Can a Creditor Sell the Home of a Debtor to Recover Outstanding Debt?

Most South Africans today, are overburdened and overwhelmed with debt and are struggling to repay creditors. According to recent statistics, a third of people in South Africa with credit are struggling to repay their debts. This means, there are approximately 10 million people who are three months or more behind on debt repayments. This article will explore under what circumstances can a creditor (someone to who you owe money) have your residential home or immovable property sold in execution to obtain payment of an outstanding debt after judgment has been granted in their favour.

The case of Jaftha v Schoeman and Others, Van Rooyen v Stoltz and Others (Jaftha) concerned a person who was overburdened with debt and was unable to repay her creditors. The facts of the case were as follows: Ms Jaftha was unemployed, ill, and poor. She only had standard two education. In 1997, Ms Jaftha was granted a state housing subsidy with which she bought a home where she lived with her two children.

In 1998, Ms Jaftha borrowed R250 from Ms Skaarnek which was to be repaid in instalments. Ms Jaftha was unable to repay the amount owed and Ms Skaarnek approached a law firm to enforce payment. In March 2001, she was informed by Markotter Attorneys that she would need to pay R5,500, including accrued interest, otherwise, her residential home would be sold. Ms Jaftha was unable to pay this amount and was forced to vacate her home following its sale in execution for R5,000 on 17 August 2001.

The Constitutional Court in the Jaftha case, clearly outlined the legal process which ought to be followed before a creditor can have the residential home of a debtor sold in execution to recover payment of an outstanding debt. In principle, the court held that a creditor after obtaining judgement, must first resort to attaching the movable property of a debtor to enforce payment of an outstanding debt. It is only once there is insufficient movable property to satisfy a debt, then a creditor may proceed to apply to the court to request the immovable property or residential home of a debtor to be sold to obtain payment of the debt. Therefore, a creditor cannot, as a first resort, have a debtor’s residential home sold to obtain payment when the debtor has not paid their debts.

The court introduced in this case the mechanism of “judicial oversight”, which means, that before the residential home of a debtor may be sold to satisfy a debt, the court must grant permission to do so. The following factors will be taken into consideration by the court before permitting such an order: the circumstances in which the debt was incurred; any attempts made by the debtor to pay off the debt; the financial situation of the parties; the amount of the debt; whether the debtor is employed or has a source of income to pay off the debt and any other factor relevant to the particular facts of the case before the court.

However, recent case law developments have indicated that it may be possible for creditors, in specific circumstances, to have the immovable property of a debtor sold to obtain payment of a debt as a first resort. Effectively, this opens the possibility of creditors being able to bypass the requirement of attaching the movable property of a debtor first.

The Supreme Court of Appeal in the Mapea v M.A Selota Attorneys and Another case has recently endorsed the decision of Silva v Transcope Transport Consultants and Another in which the court held that where a debtor acts in a tricky manner and deliberately frustrates the creditors’ efforts to obtain payment. The court can exercise its discretion to allow execution against the debtor’s immovable property without resorting to the attachment of movable property first.

The implication of this case is that a court can order the sale of immovable property to obtain payment in instances where a debtor is wilfully and intentionally acting in a way that frustrates the creditors’ right to obtain payment. For example, if the debtor has fled the country to avoid payment, or the debtor is hiding their movable property from the creditor.

In conclusion, a creditor cannot, as a first resort, have the residential home of a debtor attached to recover payment of an outstanding debt. The creditor is first required to enforce payment by attaching the movable property of a debtor. However, there may be instances where a creditor can surpass/bypass attaching the movable property of a debtor and could have the immovable property of a debtor sold as a first resort.

Reference List:

1. https://www.theoutlier.co.za/economy/2024-04-08/87042/south-africans-debt-problem (accessed: 19-07-2024).
2. Jaftha v Schoeman and Others, Van Rooyen v Stoltz and Others (CCT74/03) [2004] ZACC 25; 2005 (2) SA 140 (CC).
3. Mapea v M.A Selota Attorneys and Another [2023] ZAGPPHC 437.

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