A financial scam that steals homes from poor people goes to court

Posted on:
13 Mar 2016
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News, Property
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Ujuh Reporter

A financial scam disguised as a loan scheme that steals homes from poor people has been taken to court in what may expose alleged complicity by major banks in the scheme.

This is playing out in a case filed in the Grahamstown High Court by the Legal Resources Cen­tre (LRC) on behalf of the Tshatshu family.

The LRC was approached to intervene by the Tshat­shu fam­ily who stand to lose their home due to a fraud­u­lent lend­ing scheme, approach it.

At the centre of the scheme is a com­pany under liq­ui­da­tion, Dream World Invest­ments, and their agent, also under liq­ui­da­tion, Asset Man­age­ment Spe­cial­ists (AMS). Both are cited as respondents in the matter alongside Stan­dard Bank.

In a statement released last week the LRC explains that the Tshat­shu fam­ily entered into an agreement to acquire a loan in an amount of R100 000 from Dream World Invest­ments. “AMS mar­keted these loan schemes par­tic­u­larly at peo­ple who had been black listed by the credit bureau and who owned prop­erty. Unbe­known to them, as secu­rity for the loan, the Tshat­shus signed doc­u­ments which autho­rised the trans­fer of their home to Dream World.”

The LRC statement adds that the Tshat­shus believed they were sign­ing doc­u­ments solic­it­ing a loan and the house was being used as secu­rity for the repay­ment of the loan. At no point were they led to believe that they were sell­ing their house. If they had been, they would not have signed the doc­u­ments.

To finance their pur­chase, Dream World then acquired a loan from Stan­dard Bank secured by a mort­gage bond on the Tshathu home. The scheme envis­aged that the Tshath­sus would pay “rent” on the prop­erty and Dream World would use this to pay their monthly bond instal­ments to Stan­dard Bank. In due course, Mrs Tshat­shu stopped mak­ing monthly pay­ments and Dream­world stopped pay­ing its bond.

In 2007, the Asset Man­age­ment Spe­cial­ist com­pa­nies, includ­ing Dream World Invest­ments, were liq­ui­dated. The liq­uida­tors first offered the Tshat­shus their home at the price of the out­stand­ing bond, which was in excess of R600 000. The loan they had received from Dream World was R100 000. They could not afford this price and their home was sold on auc­tion. The Tshathus approached the LRC after they were faced with an appli­ca­tion from the pur­chaser to evict them from their prop­erty.

The statement adds that Stan­dard Bank argues that the home was legally sold to Dream World and that it has a right to ben­e­fit from the secu­rity of the reg­is­tra­tion of a mort­gage bond for the pay­ment of the loan.

The Tshat­shus seek an order to declare the agree­ment con­cluded with Dream World invalid. They also seek an order declar­ing that they are enti­tled to resti­tu­tion of the home, and for the Reg­is­trar of Deeds to reg­is­ter the prop­erty in their name within one month of the court order.

LRC explains that a sim­i­lar mat­ter went to the Supreme Court of Appeal in Absa v Moore (2015 ZASCA 171). In sim­i­lar cir­cum­stances to the Tshathus, the Moore fam­ily was defrauded out of the own­er­ship of their prop­erty by the Brus­son Finance Scheme.

The SCA found that in respect of resti­tu­tion of prop­erty in fraud­u­lent money-lending schemes, such as the one run by AMS and Dream World, where there was no inten­tion to trans­fer own­er­ship of a prop­erty, the trans­fer and any bond reg­is­tered by the trans­feree over that prop­erty has no effect.

The LRC says the ques­tion that the Gra­ham­stown High Court must decide is whether the Tshat­shus intended to trans­fer own­er­ship of their prop­erty to Dream World, or whether they were defrauded into sign­ing the doc­u­ments that resulted in the trans­fer of their prop­erty.

The mat­ter will be heard on 17 March 2016.

A search of the South African news media platforms will suggest that such a scam is becoming widespread.

news@ujuh.co.za

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