Coolio owns a house in Bloemfontein and can’t stop talking about rising interest rate costs and how it affects his bond payments. You reminded him that he should return your set of golf clubs.
You don’t really understand how he can say that he “owns” the house, since he is still paying off a bond. You also know that he purchased his nice green couch from FabFurn with a payment scheme, so does that really “belong” to him then?
As far as you know, he owns the latest 70-inch flat-screen Samsung TV which he won after hitting a “hole-in-one” last September at the Kovsie golf day. His father’s speedboat stands in the driveway but is just gathering dust due to the high petrol price. Apparently, that was a gift to Coolio for his 30th birthday from his father. You wonder what the insurance premiums are.
And that is not the end of Coolio’s flashy lifestyle - he also owns a brand-new red sports car. He paid a deposit of R100 000, but the rest is paid off to Wesbank in terms of an instalment sale agreement. He didn’t want to listen to you when you advised him to make use of a hire purchase agreement. You also wonder what difference the insurance premiums are on these two types of loans. Did the bank even require security for that transaction?
10.1 Should interest rates rise too much, Coolio will be unable to pay back his monthly premiums. In which ways would FNB be protected from bad debt in respect of Coolio’s home loan? (4)
10.2 In the event that Coolio didn’t own the home but rented the home from Bloem Rentals, would the sheriff be allowed to seize your golf clubs in the execution of a warrant against Coolio for bad debt on his rental agreement with Bloem Rentals? The sheriff didn’t ask Coolio who the owner was as he assumed every item on the premises belonged to Coolio and Coolio was too shocked to even mention that it belonged to you. (4)
10.3 The sheriff acting for Bloem Rentals left the green couch alone. Explain why he didn’t seize the couch in terms of the law as applied between creditor/debtor matters. (4)
10.4 The sheriff acting for Bloem Rentals did not leave the TV behind. Does this not infringe upon a South African’s right to support national sports teams? Coolio will now not be able to follow the Springboks in the 2023 World Cup in France. He knows you are studying law and approached you for advice. Advise your friend Coolio. (4)
10.1 In the case of Coolio's home loan, FNB would have several protections against bad debt. Firstly, FNB would have conducted a thorough credit assessment before approving the loan, ensuring that Coolio had the financial means to make the monthly payments. Secondly, FNB would have registered a mortgage bond over the property, which means that in the event of default, FNB would have the right to repossess and sell the property to recover the outstanding debt. FNB would also have the ability to utilize debt collection processes, such as issuing summonses and obtaining judgments against Coolio, which could result in the attachment of his assets or garnishment of his wages. Additionally, FNB may have required Coolio to take out insurance on the property, which could provide further protection in the event of damage or loss.
10.2 If Coolio rented the home from Bloem Rentals and a warrant was issued against him for bad debt on his rental agreement, the sheriff would not be allowed to seize your golf clubs. As the golf clubs belong to you and not Coolio, they would not form part of his assets that can be attached for the purposes of satisfying the warrant. The sheriff would only be able to seize items that belong to Coolio or are in his possession or control.
10.3 The sheriff acting for Bloem Rentals may not have seized the green couch in accordance with the law because it could be considered an exempted item. In South Africa, certain essential household items and furniture are protected from being seized to satisfy judgments or debts. This is to ensure that individuals are not left entirely without basic necessities. The law typically allows for a household to retain a certain amount of exempted assets, which may include items like furniture, appliances, and clothing. The green couch could fall under this exemption and therefore would not be subject to seizure by the sheriff.
10.4 The sheriffs acting for Bloem Rentals would not be infringing upon the South African's right to support national sports teams by seizing the TV. While Coolio may be disappointed that he can no longer follow the Springboks in the 2023 World Cup, the seizure of assets in execution of a warrant is a legal process aimed at recovering outstanding debt. The rights to support national sports teams and access to entertainment are not absolute rights and may be limited or restricted in certain circumstances, such as when there are outstanding debts or legal processes being carried out. Coolio could explore alternative options, such as watching the games at a friend's house or finding ways to follow the matches online or through radio broadcasts.
10.1 FNB would be protected from bad debt in respect of Coolio's home loan through several mechanisms:
1. Mortgage bond: FNB would have registered a mortgage bond over the property, which means they have a legal claim on the property as security for the loan. If Coolio fails to make his monthly premiums, FNB can initiate a foreclosure process and sell the property to recover the outstanding debt.
2. Creditworthiness assessment: Before granting the home loan, FNB would have assessed Coolio's creditworthiness, including his income, expenses, and credit history. This assessment helps to determine if Coolio has the financial capacity to afford the home loan repayments. By doing this, FNB aims to minimize the risk of lending to borrowers who are likely to default on their payments.
3. Insurance: FNB may require Coolio to have homeowner's insurance for the property. This insurance helps to protect FNB's interest in the property in case of damage or loss. It may also include coverage for situations where Coolio is unable to make the mortgage payments due to unexpected events such as disability or death.
