Can Your Home Be Sold By Your Creditors To Recover Your Outstanding Debt To Them?

Many South Africans are currently overburdened and overwhelmed with debt and are struggling to repay creditors. Recent statistics indicate that a third of individuals with credit in South Africa are having difficulty meeting their debt obligations. This means approximately 10 million people are three months or more behind on debt repayments. This article will explore the circumstances under which a creditor (someone to who you owe money) can have your residential home or immovable property sold in execution to recover an outstanding debt following a favourable judgement.
 
In the case of Jaftha v Schoeman and Others, Van Rooyen v Stoltz and Others (Jaftha), the Constitutional Court outlined the legal process creditors must follow before selling a debtor's residential home in execution.  The facts of the case were as follows: Ms Jafta was overburdened with debt and was unable to repay her creditors. She was also 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.
 
In principle, the Constitutional 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 the concept of "judicial oversight," requiring court approval before selling a debtor's residential home to satisfy a debt.

The court considers factors such as:

• 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 suggested that creditors may be able to sell a debtor's immovable property as a first resort in specific circumstances. This could potentially circumvent the requirement of attaching movable property 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 requiring prior attachment of movable property.
 
This implies that a court can order the sale of immovable property to recover payment when a debtor deliberately evades payment, such as by fleeing the country or concealing their movable property.

In conclusion, while creditors cannot initially sell a debtor's residential home to recover an outstanding debt, there may be instances where they can bypass the attachment of movable property and proceed directly to the sale of immovable property.