Immovable Property Sold To Settle Debt – Reserve Price Issue

Amendments to the Rules of both the High Courts and Magistrates’ Courts regarding the sale in execution of immovable property came into effect in December 2017. One of these provides for the introduction of a court-imposed reserve price, should it be deemed appropriate in the circumstances. To come to such conclusion, a court must weigh up various factors, such as the market value of the property, the amount owed in taxes and levies and the amount owed to the bank. 

In March this year, the Pretoria High Court approved an execution sale of a debtor’s property for R40 000, without reserve. Before the sale, the bank had done what it could to assist the debtor with his financial obligations. The property’s municipal valuation was R480 000. 

The court took into account that a sale in execution is a forced sale and, consequently, results in lower prices being obtained. Also, the conditions of a forced sale often render the buyer liable for outstanding rates and taxes, and a buyer may be faced with drawn out eviction proceedings to remove occupants from the property. A reserve price often reduces interest in the sale and may result in the property not being sold at all, which would inevitably prejudice both the debtor and creditor. 

The judgment on the above-mentioned Pretoria High Court matter is currently on appeal. However, as suggested by the court, perhaps this is an aspect where Parliament should intervene and issue a policy directive in this regard.