Section 26(1) of the Constitution of South Africa, which forms part of the Bill of Rights where the various fundamental rights are enumerated, confers the right of access to adequate housing on everyone. Whilst the state has a duty to achieve the realisation and progression of this right, it is widely accepted that the right of access to adequate housing is influenced by the high prevalence of poverty, unemployment, lack of education, inequality and marginalization. In addition, once a person has obtained ‘adequate housing’, the issue of over-indebtedness, in essence ‘biting off more than one can chew’, becomes a major contributing factor in putting this housing at risk. A common consequence of over-indebtedness is the possible loss of one’s primary residence caused by a failure to meet obligations in terms of a mortgage bond agreement, which in turn has a direct influence on the fundamental right contained in s 26. It is for this reason that the courts have taken judicial oversight over this situation, more so, over the attachment and execution of immovable property.
Prior to the constitutional protection of housing, a failure to maintain mortgage bond payments could result in a default judgment, which, if not satisfied, led to execution against the debtor’s property, with as end result the possible sale of the property over which the bond was registered. The impetus to protect those at risk of losing their housing commenced with the Jaftha v Schoeman; van Rooyen v Stoltz 2005 (2) SA 140 (CC) judgment, where Mokgoro J held as follows:
- I emphasise that the underlying problem raised by the facts of this case is not greed, wickedness or carelessness, but poverty. What is really a welfare problem gets converted into a property one. People at the lower end of the market are quadruply vulnerable: they lack income and savings to pay for the necessities of life; they have poor prospects of raising loans, since their only asset is a state-subsidised house; the consequences of inability to pay, under the law as it stands, can be drastic because they live on the threshold of being cast back into the ranks of the homeless in informal settlements, with little chance of escape; and they can easily find themselves at the mercy of conscienceless persons ready to abuse the law for purely selfish gain.
The Constitutional Court held that, to give effect to the right to access housing, court oversight was required before any immovable property was declared executable and included this requirement into the then Rule 46(1). Subsequently, the Constitutional Court, in Gundwana v Steko Development 2011 (3) SA 608 (CC), held that it was unconstitutional for the registrar of a court to declare immovable property executable when ordering default judgment, and that only a court could declare a judgment debtor’s primary residence executable. These and other judgments resulted in various amendments to Rule 46. In 2010, Rule 46(a)(ii) was amended to provide that, even if immovable property had been declared specially executable, if it was the primary residence of the judgment debtor, the court had to consider ‘all relevant circumstances’ before deciding whether to authorise a sale in execution. Finally, a new Rule 46A was introduced in December 2017. Apart from requiring court oversight before permitting execution against a debtor’s primary residence, it also requires the court to ‘consider alternative means by the judgment debtor of satisfying the judgment debt, other than execution …’ (Rule 46A(2)(a)(ii)). In addition, this rule permits a court, in appropriate circumstances, to determine conditions to be included in the conditions of sale and to set a reserve price for the sale (Rule 46A(8).
While the original Rule 46 has changed considerably, to assist a debtor in retaining his or her residential property, even the current Rule 46A can be seen to introduce a limitation to section 26 of the Constitution in that it allows for the attachment of a debtor’s primary residence. This possibly controversial element is that the right of access to adequate housing is therefore not absolute, as this rule still allows for an owner to lose a home in some circumstances.
It must be noted that section 36 of the Constitution provides that the rights contained in the Bill of Rights are subject to limitations, on condition that such limitations must be reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom. The application of this section to a default on a mortgage loan agreement can be interpreted as a measure to balance the rights of a creditor against the protection given to debtors by s 26, insofar as possible, prior to the foreclosure process being explored.
Does any other legislation exist that can balance these competing rights and assist a debtor faced with the sale of his or her property? The National Credit Act 34 of 2005 (hereafter referred to as the NCA) is legislation that is considered to be consumer-centric, and aims to ensure that consumers are not left over-indebted due to reckless credit. It serves as a protective armor for debtors against creditors and provides reasonable governance of agreements between consumers and financial institutions. As such, the NCA seeks to achieve proportionality between the protection of debtors whilst acknowledging the rights of creditors, within a credit agreement, by regulating credit agreements to ensure that the rights of both parties are protected and not exploited.
As the full bench held in ABSA Bank Limited v Mokebe 2018 (6) SA 492 (GJ), the purpose of the NCA, is ‘to balance the rights and obligations of consumers and credit providers. This balancing act is difficult as the rights of the credit providers are driven by profit, while that of consumers are driven by the ability to access the credit market’. Most mortgage loan agreements entered into by individuals fall within the ambit of the NCA, and this balancing act can be seen in such instances, where the rights of both parties need to be considered and aligned with the constitutional provisions of section 26. Although a credit provider, in agreements where the consumer has offered their house as security, has the right to foreclose on the property, should the consumer fail to adhere to the rights and obligations contained in the said credit agreement, this right can only be exercised as a last resort. In both the Mokebe decision, and the earlier Nkata v Firstrand Bank 2016 (4) SA 257 (CC) decision, the NCA has been interpreted so as to provide as much relief as possible to indebted consumers faced with the loss of their accommodation.
It is also for this reason that the NCA contains further attempts at the prevention of the execution of a primary residence, whilst still acknowledging the rights and interests of the creditor. An example of such measures are the debt review proceedings contained in sections 86 and 88 of the NCA, which aim to acknowledge and enforce the terms of the initial agreement whilst ensuring that the consumer remains protected from foreclosure. The purpose of this remedy is to achieve an end result which provides an amicable solution to an unfortunate breach of contract for all parties concerned, by extending the repayment period of the loan. Although this will increase the amount of interest due to the creditor, it nevertheless protects the consumer from the loss of their house.
In conclusion, it can be said that both the new Rule 46A and the provisions of the NCA seek to enhance the fundamental socio-economic right of access to accommodation.