A class action lawsuit valued at 60 billion rand (3.2 billion US dollars) will soon proceed in court. The case involves hundreds of people who have lost their homes due to failing to make bond payments.
Douglas Shaw, a lawyer who has invested years in developing this case, told Class Actions Insight that the Gauteng High Court in Johannesburg is about to announce a hearing date. Initially filed in 2020, the case has faced numerous delays; however, there is optimism that the court will certify it as a class action within the coming months.
Many affected homeowners saw their properties auctioned for as little as 10% of their market value, leaving them homeless and destitute, while banks such as Absa, Standard Bank, FirstRand Bank, and Nedbank banks recovered their debts.
Until 2017, banks conducted property sales at sheriff auctions without a reserve price, resulting in significant financial losses for homeowners who continued to owe substantial amounts to the banks post-auction. In 2018, the court amended the regulations to mandate reserve prices for properties sold at bank auctions.
Each class member has entered into mortgage bond agreements with the defendant banks at different times and locations. The banks have secured court orders permitting them to sell properties through execution sales when individuals default on their bond payments. Allegedly, the banks sold these properties for significantly less than their actual value and not as a measure of last resort.
While the applicants acknowledge that the banks have the right to sell properties in execution under certain circumstances, they contest the constitutionality of executing sales when such actions are unnecessary or when the accepted sale price is considerably below the property’s market value.
Properties sold in execution have generally fetched an average price of about 50% of their market value. In several cases, the selling prices have been further reduced, with discounts reaching approximately 10% of the market value. Court documents indicated that, in certain cases, properties were sold for prices as low as R100.
The banks are currently contesting the application and refute any allegations of misconduct. FirstRand Bank, echoing the sentiments of the other financial institutions, stated in its opposing documents that the belief that banks auction properties indiscriminately and without consideration for the property owners is “simply not true.”
