The right to adequate housing is a basic human right recognised by Section 26 of the Constitution. In terms of Section 26(1), everyone has a right to adequate housing, and Section 26(2) imposes an obligation on the state to provide legislative and other measures to achieve progressive realisation of this right. One such measure which has been enacted to give effect to this right is Rule 46A of the Uniform Rule of Court. 

Rule 46A regulates the procedure for which creditors are to follow when seeking to execute a judgment debt against immovable property. The rule applies “whenever an execution creditor seeks to execute against the residential immovable property of a judgment debtor”. If the property in question is the debtor’s primary residence, the Court will consider whether the debtor can satisfy the judgment debt by alternative means to prevent the sale of the debtor’s property. In Jaftha v Schoeman, the court held that execution against a primary residence entails a limitation of the “right to have access to adequate housing”. In other words, the limitation on the debtor’s right to housing is only constitutionally permitted when the requirements of the limitations clause have been met. In essence, the sale of the debtor’s property should be the last resort and unless it is apparent that there is no other reasonable way of satisfying the judgment debt. The underlying principle emphasized in the Jaftha judgment is that execution against residential property requires judicial oversight.

The central question then arises: Does the right to adequate housing guaranteed by Section 26(1) of the Constitution extend to juristic persons and trusts where the property is used for residential purposes by a member, shareholder or beneficiary?

In Nedbank v Trustees of the time being of The Mthunzi Mdwaba Family Trust, the Court had to interpret the meaning of the word “judgment debtor” in the context of Rule 46A. In this case, the creditor contended that the Rule 46A procedure was not required to be followed as the mortgaged property was registered in the name of a trust. Notwithstanding the property being the primary residence of one of the trustees and their children, the creditor argued that the debtor, owner and mortgagor was a juristic person and, therefore, that the Rule 46A procedure did not need to be followed. The trustees acknowledged that Rule 46A only applied to natural persons in respect of their primary residence, however, they submitted that if a property is registered “nominally” in the name of a juristic person or trust but used as the primary residence of the trustee or beneficiary, then Rule 46A must be followed. The Court agreed with the trust’s assessment with the rationale being that the judgment debtor must perform a function of providing a dwelling or shelter for humans - it is irrelevant whether the judgment debtor is a juristic person or trust. The Court further emphasised the significance of the usage of the property by one of the trustees or trust beneficiaries for residential purposes which then invokes Section 26 of the Constitution.

In Nedbank Ltd v Fraser, the Court concluded that the factor triggering protection in terms of Section 26 of the Constitution is not the status of the judgment debtor, but whether the property is someone’s home. Subsequently, the constitutional protection must extend to shareholders, members, trustees and beneficiaries, provided that these natural persons reside at the property and are considered “beneficial owners” of the property. Such persons are regarded as the true debtors of the property and cannot be denied the constitutional protection afforded by Rule 46A.

The difficulty experienced by credit providers is determining the relationship between an occupier and the legal entity which owns the property. Finding out the truth of the matter can be troublesome and even impossible. In such instances, a bank would have prior knowledge due to the compliance with anti-money laundering law, however, non-bank creditors may not have such information or be in a position to acquire the information as easily. It, therefore, is prudent for a creditor to acquire and store such information by practicing due diligence in relation to all forms of occupation of the residential properties of their debtors, which would assist them in conducting risk assessments, particularly in respect of property mortgaged in favour of the creditor, as this would impact the creditor’s security. 

In any event, it appears our Courts are prepared to extend the protection guaranteed by Section 26 to trusts or juristic persons where the occupier is a natural person and uses the property as their primary residence or when shareholders, members, trustees and beneficiaries, are beneficial owners of the property.