[1]
When an auction occurs, the process must be improved to attract more potential buyers. One possibility for improvement might be for the legislature to exempt sales in execution from transfer duties and also for municipalities to approach the seller for any municipal charges that are due, not the buyer. It is not obvious why buyers should take on the unpaid levies of the previous owner. They are required to pay them at present under the current law should they succeed in purchasing a property at auction. Often these amounts are not known or disclosed at the auction. The buyer thus takes considerable risk. Buyers are clearly deterred by the possibility of these fees, reducing the liquidity of the auction. These fees are often not clear at the time of purchase. A better solution would be that they should at least only be payable if the municipality updates the record with the exact amount before the sale. This means that sales would be transparent, and people would know their liabilities in purchasing the property. This would increase the number of people willing to take part. I will deal with more needed modifications to the process of auction below. The current system is also the system in the United States and generally held to bring down the prices offered at auctions.[2] In most of Europe, the buyer at the sheriff’s auction receives the property unencumbered which is thought to lead to higher prices.[3] More research is needed to see how the system in South Africa could emulate the European model.
[1] This problem has to some degree been addressed in the new Rule 46A in force from December 2018
[2] Gramckow Dr. Heike “Court Auctions: Effective Processes and Enforcement Agents – Justice and Development Working Papers Series 18/2012 (Washington: World Bank) 17
[3] Gramckow Dr. Heike “Court Auctions: Effective Processes and Enforcement Agents – Justice and Development Working Papers Series 18/2012 (Washington: World Bank) 17