was an offer to purchase pending at the time of the sale which the bank or sheriff had been made aware of before the sale, and in others properties had been sold when there were no arrears owed at the time of the judgment or sale.

He said properties had also been sold although the home owner had become able to pay the bond and arrears over the remaining time of the bond, if the interest was capitalised and in other cases there was sufficient equity in the property of more than 30% of the market value which meant the bank could have waited longer before selling the home.

Booysen added that properties had also been sold in execution when there was a rescission or appeal pending against a judgment on which the sale in execution was based.

“It is further averred that the bank has added charges and fees to the amount outstanding on bonds of the class members that are not authorised by the contract nor taxed nor agreed, and the bank has thus breached the contract, particularly when they appear in a certificate of balance,” Booysen said.

Booysen said the trial court may find that the banks’ actions of selling in execution in some or all circumstances is “indeed a delict in our law”. He said applicants could supplement the papers with at least 100 pages of affidavits regarding how banks allegedly sold properties when it was not "a last resort”.

"The defendant banks were aware that they were destroying the lives of people by eliminating their life savings and sometimes creating huge debts in addition and yet did not disclose this information to the courts or try to improve the sherrif’s system or work with the Minister of Justice to improve the sale in execution system," he said.

“They were aware that some properties were selling for R100 and most for huge discounts on their value. They did not do this once or twice, or even hundreds or thousands of times but hundreds of thousands of times even since the Constitution brought a new value system to South Africa. The defendant banks acted with callous indifference to their clients and their new rights and to the values expressed in the Bill of Rights,” he said.

Booysen argued that if the banks were not found liable in terms of the current law of delict or otherwise, “the trial would have an obligation to extend the common law in terms of constitutional rights … housing, property, dignity and life in order to find the bank so liable.”

However, Nedbank said in a statement that it “denies any wrongdoing as alleged and is opposing the application”.

“It is worth noting that a similar action was previously instituted and dismissed by the Constitutional Court in 2017. Nedbank would like to confirm that the reserve price for sales in execution, being the minimum price at which the property can be auctioned for, is currently determined by the courts,” she said.

“This has been the position since December 2017. Nedbank understands the impact of foreclosure and sales in execution on customers and their families. We regard sales in execution as a last resort. Our processes have and will always comply with applicable laws.”

A spokesperson for Standard Bank said the bank had opposed the application.

"Given that same is lis pendens, we cannot comment at this stage,” he said.

The other banks had not responded to a request for comment while Investec could not be reached at the time of publication.