SA Affordable Housing March - April 2020 // ISSUE: 81 | Page 37

FINANCE MATTERS
SIE process may be initiated by a bank when a mortgagee is no
longer able to, or in some cases when a mortgagee is unwilling
to, repay the monthly instalments in terms of their home loan
agreement. Bondholders are required by law to approach a
court and get a court order before they can repossess a
property, the court order will declare the property ‘specifically
executable’ and only then can the SIE process be initiated. The
bondholder is typically only able to do this after many requests
to the mortgagee informing them to pay the outstanding
amount on their home loan and when there is no other way to
recover the amount owing to the bank. The warrant of
execution gives the sheriff the legal power to take possession
of the property and a mandate to sell the property. When a
debtor’s home is sold at a SIE he or she is no longer the legal
owner of that property. Upon obtaining a warrant of execution
a bondholder must use it within three years of obtaining it or
within three years from the last payment accepted from the
defaulting mortgage, if the warrant of execution is not used by
the bank within this time it becomes invalid.
Sales in execution are an important way for bondholders to
enforce their rights in terms of mortgage agreements that they
have with mortgagees (debtors) and the courts are positioned
to decide whether to allow a SIE to go ahead by carefully
considering the rights and interests of both the bondholder
and the mortgagee. It is imperative that a court makes sure that
the sale of the property will be proportional to the bank’s
interest in recovering the debt, a court will not allow a
bondholder to sell a debtors home to recover a small amount
of money when there could be another way for the bondholder
to recover this amount. A reserve price may also be set, to
ensure that a property is not sold for a drastically reduced
amount than what it may potentially be worth.
process of a mortgagee whose primary residence goes into a
SIE, if a mortgagee’s second home or other property is sold
then different rules may apply. This underscores the
importance of communicating to the bank the most up-to-date
address where, as the mortgagee, you regularly receive mail
and where the bank should send any notifications. When a
defaulting mortgagees’ home is repossessed by a bank and
then sold at a sale in execution it is in view of the statutory
responsibility that banks have, to guard against the arbitrary
dispossession of housing; because access to a residence
(home) fulfils a fundamental and constitutional right, it is
crucial to give context to when a sale in execution (SIE) process
may be initiated by a bank and the possible actions that a
mortgagee may take to circumvent an SIE.
The law provides some protection to homeowners who are
at risk of losing their home and so before a bank can put a
property up for a SIE the bank has to follow specific
requirements set out in law. The SIE process is dealt with in
Section 129 of the National Credit Act (NCA) which is typically
the first step of a SIE process and Rules 6 and 46 of the Uniform
Rules of Court. Due to the emotive and socio-politically
charged nature of SIEs there have been several court cases that
have made their way into the public domain and dominated
much of the discussion around what is the responsibility of
government and that of banks in keeping with the spirit and
prescripts of the Constitution and ensuing legislation around
access to housing.
A sale in execution sometimes referred to as a property
repossession, is a legal process where a property is sold at a
public auction by a local sheriff, appointed as an officer of the
court, on instruction by an executive creditor (usually a bank)
to the highest bidder at the fall of the auctioneers hammer. The
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