UNABLE TO PAY YOUR DEBT? CONSIDERING DEBT REVIEW? YOU SHOULD CONSIDER THE FOLLOWING
In these difficult economic circumstances, you may find yourself in a position where you are unable to pay your debt. The National Credit Act makes provision for debt management in the form of debt review by making an application to the court to restructure the payment schemes of all your creditors. It may be a good way to recover from over-indebtedness, keeping in mind the importance of what debt review entails.
Debt review is a way of managing over-indebtedness by making an application to the court in terms of section 86 of the National Credit Act 34 of 2005 (hereinafter the NCA). Although it may seem like a very favourable option when the burden of debt becomes too heavy, there are a number of things to consider.
A debt counsellor has to consider the financial position of a consumer by the prescribed form, after which he/she may declare the consumer over-indebted. This is followed by an application made at court to place the consumer under debt review by means of a court order. Such an order entails inter alia that the repayment instalments of the consumer’s debt to his/her creditors are restructured to be more affordable. Consequently, the repayment period is extended and settling said debt will take considerably longer.
It is important to be aware that there are certain fees applicable to debt review applications. These fees are payable by the consumer and include inter alia application fees, rejection fees, restructuring fees, legal fees and monthly administration fees with the payments made according to the debt review order.
An order placing a consumer under debt review has numerous effects as stated in section 88 of the NCA. A considered positive effect of a debt review order could be the breathing space it creates by the re-arrangement of the payment instalments. Creditors will not be able to sue the consumer after receipt of a notice of an application of debt review and when the application is made an order of the court, repayment instalments will be lower than the initial instalments, allowing the consumer to attend to his/her basic needs.
The negative aspects are that the consumer subject to a debt review will not be able to enter into another credit agreement and the credit bureau will list the consumer as being over-indebted.
In the event that a debt review court order has been granted against a consumer or the creditors have made an agreement with the consumer for the re-arrangement of credit obligations, the consumer must fulfil all obligations under the agreement or the court order before any further credit agreements may be entered into.
After the full obligations by the agreement or court order has been fulfilled, the debt counsellor will issue a clearance certificate to certify that the consumer is no longer indebted. Only upon issue of the clearance certificate may the consumer enter into a new credit agreement.
In the matter of Van Vuuren v Roets and Others at the Gauteng Local Division, the applicants in the case were under debt review and their financial positions improved to the extent that they could afford to pay the instalments as per their initial credit agreements. However, they could not settle the amounts in full and the debt counsellor refused to issue a clearance certificate.
The court ruled that it does not have the authority to release a consumer from debt review until the full obligations have been met. In the case where there is a debt review court order, the consumer is bound by the re-arrangement order until full settlement.
Where an application is still pending a court hearing, the consumer can present the improvement of financial position, of which the magistrate will reject the order for debt review in accordance with the NCA.
The consumer has to weigh the pros and cons of being placed under debt review. Essentially, this constitutes deciding between the latitude regarding the repayment of debt together with the right not to be sued, as opposed to being restricted from entering into new credit agreements until full settlement of the debt review agreements. Nothing prevents a consumer to settle the re-arranged debt in a shorter period by increasing their payments.
- National Credit Act 34 of 2005
- Janse van Vuuren v Roets and Others, Nel v Roets and Others (37407/2018)  ZAGPPHC 428
CANCELLING A LEASE AGREEMENT DURING COVID-19
2020 has been an unpredictable year, to say the least. Each new week seems to hold its own uncertainties and concerns. In such times, it is important for tenants of residential property to know what their rights are in terms of premature cancellation of lease agreements that may be necessitated by COVID-19, the pursuant lockdown and general change of personal circumstances.
As a point of departure, the tenant can consult the lease agreement to check if there are any provisions pertaining to early cancellation. If there is no such clause, or the terms of the clause are unacceptable, the tenant can turn to the provisions of the Consumer Protection Act 68 of 2008 (“the CPA”), if applicable.
The CPA will be applicable to residential lease agreements, except in rare circumstances. Consult with your lawyer to determine the CPA’s applicability to your lease agreement. If the CPA is applicable to the lease agreement, the tenant would be able to lawfully cancel the lease agreement at any time, even if there is no cancellation clause in the agreement. Section 14(2)(b) of the CPA states that a tenant may cancel the lease agreement, despite any provision of the lease agreement to the contrary, by giving 20 business days’ notice in writing.
