Reinstatement of a Home Mortgage Bond by Paying the Arrears: The Need for Appropriate Legislative Reform

• Jurisdiction: South Africa
• Pages: 132-155
• Published date: 16 August 2019
• Citation: (2015) 26 Stell LR 132
• Author: Lienne Steyn
• Date: 16 August 2019

132

REINSTATEMENT OF A HOME MORTGAGE

BOND BY PAYING THE ARREARS: THE NEED

FOR APPROPRIATE LEGISLATIVE REFORM

Lienne Steyn

BA LLB (Natal) LLM (UNISA) LLD (Pretoria)

Associate Professor, School of Law, University of KwaZulu-Natal

1 Introduction

The recent case of Nkata v Firstrand Bank Limited (“Nkata v Firstrand

Bank”)1 brings to the forefront yet again 2 the need for uniform and consistent

application, in all high courts, of clearly articulated substantive and

procedural requirements3 that must be met before the sale in execution, or

“forced sale”, of a person’s mortgaged home may proceed.4 The facts and

the outcome of Nkata v Firstrand Bank illustrate the failure of the applicable

South African statutory provisions to deal satisfactorily with the situation in

which a homeowner, having fallen into arrears in respect of home mortgage

obligations, thereafter remedies his default by paying the arrears to the

mortgagee. The judgment expo ses the lack of clarity regarding the application

of subsections 129(3) and (4) of the National Credit Act 34 of 2005 (“NCA”)

and the mortgagor’s entitlement to reinstatement of the mortgage agreement

in such circumstances.

This article discusses Nkata v Firstrand Bank and some of the

unsatisfactory aspects of the decision, including the retrospective impact of

the judgment upon the positions of the homeowner and the lender and also

resultant adverse implications for the purchaser in execution as well as the

subsequent purchaser in a private sale of the property. There is also the issue

of wasted expenditure a nd court time. The shortcom ings of subsections 129(3)

and (4), as well as their recent amendment by the National Credit A mendment

Act 19 of 2014 (“NCAA”) will also be discussed. Comparative observations

1 2014 2 SA 412 (WCC)

2 See L Steyn Sta tutory Regulat ion of Forced Sale of the Hom e in South Africa LLD t hesis Pretoria (2012)

1-647; L Steyn “Treatme nt of a Debtor’s Home in Insolvency: Compa rative Perspectives and Pote ntial

Developments in South Africa” (2013) 22 IIR 144 144-170; L Steyn “Sink or Swim? Debt Review’s

Ambivalent ‘Lifeli ne’ – a Second Sequel to ‘… a Tale of Two Judgments’: Nedbank v And rews (240/2011)

(2011) ZAECPEHC 29 (10 May 2011); Firstran d Bank Ltd v Evans 2011 4 597 (KZD) and Firstrand Bank

Ltd v Janse van Ren sburg 2012 2 All SA 186 (ECP)’’ (2012) 15 PELJ 189 189-231; L Steyn “FirstRand

Bank Ltd t/a First Nat ional Bank v Seyffer t and Another and three simil ar cases2010 6 SA 429 (GSJ),

Seyffert & S eyffert v Firstrand Ban k Ltd [2012] ZASCA 81 – Brin ging Home the Inadequac ies of the

National Cred it Act”(2012) 45 De Jure 639 639-651

3 Including st eps with which cred itors and debtors sho uld comply

4 Sometimes loo sely referred to as “home mor tgage foreclosure” “Foreclosure” in Roma n law involved

(and still does in some jurisdictions abroad) the forfeiture of the proper ty to the mortgagee upon the

mortgagor’s default See Steyn Force d Sale of the Home 33, 440 fn 113, 441, 457 fn 227 with refere nce, in

particu lar, to JG Miller The Family, Cre ditors and Insolvenc y (2004) 53, L Fox Conceptualising Home:

Theories, Laws, Policies (2007) 43 and EF Cousi ns Cousins on The La w of Mortgages 3 ed (2010) 514

(2015) 26 Stell LR 132

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will reect how some foreign jurisdictions’ legislation regulates forced sale

of a debtor’s mortgaged home and reinstatement after the homeowner pays

the arrears. This article emphasises the need for more appropriate legislative

amendment that will give effect to the objectives of the NCA and afford the

debtor’s home the respect and legal recognition which it deserves5 while

nevertheless positively affecting lender s’ interests.

2 Background: requirements for execution against a debtor’s

home

The combined effect of the Constitutional Court’s decisions in Jaftha v

Schoeman; Van Rooyen v Stoltz6 (“Jaftha v Schoeman”) and Gundwana v

Steko Development CC (“Gundwana v Steko”)7 is that it is acknowledged

that execution against a debtor’s home – even one that has been mortgaged

in favour of the cred itor – may constitute an unjustiable inf ringement of

the right to have access to adequate housing protected by section 26 of the

Constitution of the Republic of South Africa, 1996 ( the “Constitution”).

Now, in every case in which execution is sought against a person’s home,

judicial oversight is required, considering “all the relevant circumstances”,

to determine whether execution is ju stiable in terms of section 36 of the

Constitution.8

In Gundwana v Steko, the Constitutional Court declared invalid rule 31(5)

(b) of the Uniform Rules of Court (“High Court Rules”) to the extent that

it permitted a registrar (rather than a court) to issue default judgment and a

declaration of special executability of immovable property that constitutes a

person’s home. The Constitutional Court opte d not to rule against ret rospectivity

of its decision. However, it held that this did not mean that every sale in

execution that had occur red in consequence of an order of special executabilit y

issued by a registrar would automatically become invalid and void. When the

validity of a sale is challenged, each case would have to be considered on its

merits and in light of the relevant cir cumstances.9

The decision in Gundwan a v Steko supplemented the position as reg ulated by

rule 46(1) of the High Court Rules, as amended wit h effect from 24 December

2010.10 Rule 46(1) provides that only a court, and not a registrar, may issue a

writ of execution against the “pr imary residence” of a “judgment debtor” and

only after it has considered “all the relevant circumsta nces”. One would have

anticipated that, after a number of years of uncertainty and confusion,11 the

5 For discussion of this topic, see generally L Fox Conceptualising Home 1-543; L Fox O’Mahony &

J Sweeney (eds) The Idea of Ho me in Law: Displacement an d Dispossession (2010) 1-13; Steyn Forced

Sale of the Home 1-6 47; R Brits Mortgage Foreclos ure under the Co nstitution: P roperty, Hous ing and the

National Cred it Act LLD thesis Stellen bosch (2012) 378

6 2005 2 SA 140 (CC)

7 2011 3 SA 608 (CC)

8 For more detailed d iscussion of the position , see Steyn Forced Sale of t he Home 67-72; Steyn (2013) IIR

162-164; R Brits & AJ van der Walt “Application of the Ho using Clause duri ng Mortgage Foreclosur e: a

Subsidiarit y Approach to the Role of th e National Credit Act” ( Part 1) (2014) 2 TSAR 288 288

9 Gundwana v S teko2005 2 SA 140 (CC) paras 58-59

10See GN R 981 of 2010 in GG 33689 of 19-11-2010

11See Steyn Forc ed Sale of the Home 190-255

REINSTATEMENT OF A HOME MORTGAGE BOND 133

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