Hundreds of people who had their homes repossessed — primarily due to missed bond payments — and then sold for a fraction of their true value are anxiously awaiting the start of a R60 billion class action against major banks.
Many of these people had their homes auctioned off for as little as 10% of their market value, and have been homeless and destitute for over a decade while the banks recovered the debt.
Most of these people are poor and not able to recover their losses after losing their homes to the banks.
The class action against banks such as Absa, Standard Bank, FirstRand Bank, and Nedbank was filed in 2020 in the Gauteng High Court, Johannesburg. However, the quest for justice began much earlier.
In 2017, the affected individuals sought damages from the banks by turning to the Constitutional Court.
Advocate Douglas Shaw, an expert in this field, has dedicated many years to building their case. The Constitutional Court, however, referred the matter to the lower court (the high court) for further hearing.
Now, they are seeking certification for the R60bn class action, which the banks are opposing, denying any wrongdoing.
Other respondents in the matter include the SA Human Rights Commission, the Rules Board and the Minister of Justice, although the applicants are mainly seeking relief from the banks.
The more than 200 applicants are now desperately hoping that a meeting scheduled between their legal team and that of the banks, with the judge hearing the matter, will proceed this week.
The meeting is scheduled to happen virtually, during which all the parties concerned will pave the way for the certification application to get off the ground.
Some of those who had lost their homes told Independent Media that they simply want justice.
They said they have been waiting since 2016 for some kind of judicial intervention. “Some of us are living below the poverty line due to the banks, who sold the houses for a song. We just want to ensure our case is heard and that we receive justice,” one of the applicants said.
In their application, they are asking the court to represent various different classes. These include those whose properties were sold for more than 10% below market value.
Up to 2017, the banks were selling houses at sheriff auctions, without a reserve price, thus leading to substantial losses and the owners still owing large sums to the bank after the auction. In 2018, the Gauteng High Court, Pretoria, altered the rules to include reserve prices for properties to be sold by auction by a bank.
The applicants said in their application that the practices of the defendant banks are not justifiable in a democratic society.
They said that in the event that the banks are held liable for past sales in executions that were unjustly obtained, the applicants should be suitably compensated.
It is said that for the most part, an extremely economically challenged and poor group of individuals, with a very small legal team, are faced with an extremely sophisticated group of defendant banks.
The banks, it is said, have access to a strategic and rich legal team consisting of some of the best advocates and attorneys in the country to represent them.
Each of the class members has, at various times and at various locations, entered into mortgage bond agreements with the defendant banks, who have obtained court orders for them to sell the properties by way of sale in execution when the people fell in arrears with their bond payments.
It is said that the banks sold the properties for substantially less than the properties are worth and/or not as a last resort.
The applicants do not dispute that occasionally and in certain instances, the banks are and should be entitled to sell properties in sale in execution using their security. They; however, dispute the constitutionality of selling properties in execution when It is not necessary, in that the sale is not executed as a last resort; or when the sale price accepted is far lower than the market value of the property.
It is claimed by them that the average price properties have sold for in execution has been around 50% of the market value. In many cases, properties have sold for discounted prices of around 10% of the market value.
In fact, it was stated in court papers, in some instances, properties were even sold for prices as low as R100.
It is said that the immovable properties sold by the banks by way of execution, were the applicants’ only place of residence.
It is stated that the banks in most cases instruct the sheriff to attend to the sales in execution and the latter then accept a sale price in an amount which is considerably lower than the fair market price or value of the immovable property at the time of the sale.
The market price is defined as the amount that would be obtained from a sale of the property if it was sold by competing estate agents in a usual "willing buyer, willing seller" situation. It will be argued that the bank could have arranged this, instead of a sheriff's auction by an agreement, leaving the defaulting homeowner out of pocket.
It is stated in court papers that in each of the applicants’ circumstances, and in fact in more than one hundred thousand instances within South Africa since the inception of the Constitution, properties have been sold in execution.
“The sale of properties for much less than fair market value is at great human cost…. The class members (applicants) are left with no place to live, or a much inferior place to live, which particularly flies in the face of justice when the sale is not a last resort.”
It is further said that in many, if not most cases, these people’s life savings are destroyed as a result.