The gates have been closed (temporarily) on foreclosures

On 2 May 2018, Judge President Mlambo issued a practice directive applicable to the Gauteng Local Division, Johannesburg for a Full Court to be constituted to decide the legal issues that arise from application proceedings launched by bond creditors (mostly the commercial banks) and which are not opposed by the home owners concerned, for: 

• money judgments for the accelerated payment of the full outstanding balance due under a home loan secured by a mortgage bond over the home; and
• an order declaring that the property may be sold on auction by the Sheriff.

It has been the practice of the Gauteng Local Division to postpone these foreclosure applications for a few months to give homeowners a chance to pay the arrears on their bond account. If the homeowner is able to pay the arrears, then the court would not give an order for the home to be sold on auction. This practice is aligned with s26(3) of the Constitution which provides that “no one may be evicted from their home, or have their home demolished without an order of court made after considering all relevant circumstances…”. Naturally bond creditors are aggrieved at the delay as they are not being paid the monthly instalments and are not able to get their money through the courts. 

What has been happening as a result is that the bond creditors have started asking the court only for money judgments for the full accelerated outstanding balance due on the home loan. With that judgment the bond creditor then issues a warrant of execution and attaches the movable property of the homeowner. That property is then sold on auction and the money is paid into the bond account to reduce the balance due.

The disparity in the processes described above has become an issue and accordingly the Full Court will be asked to consider:

• whether the Court has a discretion (in terms of the National Credit Act), when postponing an application in respect of the executability of a property in order to afford the homeowner an opportunity of paying the arrears, to refuse to give an immediate accelerated money judgment for the outstanding amount due in terms of the bond;
• if the Court does have that discretion, whether the Practice Manual should stipulate uniformity of treatment by the Judges in the Gauteng Local Division and if so, what should that uniformity be; and
• the circumstances under which the Court should set a reserve price for an auction of the immovable property and how that reserve price would be determined.

Notwithstanding the 2 May practice directive, homeowners continue defaulting on bond payments and bond creditors have carried on enrolling foreclosure applications for hearing pending the outcome of the hearing of the Full Court. That was until 28 May 2018.

On 28 May 2018, Judge President Mlambo issued a further directive that:

• all foreclosure matters already enrolled be postponed sine die pending the decision of the Full Court; and
• no new matters involving the issues that would be considered by the Full Court can be enrolled until such time as the Full Court has made its decision.

So there it is. The hearings of foreclosure matters in the Gauteng Local Division, Johannesburg have been placed on hold until the Full Court has handed down judgment on the issues.

It is important to note that these directives only relate to foreclosure matters issued out of the Gauteng Local Division, Johannesburg. Given that the Gauteng Provincial Division, Pretoria has concurrent jurisdiction, forum shopping is probably inevitable, as is a similar practice directive in that court.