Compulsory debt reorganisation in South African mortgage law : a ‘sharing’ remedy

Abstract

Since the Jaftha judgment about 15 years ago, South African mortgage foreclosure law has undergone dramatic changes in the light of the protection afforded to mortgage debtors against the unjustified limitation of their constitutional housing rights. Previously the approach of mortgage enforcement law was to give effect to the proven rights of creditors without much question, but Jaftha changed the approach to one where creative alternatives should be pursued before the home is sold only as a last resort. This contribution focuses on one of the major alternatives to normal foreclosure, namely the debt rearrangement order that can be granted to an over-indebted consumer as part of the National Credit Act’s debt-review process. A particular aim is to link this compulsory debt reorganisation remedy with arguments made by Dyal-Chand with regard to so-called ‘sharing’remedies based on an interest–outcome model. I therefore illustrate that debt rearrangement can be regarded as a ‘sharing’ remedy that does not solely focus on the parties’ formal title to the mortgaged property, but indeed pays more attention to their respective interests in, and uses of, the property. This perspective can arguably help to uphold debtors’housing interests while also giving effect to creditors’economic interests.