Home South African Multi-billion class action suit launched against SA banks over home foreclosure

Multi-billion class action suit launched against SA banks over home foreclosure

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The applicants are drawn from all segments of the South African population and are demanding damages from the major banks for selling their properties for a fraction of their market worth as a result of the foreclosure process.

JOHANNESBURG – The Lungelo Lethu Human Rights Foundation along with hundreds of their clients have launched a class action suit against South African banks on Wednesday in the Johannesburg High Court.

The applicants are drawn from all segments of the South African population and are demanding damages from the major banks for selling their properties for a fraction of their market worth as a result of the foreclosure process.

According to the foundation, it is estimated that upwards of 100,000 people have lost their homes since the constitution came into effect in 1994 in violation of constitutional protections against arbitrary deprivation of property, as well as protections to life and dignity.

The foundation said that some of these properties were sold for as little as R100 following the sale in execution process.

“The case was filed yesterday in the Johannesburg High Court after the case first brought directly to the Constitutional Court in 2017. The Concourt directed that the case should be first brought before the high court. King Sibiya, President of the Lungelo Lethu Human Rights Foundation, says the case is vital to restoring human rights and dignity for those stripped of their homes. “Most of those affected are from poor communities,” the foundation said in a statement. 

“The purpose of this case is to restore to people their rights, property and dignity after 25 years of systematic abuse by the mortgage banks. The evidence before the High Court details how the banks have abused the court processes to have people evicted from their homes, for arrears amounts that were frequently trivial. The evidence is incontrovertible. The result of these abusive practices is that families were left homeless and destitute. The banks have claimed they resort to sales in execution as a last resort, but our evidence shows this is not the case. Foreclosure is often used as a first resort, which is against the law and the Constitution,” Sibiya said. 

 

The foundation also claimed that some of the applicants in the case were evicted from their homes after the banks claimed they had fallen into arrears on their mortgage bond repayments. 

The foundation’s statement said, “The first they heard about it was when a “new owner” turned up at the door claiming the right to take occupation. There was no serious attempt to communicate with the home owners, nor were many of them served with Section 129 notices as required under the National Credit Act when a creditor seeks to recover arrears.”

The applicants are applying to the court to be recognised as a class of applicants with substantially the same complaints. 

The different classes are:

– Those whose properties were sold for more than 10% below market value since the Constitution came into effect in 1994

– Those whose properties were sold by the banks in a manner which was not a “last resort” as required by law

– Those who remain in debt to the bank after their properties were sold for below market value

– Those who were over-charged on their bond fees in the course of legal action.

All the major banks are cited as respondents, as well as the National Credit Regulator, the SA Human Rights Commission and the Minister of Constitutional Development.

Until 2018, foreclosed properties were sold at sheriffs’ auctions without a reserve price, which resulted in some properties being sold at sheriffs’ auctions for 10% (and less) of their market value.

The high court rules were changed to require the setting of a reserve price after Lungelo Lethu Human Rights Foundation brought a case before the full bench of the Johannesburg High Court in 2018.

The widespread sale in execution of homes at below market price violates Constitutional rights against arbitrary deprivation of property, argue the applicants. Many properties have been sold for “50% or even 90% less than they were worth.”

“Some of the applicants had their properties sold at auction for a fraction of their market worth even when they better offers from private buyers. Some had judgments issued against them even though they were up-to-date on their monthly mortgage instalments. Others attempted to have their arrears spread over the remaining term of the mortgage loans, but were refused by the banks. Some of the applicants lost their houses even though they had rescission applications or appeals pending before the court – which should freezes any attempt to sell the property,” the foundation further said in a statement. 

The applicants are asking that the court trial focus “on the questions of whether the witness’s property was sold for substantially less than value and whether the sale was a last resort and thus whether the bank is liable to that class and to avoid issues extraneous to those issues.”

Victory for the applicants would result in financial compensation for their losses, the rescinding of any judgments against them and expunging adverse listings with the credit bureaus.

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