Engelsman Magabane Incorporated brings to your attention a recent case heard by the Pretoria High Court which offers valuable insights for both lenders and borrowers. The case involved Standard Bank suing two sureties, Aubrey Schneider and Stephen Zagey, for an outstanding home loan balance.
The crux of the matter revolved around the concept of prescription, a legal principle that sets time limits for claiming debts. In South Africa, the Prescription Act outlines these limits, with unsecured debts subject to a three-year window and mortgage debts having a 30-year window for recovery.
Schneider and Zagey argued that the debt was prescribed as summons were served more than three years after the default. Standard Bank, however, contended that the loan was secured by a bond, extending the prescription period to 30 years.
Here’s where the case gets interesting. While there were references to a bond in various documents attached to the lawsuit, the bank itself failed to explicitly plead the existence of a registered bond in its court papers. This seemingly minor oversight proved critical.
The Pretoria High Court ruled in favor of Schneider and Zagey, highlighting the importance of properly pleading the existence of a bond when pursuing recovery of a home loan debt. The court’s decision underscores the potential consequence of a bond not being registered – the debt transforming into unsecured debt and falling under the shorter three-year prescription window.
This case serves as a reminder for both lenders and borrowers:
Lenders: Ensure all necessary documentation, including the existence of a registered bond, is clearly pleaded in lawsuits pertaining to home loans.
Borrowers: Understand the implications of prescription periods for different types of debt, particularly the distinction between secured and unsecured loans.
Engelsman Magabane Incorporated advises consulting with a qualified legal professional for in-depth guidance on matters related to home loans, bonds, and prescription. By staying informed, you can safeguard your interests in such situations.