South African banks have the power to lock you out your home

South African banks hold significant powers to protect their financial interests, which can have unexpected and far-reaching consequences for homeowners.

One such power allows banks to install a caretaker in a property they believe to be abandoned.

While intended to safeguard the property—an asset shared by both the bank and the homeowner—this practice has raised questions about communication, rights, and the impact on already strained homeowners.

This issue recently came to light on The Money Show with consumer journalist Wendy Knowler.

She shared the story of a homeowner in Weltevreden Park, Roodepoort, who experienced the unsettling reality of this bank policy.

The owner had fallen behind on her bond repayments and temporarily left her house to stay with family nearby after the electricity supply was disconnected.

To ensure the property remained secure, the owner and her siblings regularly checked on it.

“The longest I was away from the house was between the 20th and 30th of December, as I was on holiday with my family in Durban,” she said.

Upon returning, however, she was shocked to find that a company (caretaker) had used a locksmith to gain access to her home and take control of the property.

The company claimed to have been sent by Nedbank, her bond financier, to “guard” the house.

Knowler highlighted the broader implications of such incidents, particularly around the legal obligations of banks.

She explained that while South African law requires banks to issue a Section 129 notice (a formal letter of demand) before initiating legal action against a defaulting homeowner, the burden of proof for delivery is minimal.

Banks are only required to send the notice to the address provided by the homeowner via registered mail.

They are not obligated to confirm receipt.

As a result, many homeowners may find themselves blindsided by default judgments granted in their absence, without any opportunity to respond or defend themselves.

This case serves as a cautionary tale amid mounting economic pressures faced by South African homeowners.

More homeowners at risk

According to the latest data from financial experts, there has been a concerning rise in home loan defaults and properties in arrears.

First National Bank (FNB) reported that 23% of homeowners who sold their properties in the third quarter of 2024 did so due to financial difficulties, up from 21% in the preceding quarter.

This figure is notably higher than the long-term average of 18%, revealing the growing trend of forced sales as homeowners grapple with unaffordable mortgage repayments.

Additionally, mortgage arrears have risen sharply, with 7.8% of South Africa’s mortgage debtors behind on payments by mid-2024, well above the historical average of 4.5% to 5%.

While Banks normally install caretakers to prevent vandalism or further degradation of an abandoned asset, Mpho’s experience demonstrates that this process can have repercussions for homeowners who are behind on their payments.

Struggling homeowners are reminded to stay in touch with their bank and ensure that all contact details are up to date.

It’s also important to know your rights and what options are available, like talking to a debt counsellor or trying to renegotiate payment terms with the bank.