Einstatement of a mortgage agreement in respect of residential property: a discussion of the judgment in Nkata v First Rand bank ltd and its implications.

Abstract

There is a lack of clarity in subsections 129(3) and (4) of the National Credit Act 34 of 2005 (the NCA) dealing with reinstatement of a credit agreement. These provisions state that a credit agreement can be reinstated if certain conditions are complied with. Reinstatement of a credit agreement is an important remedy for consumers who have fallen into default and who are willing to pay the arrears and the credit provider’s costs and charges that were incurred as a result of the default. This remedy is essential to mortgagors, who may be rendered homeless if their homes were to be sold in execution. However, it has been evident from the judicial disagreement in Nkata v First Rand Bank Ltd 2016 (4) SA 257 (CC) that there are difficulties with interpreting subsections 129(3) and (4) of the NCA. The legislature amended section 129(3) of the NCA by the enactment of section 32 of National Credit Amendment Act 19 of 2014 (‘Amendment Act’) in an attempt to rectify these problems. This dissertation will discuss the interpretation of these subsections applied by the Constitutional Court and its implications. This paper will also discuss Rule 46 of the Uniform Rules of Court which has recently been amended by the insertion of Rule 46A. This rule requires the court to consider alternative means, ie other than execution against a primary residence, which resulted in some High Court Divisions amending their practice manuals and directives. For instance, the South Gauteng Local Division did so. Reinstatement may be considered as an alternative to execution; however the ambiguity and the failure of the provision to stipulate a logical and consistent procedure for reinstatement creates uncertainty. Therefore, in view of the lacuna revealed it is recommended that a further amendment to the NCA is desirable which will be precise, coherent and adhere to the objectives of the Act.