4. Legal recourse: If Coolio defaults on his mortgage payments, FNB has the legal right to take legal action against him to recover the outstanding debt. This may involve obtaining a judgment against him and potentially garnishing his wages or seizing other assets.
10.2 If Coolio didn't own the home but rented it from Bloem Rentals, the sheriff would not be allowed to seize your golf clubs in execution of a warrant against Coolio for bad debt on his rental agreement. This is because the golf clubs are not owned by Coolio but belong to you. In rental agreements, the landlord or rental company does not have a claim on the personal belongings of the tenant to recover outstanding rent. The sheriff should have asked Coolio about the ownership of the items on the premises before seizing them.
10.3 The sheriff acting for Bloem Rentals didn't seize the green couch in terms of the law as applied between creditor/debtor matters because the green couch is considered an exempt asset. In South Africa, certain items are protected from being seized by creditors to satisfy debt. These exempt assets include essential household items like furniture, appliances, and clothing, which are necessary for the debtor's and their family's basic needs. Therefore, the green couch was exempt from being seized as it falls under this category.
10.4 The sheriff acting for Bloem Rentals seizing the TV does not infringe upon a South African's right to support national sports teams. The right to support national sports teams is not a protected constitutional right. While the TV may provide enjoyment and information related to national sports teams, the seizure of the TV does not directly infringe on the right to support or follow sports teams. Coolio may consider other ways to access and support national sports teams, such as watching games at sports bars or online streaming.
10.1 To protect themselves from bad debt in respect of Coolio's home loan, FNB (First National Bank) would have certain protections in place. These protections include the following:
1. Loan-to-Value Ratio (LTV): FNB would have assessed the value of the property at the time of the loan application and determined the loan amount based on a certain percentage of the property's value. If Coolio defaults on his payments and FNB needs to repossess the property, they can sell it and recover the loan amount. This ensures that they are not at a significant loss in case of default.
2. Mortgage Bond: Coolio would have signed a mortgage bond, which acts as security for the loan. This bond gives FNB the right to repossess the property if Coolio fails to make the required payments. FNB can then sell the property to recover the outstanding loan amount.
3. Creditworthiness Assessment: Before granting the home loan, FNB would have assessed Coolio's creditworthiness, including his income, expenses, and credit history. This assessment helps determine whether Coolio has the financial capacity to afford the monthly bond payments. By conducting this assessment, FNB aims to minimize the risk of default.
4. Insurance: FNB may require Coolio to have insurance on the property, including homeowner's insurance and mortgage protection insurance. These insurances provide additional protection for FNB in case of damage to the property or if Coolio is unable to make the loan payments due to certain unforeseen circumstances.
All these measures are put in place to protect FNB from potential bad debt in the event that Coolio cannot afford to pay his monthly premiums.
10.2 If Coolio didn't own the home but rented it from Bloem Rentals, the sheriff would not be allowed to seize your golf clubs in the execution of a warrant against Coolio for bad debt on his rental agreement. This is because, legally, the sheriff can only seize assets that belong to the debtor (Coolio) and not to a third party (you).
In this case, the golf clubs belong to you and not Coolio. Therefore, they cannot be seized to satisfy Coolio's debt to Bloem Rentals. The ownership of the golf clubs should be properly established, and it should be made known to the sheriff that they do not belong to Coolio and are not subject to seizure.
10.3 The sheriff acting for Bloem Rentals did not seize the green couch in terms of the law as applied between creditor/debtor matters because certain assets are protected from seizure under the law. This protection ensures that creditors cannot take away all essential possessions from a debtor, leaving them with nothing.
South African law recognizes that debtors still need certain basic items for everyday living, such as furniture, clothing, and basic household necessities. These assets are referred to as "exempted property" and cannot be seized by the creditor in order to satisfy a debt.
The green couch would be considered as part of Coolio's exempted property, and therefore, the sheriff would not be allowed to take it away. The sheriff is only entitled to seize non-exempt property that could be sold or liquidated to satisfy the debt owed to Bloem Rentals.
10.4 The sheriff acting for Bloem Rentals did not leave the TV behind because there is no legal requirement to prioritize Coolio's right to support national sports teams over his debt obligations.
While supporting national sports teams is a personal choice and a form of entertainment, it does not take precedence over a debtor's responsibility to fulfill their financial obligations. If Coolio had defaulted on his rental agreement with Bloem Rentals, the TV, as a valuable asset, could legally be seized to satisfy the debt.
Therefore, Coolio's inability to follow the Springboks in the 2023 World Cup in France does not infringe upon his rights. When faced with financial difficulties, it is advisable for Coolio to prioritize meeting his financial obligations and finding ways to manage his debt effectively. He may seek professional advice or explore options such as debt consolidation or negotiating with the creditor to find a solution that works for both parties.