There may however be financial consequences for the tenant as the landlord can impose a reasonable cancellation penalty on the tenant upon early cancellation. There are guidelines in Regulation 5 of the Act as to what a “reasonable cancellation penalty” entails. The cancellation penalty should not be exorbitant, and if the tenant feels that the landlord’s claim is excessive and unfair, they can approach the National Consumer Tribunal or the Rental Housing Tribunal. Tenants can also approach their lawyer, who can address the landlord and negotiate a reasonable cancellation penalty, considering the relevant facts of the matter.
Upon expiry of a fixed-term lease agreement the lease agreement will automatically carry on a month-to-month basis, unless the tenant expressly agreed to the renewal of a further fixed-term or the tenant terminated the agreement upon the expiry date. In such a case, the provisions of the Rental Housing Act 50 of 199 are relevant. The landlord can cancel the lease agreement, in terms of the Act, by giving one calendar months’ notice.
In Luanga v Perthpark Properties Ltd 2019 (3) SA 214 (WCC), the Western Cape High Court held that one month’s notice must be interpreted as a notice given before the end of the month, to terminate the contract at the end of the next month.
There are therefore various considerations at play when a tenant considers premature cancellation of a lease agreement. To avoid unnecessary disputes and an exorbitant cancellation penalty, a tenant would benefit from consulting their attorney before giving notice of cancellation to their landlord.
IS BUSINESS INTERRUPTION INSURANCE THE KEY?
A business interruption insurance policy typically caters for a decrease in turnover or profit (depending on the type of cover); an increase in operating expenses and a move to a temporary location (if necessary).
The question arises whether or not COVID-19 qualifies as an insured event which could lead to a valid and enforceable insurance claim?
The short-term insurance sector has experienced an influx of interest and claims arising as a result of the impact experienced during the lockdown. Business Interruption Insurance is possibly one of the most highlighted arrears of concern in respect of assessing our current abilities to deal with this impact.
Whether you are covered for business interruption is ordinarily determined by a policyholder’s policy document. Most of these policies are short-term insurance policies and usually require a form of “damage event” to trigger cover in that instance. However, there are instances where cover for business interruption insurance is a standalone policy. These are usually more complex and have a number of qualifying factors in respect of the relevant claims. Unfortunately, a number of insurers are not regarding the lockdown as the “damage event” or “insured event” required to trigger cover for business interruption. Insurers appear to be of the view that the actual infection may be an insurable event if the policy document covers for business interruption in respect of infectious diseases, but the lockdown is not.
In the recent judgment against Guardrisk, the Western Cape High Court addressed the question of notifiable disease in great length. According to that ruling, COVID-19 is a notifiable disease. judge Andre Le Grange said although that announcement was made by a national minister, and not a local authority as insurers argue, “COVID-19 was by law portable to a local competent authority”.
The Guardrisk judgment has clarified that COVID-19 is a notifiable disease and as such the virus being a notifiable disease is a binding component, at least in matters heard in the Western Cape High Court.
The Court ruled that Guardrisk must pay out business interruption claims of Cape Town restaurant, Cafe Chameleon, but it is still unclear whether the ruling will set a precedent for other cases of this nature. It was ruled that Guardrisk is liable to pay Cafe Chameleon’s claim for losses suffered when the lockdown began on 27 March, an order that has left a question mark on whether other insurers still stand a chance in winning the same argument or if they should just start paying up.
The court did not only rule in favour of Cafe Chameleon, but it also ordered Guardrisk to pay costs, an order that is normally reserved for cases where the judge feels the defence argument was a waste of the court’s time. But the ruling is not binding to other regional courts unless the Supreme Court of Appeal arrives at the same conclusion. The judge did, however, make it clear that each case must be decided upon its own facts. One can, in summary, gather from the judgment that the judge’s intention was to say that there could be poorly worded policies that could deviate from the Guardrisk outcome and as such there could be scope for one to go to court if your policy is massively differently worded.
It is of extreme importance that policyholders are aware of the mechanisms for claiming business interruption insurance in respect of their specific policy documents. It is further relevant to seek proper assistance when dealing with the rejection of a claim, where such rejection appears to be invalid. Know your policy and know your recourse.
- Café Chameleon CC v Guardrisk Insurance Company Ltd (5736/2020) 
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.