A GUIDE TO SALES IN EXECUTION

A sale in execution is a public auction held by a sheriff of the Court. To repossess and sell an asset, an execution creditor needs to obtain a court order. Last mentioned judgment can only be executed by sending the sheriff of the court to attach the property of the debtor. Judicial attachment of property, be that movable or immovable property, means that the sheriff draws an inventory of the assets of the debtor and those attached assets may not be removed from the premises or alienated. This gives the debtor some time to try and settle the debt before the sheriff is instructed by the attorneys for the execution creditor to remove the attached property to a place of safety.Once the assets have been removed, and are in the custody of the sheriff, the attorneys for the execution creditor arrange for a sale in execution, more commonly referred to as a public auction.

A sheriff charges commission on a sale in execution made up as follows:

1. 6% on the first R30 000.00 (plus VAT);
2. 5% on the balance of the price.

The minimum commission payable is R440.00 (plus VAT) and the maximum is R8 750.00 (excluding VAT). It is important to note that the commission is payable by the successful buyer at the auction and is based on the purchase price as set out above.

The Rules of Court stipulate that these sales have to be by way of auction but no provision is made for the fact that fair market value must be achieved. Movable and immovable property can be purchased at greatly discounted, sometimes well below their market value, prices at sales in execution. The property often never reaches the value it would have had it been sold in the open market. This is largely due to the fact that sales in executions may only be held by the sheriff of the court. The execution debtor is not allowed to attempt to increase the market value of his/her asset by selling same in the open market.

Furthermore there is no mandatory reserve price for repossessed assets sold at a public auction. A reserve price is a price that may be placed on an asset on auction, effectively meaning that that same asset may not be sold for less than the reserve price.

The fact that there is no mandatory reserve price has been a hot topic in recent years, especially with the advent of the era of consumer protection. Auctions for most part remain anti-competitive. It is true that no one but the bargain hunter gains from these public auctions. The execution creditor is often left without the judgment debt being recovered in full. The judgment creditor still has a claim for the outstanding amount in terms of the judgment.

There are clear short falls in the process of selling assets by way of public auction. These shortfalls need to be addressed by the courts to fall in line with consumer protection in South Africa. It is common cause that sudden changes in economic conditions vastly influence the lives of the most economically distressed in our country.